As filed with the Securities and Exchange Commission
on January 27, 2000.
Registration No.333-__________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
Registration Statement
under
The Securities Act of 1933
USURF America, Inc.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 7375 72-1346591
(STATE OR OTHER (PRIMARY STANDARD (IRS EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSI- IDENTIFICATION NO.)
INCORPORATION OR FICATION CODE NUMBER
ORGANIZATION)
8748 Quarters Lake Road, Baton Rouge, Louisiana 70809
(225) 922-7744
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
David M. Loflin, President
USURF America, Inc.
8748 Quarters Lake Road, Baton Rouge, Louisiana 70809
(225) 922-7744
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
Eric Newlan, Esq.
NEWLAN & NEWLAN
819 Office Park Circle
Lewisville, Texas 75057
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration number of the
earlier effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of maximum maximum
each class of Amount offering aggregate Amount of
securities to to be price per offering registration
be registered registered(1) unit price fee
- ------------- ---------- --------- --------- ------------
Common Stock 2,000,000 $8.6875(2) $8.6875(2 ) $4,587.00
$.0001 par shares(3)
value per 462,607
share shares(4) $8.6875(2) $8.6875(2) 1,060.99
per share 68,810
shares(4) $1.25(5) $1.25(5) 22.71
56,667
shares(4) $1.50(6) $1.50(6) 22.41
60,000
shares(4) $3.50(7) $3.50(7) 55.44
50,000
shares(4) $6.00(8) $6.00(8) 79.20
95,000
shares(4) $7.00(9) $7.00(9) 175.56
--------- --------
Total 2,793,084 $6,003.31
shares
- ------------
(1) Pursuant to Rule 416 under the Securities Act of 1933, as amended,
this Registration Statement covers such additional indeterminate shares of
Common Stock as may be issued by reason of adjustments in the number of
shares of Common Stock pursuant to anti-dilution provisions contained in
various Common Stock Purchase Warrants. Because such additional shares of
Common Stock will, if issued, be issued for no additional consideration, no
registration fee is required.
(2) Estimated in accordance with Rule 457(c) solely for the purpose of
calculating the registration fee on the basis of the average of the bid and
ask prices reported on the American Stock Exchange on January 25, 2000,
$8.6875 per share.
(3) May be offered and issued by Registrant from time to time in
connection with one or more acquisitive transactions by Registrant of
securities, businesses or assets.
(4) To be offered and sold by Selling Shareholders.
(5) Shares issuable upon exercise of common stock purchase warrants.
Pursuant to Rule 457(g) the fee is based upon the Warrant exercise price of
$1.25 per share.
(6) Shares issuable upon exercise of common stock purchase warrants.
Pursuant to Rule 457(g) the fee is based upon the Warrant exercise price of
$1.50 per share.
(7) Shares issuable upon exercise of common stock purchase warrants.
Pursuant to Rule 457(g) the fee is based upon the Warrant exercise price of
$3.50 per share.
(8) Shares issuable upon exercise of common stock purchase warrants.
Pursuant to Rule 457(g) the fee is based upon the Warrant exercise price of
$6.00 per share.
(9) Shares issuable upon exercise of common stock purchase warrants.
Pursuant to Rule 457(g) the fee is based upon the Warrant exercise price of
$7.00 per share.
- -----------------------------------------------------------------
Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until Registrant shall file
a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to Section
8(a), may determine.
- -----------------------------------------------------------------
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
SEC. These securities may not be sold nor may offers to buy be accepted
prior to the time the Registration Statement becomes effective. This
Prospectus shall not constitute an offer to sell or the solicitation of an
offer to sell or the solicitation of an offer to buy nor shall there be any
sale of these securities in any state in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities laws of any such state.
PROSPECTUS SUBJECT TO COMPLETION, DATED JANUARY 24, 1999
2,793,084 Shares
USURF America, Inc.
Common Stock
$.0001 par value
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus relates to up to 2,000,000 shares (the "Acquisition Stock")
of the $.0001 par value common stock (the "Common Stock") of USURF America,
Inc., a Nevada corporation (the "Company"), to be offered and issued by the
Company from time to time in connection with business combination
transactions involving issuance of shares of the Acquisition Stock. It is
the Company's intention to search actively for business combinations, which
may be in the form of mergers, stock-for-stock exchanges or
stock-for-assets acquisitions. The Company anticipates that the terms of
business combinations, if any, involving the issuance of shares of the
Acquisition Stock will be determined by direct negotiations with the owners
or controlling persons of the securities, businesses or assets to be
acquired. Shares of Acquisition Stock issued will be valued at prices
reasonably related to then-current market prices, subject to negotiation.
No underwriting discounts or commissions will be paid, although finder's
fees may be paid, in connection with business combination transactions
involving the issuance of shares of Acquisition Stock. Any person
receiving a finder's fee may be deemed to be an underwriter within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
(See "Proposed Transactions" under "Business"). As of the date of this
Prospectus, the Company has made no commitments for a business combination
involving the issuance of shares of the Acquisition Stock to which this
Prospectus relates and there is no assurance that the Company will, in
fact, consummate a business combination transaction contemplated herein on
terms that are favorable to the Company.
This Prospectus also relates to 793,084 shares of Common Stock (the
"Selling Shareholder Stock"), 462,607 of which shares have been issued and
330,477 of which shares are issuable upon the exercise of a like number of
currently outstanding warrants to purchase shares of Common Stock. This
Prospectus also relates to such additional shares of Common Stock that may
be issued pursuant to the anti-dilution provisions of the outstanding
warrants. (See "Description of Securities of the Company"). The shares of
Selling Shareholder Stock will be offered and sold from time to time by
certain persons (the "Selling Shareholders") identified elsewhere herein
under "Selling Shareholders". The Company will receive none of the
proceeds of any sales by the Selling Shareholders.
The Company will pay substantially all of the expenses with respect to the
offering to the public and the sale of the Acquisition Stock, as well as
with respect to the offering and the sale of the Selling Shareholder Stock
(the Acquisition Stock and the Selling Shareholder Stock being sometimes
referred to as the "Registered Securities"), including the costs associated
with registering the Registered Securities under the Securities Act and
preparing and printing this Prospectus. Normal broker fees and any
applicable transfer taxes are payable individually by the Selling
Shareholders. (See "Use of Proceeds", "Selling Shareholders" and
"Description of Securities of the Company").
The Common Stock of the Company is traded on American Stock Exchange
("AMEX") under the symbol "UAX". On January 24, 2000, the closing price of
the Common Stock of the Company, as reported by AMEX, was $8.75 per share.
The Company anticipates that the terms of business combinations, if any,
involving the issuance of Acquisition Stock will be determined by direct
negotiations with the owners or controlling persons of the securities,
business or assets to be acquired by the Company. Shares of Acquisition
Stock issued will be valued at prices reasonably related to then-current
market prices, subject to negotiation. No underwriting discounts or
commissions will be paid, although finder's fees may be paid, in connection
with business combination transactions involving the issuance of shares of
Acquisition Stock. Any person receiving a finder's fee may be deemed to be
an underwriter within the meaning of the Securities Act. No prediction as
to the actual negotiated price per share can be made. (See "Trading and
Market Prices" and "Plan of Distribution").
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED UPON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
SEE "RISK FACTORS", BEGINNING ON PAGE 7, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE
SECURITIES OFFERED.
The date of this Prospectus is _______________, 2000
So long as the Registration Statement of which this Prospectus forms a
part is effective and the disclosure set forth herein is current, the
Selling Shareholders may sell the Selling Shareholder Stock publicly. The
Selling Shareholder Stock offered by this Prospectus may be sold from time
to time by the Selling Shareholders. The distribution of the Selling
Shareholder Stock by the Selling Shareholders may be effected in one or
more transactions that may take place on the AMEX, on the over-the-counter
market, including ordinary broker's transactions, privately negotiated
transactions or through sales to one or more dealers for resale of such
securities as principals at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
Usual and customary or specially negotiated brokerage fees or commissions
may be paid by the Selling Shareholders in connection with sales of such
Selling Shareholder Stock. The Selling Shareholders and intermediaries
through whom the shares of Selling Shareholder Stock are sold may be deemed
to be "underwriters" within the meaning of the Securities Act with respect
to the shares of Selling Shareholder Stock offered. The Company has agreed
to indemnify certain of the Selling Shareholders against certain
liabilities, including liabilities under the Securities Act.
This Prospectus contains information concerning the Company as of the date
of this Prospectus, unless otherwise indicated. The delivery of this
Prospectus at any time does not constitute a representation that the
information contained herein is correct as of any date other than the date
of this Prospectus, unless otherwise indicated, and the delivery of this
Prospectus shall not create any implication that there has been no change
in the business or affairs of the Company since such date.
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS UNDER "PROSPECTUS SUMMARY",
"RISK FACTORS", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS", IN ADDITION TO CERTAIN
STATEMENTS CONTAINED ELSEWHERE IN THIS PROSPECTUS, ARE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995 AND ARE, THUS, PROSPECTIVE. SUCH FORWARD-LOOKING STATEMENTS
ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM FUTURE RESULTS EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE MOST SIGNIFICANT OF SUCH
RISKS, UNCERTAINTIES AND OTHER FACTORS ARE DISCUSSED ELSEWHERE HEREIN UNDER
"RISK FACTORS", BEGINNING ON PAGE 5 OF THIS PROSPECTUS, AND PROSPECTIVE
INVESTORS ARE URGED TO CONSIDER CAREFULLY SUCH FACTORS.
ADDITIONAL INFORMATION
The Company is subject to certain of the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports and other information (the "1934 Act Filings")
with the Securities and Exchange Commission (the "Commission"). The
Company has filed with the Commission a Form S-1 Registration Statement
(herein, together with all amendments thereto, called the "Registration
Statement") of which this Prospectus constitutes a part, under the
Securities Act and the Rules and Regulations promulgated thereunder, with
respect to the securities offered hereunder. This Prospectus omits certain
information contained in the Registration Statement, and reference is made
to the Registration Statement, including the exhibits thereto, for further
information with respect to the Company and the securities offered
hereunder. Statements contained in this Prospectus as to the contents of
any contract or other document are summaries that are not necessarily
complete, and, in each instance, reference is made to the copy of such
contract or other document filed as an exhibit to the Registration
Statement, each such statement herein being qualified and amplified in all
respects by such reference. Copies of the Registration Statement,
including the exhibits thereto and the 1934 Act Filings, can be inspected
and copied, upon the payment of the fee prescribed by the Rules and
Regulations of the Commission, at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the regional offices of the Commission located at 500 West
Madison Street, Room 1400, Chicago, Illinois 60606, and at 7 World Trade
Center, Suite 1300, New York, New York 10048. Also, the Registration
Statement, with exhibits, as well as all other documents filed
electronically with the Commission, may be examined on and/or downloaded
from the Internet at: http://www.sec.gov.
GLOSSARY OF TERMS
Dial-up: Traditional means of Internet customer access using standard
telephone instruments via telephone land lines.
E-commence: electronic commerce over the Internet.
Internet: A network of networks spanning the entire world.
NOC: Network Operations Center, the hub of an ISP's network which monitors
network traffic, services and security issues, as well as the performance
of all network-related equipment and computer software.
POP: Point-of-Presence - a location that accepts Internet access customer
logins.
Quick-CellTM: a scaled-down version of the Company's proprietary US.RF
Wireless Internet access system designed for ease and speed of installation.
US.RFTM Wireless Internet: the Company's proprietary Internet access system
that provides Internet access without the use of telephone lines and
operates primarily in the 2400 MHz band usiing two-way modems. "US.RF"
stands for "Unites States Radio Frequency".
Wireless Internet: Internet customer access provided without the use of
standard telephone instruments or telephone land lines.
PROSPECTUS SUMMARY
THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS QUALIFY THE FOLLOWING
SUMMARY IN ITS ENTIRETY, AND PROSPECTIVE PURCHASERS OF ANY OF THE
SECURITIES OFFERED HEREBY SHOULD READ SUCH MORE DETAILED INFORMATION IN
CONJUNCTION WITH THE FOLLOWING SUMMARY. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED
HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE,
BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THE SECTION OF THIS PROSPECTUS
UNDER THE CAPTION "RISK FACTORS." THE COMPANY OBTAINED CERTAIN INDUSTRY
DATA USED IN THIS PROSPECTUS FROM INDUSTRY AND GOVERNMENT SOURCES, AND THE
COMPANY HAS NOT INDEPENDENTLY VERIFIED SUCH DATA. THIS PROSPECTUS MAKES
REFERENCE TO TRADEMARKS OF OTHER COMPANIES, WHICH MARKS ARE THE PROPERTY OF
SUCH COMPANIES.
The Company
In July 1999, the Company changed its name to "USURF America, Inc.", from
"Internet Media Corporation". The Company was incorporated in the State of
Nevada on November 1, 1996, under the name "Media Entertainment, Inc.", to
act as a holding company in the wireless cable and community (low power)
television industries. Due to current market conditions in the wireless
cable industry, the Company has abandoned its efforts to develop its
wireless cable properties. In furtherance of its plan to focus on the
exploitation of its US.RF Wireless Internet access products and the
expansion of its other Internet services, the Company has assigned all of
its community television properties to New Wave Media Corp. ("New Wave"),
in exchange for 1,500,000 shares of such entity's common stock. The
Company's Board of Directors has declared a dividend with respect to all
1,500,000 New Wave shares. (See "Dividends").
The Company's outlook changed fundamentally in January 1999, when it
acquired CyberHighway, Inc., a Boise, Idaho-based ISP with approximately
30,000 dial-up subscribers. In addition to CyberHighway, the Company has
completed acquisitions of two ISPs located in Santa Fe, New Mexico, as well
as ISPs located in Denver, Colorado, Idaho Falls, Idaho, Demorest, Georgia,
and Brewton, Alabama (see "Litigation"). In addition, the Company has
executed an agreement to acquire an ISP located in Pocatello, Idaho, and
the Company is currently negotiating to acquire other ISPs, with which no
definitive acquisition agreement has been executed.
While the Company intends to continue to seek growth in its dial-up
Internet access business, the Company has determined to commit
substantially all available current and any future capital to the
exploitation of its US.RF Wireless Internet access products. (See
"Business").
References herein to the "Company" include the Company's subsidiaries,
CyberHighway, Inc., Santa Fe Wireless Internet, Inc., and USURF America
(Alabama), Inc., unless the context requires otherwise. The Company's
headquarters is located at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809. Its telephone number is (225) 922-7744; its Internet web site is
www.usurf.com.
The Offering
It is intended that the Company will offer shares of the Acquisition Stock
to which this Prospectus relates from time to time in the future for the
purpose of effecting business combinations. Each issuance of shares of the
Acquisition Stock pursuant to this Prospectus will be as a result of a
transaction resulting in the acquisition by the Company of an interest in a
business through a business combination transaction. The price per share
of the Acquisition Stock on such issuances will be negotiated; the
consideration for the issuance of shares of the Acquisition Stock will be
stock or assets of the potential combination candidate, not cash. There is
no combination transaction pending or agreed to as of the date of this
Prospectus involving shares of the Acquisition Stock to which this
Prospectus relates. It is not currently anticipated that shares of the
Acquisition Stock will be offered by anyone other than the Company. (See
"Proposed Transactions" under "Business" and "Plan of Distribution").
In addition, the Selling Shareholders intend to offer and sell their
respective shares of the Selling Shareholder Stock, pursuant to this
Prospectus. (See "Plan of Distribution").
Common Stock offered by:
The Company 2,000,000 shares (1)
Selling Shareholders 793,084 shares (2)
Common Stock Outstanding
Prior to this Offering 12,707,977 shares
Common Stock Outstanding
After this Offering 15,038,454 shares (3)
American Stock Exchange
Trading Symbol: UAX
- ------------
(1) Such shares will be offered and issued from time to time in connection
with future acquisitions by the Company.
(2) 462,607 of such shares are currently issued and outstanding and may be
offered and sold from time to time by the Selling Shareholders. An
additional 330,477 shares may be purchased from the Company upon the
exercise of certain warrants and thereafter sold by the holders thereof,
pursuant to this Prospectus. Does not include shares of Common Stock that
may be issued pursuant to anti-dilution provisions of various outstanding
warrants.
(3) Assumes: (A) the issuance of all 2,000,000 shares of the Acquisition
Stock in acquisitive transactions and (B) exercise of all 330,477 warrants
of the Company.
Summary Pro Forma Financial Data
The following table presents summary information from the unaudited pro
forma condensed statements of operations of the Company for the year ended
December 31, 1998, and assumes that the acquisition of CyberHighway had
occurred on January 1, 1998.
Year Ended
12/31/98
(unaudited)
Revenues $ 2,454,596
Total Operating Expenses 10,330,847
Operating Loss (7,876,251)
Net Loss (6,124,330)
Net Loss Per Share (.84)
Weighted Average Number of
Shares Outstanding 9,360,506
This summary pro forma financial information should be read in conjunction
with the financial statements of the Company appearing elsewhere herein.
The following table presents summary information from the unaudited pro
forma condensed balance sheet of the Company as of December 31, 1998, as if
the acquisition of CyberHighway had occurred on December 31, 1998.
As at
12/31/98
(unaudited)
Current Assets $ 314,283
Total Assets 21,772,750
Working Capital (Deficit) (160,161)
Current Liabilities 474,444
Deferred Tax Liability 5,260,690
Shareholders' Equity 16,037,616
This summary pro forma financial information should be read in conjunction
with the financial statements of the Company appearing elsewhere herein.
Summary Historical Financial Information
The following table presents summary information from the historical
financial information of the Company for the periods indicated.
STATEMENT OF OPERATIONS DATA:
Cumulative
Nine Since
Months Inception
Ended Year Ended December 31, (12/28/95)
9/30/99 1998 1997 1996 to 12/31/98
(unaudited) (audited) (audited) (audited) (unaudited)
Revenue $2,047,364 $ 5,440 $ 596 $ 3,337 $ 9,373
Expen-
ses 8,151,874 1,043,066 625,400 27,574 1,696,040
Net
Loss 5,619,445 1,037,626 624,804 24,237 1,686,667
Loss
per
share (.51) (0.14) (0.10) (0.04) (0.36)
Weighted
Average
Number
of Shares
Out
stan-
ding 11,034,764 7,361,275 6,193,678 631,622 4,715,763
BALANCE SHEET DATA:
As at Year Ended December 31,
9/30/99 1998 1997
(unaudited)
Working Capital
(Deficit) $ (133,635) $(240,806) $(198,714)
Total Assets 22,063,067 333,659 236,256
Total Current
Liabilities 487,430 249,071 198,938
Shareholders'
Equity 16,915,416 84,588 37,318
This summary financial information should be read in conjunction with the
financial statements of the Company appearing elsewhere herein.
Risk Factors
An investment in the Common Stock of the Company involves certain risks and
other considerations associated with the Company and its business
operations, including, among others, intense competition, dependence upon
consumer acceptance, dependence on management, dilution and need for
additional financing. (See "Risk Factors").
Management
The directors of the Company are David M. Loflin, Waddell D. Loflin, Julius
W. Basham, II, Richard N. Gill, Ross S. Bravata and Michael Cohn. Mr.
David Loflin serves as President, Mr. Waddell Loflin serves as Vice
President and Secretary, James Kaufman serves as Vice President - Corporate
Development and Darrell Davis serves as Vice President - U.S. Internet
Operations. Mr. Basham, pursuant to the terms of a Settlement Agreement,
dated as of November 30, 1999, resigned as Chief Operating Officer on
January 4, 2000. (See "Management" and "Certain Transactions").
RECENT DEVELOPMENTS
In recent months, the Company has negotiated contracts with two companies
that serve as Internet backbone providers, NaviNet and ioNET, a subsidiary
of PSINet, Inc. These agreements, plus an existing agreement with Electric
Lightwave, have, in effect, transformed the Company from a regional ISP to
a national ISP, an ISP that can provide dial-up Internet access in the vast
majority of the 100 largest metropolitan statistical areas in the United
States. With these agreements in place, the Company announced its National
Reseller Program for its dial-up Internet access service, marketed under
the "USURF America" brand name. It is expected that the impact of this
effort will begin to appear during the first quarter of 2000. Through the
National Reseller Program and through acquisitions of local, independent
ISPs, the Company intends to continue to seek growth in its dial-up
Internet access business.
However, all available current and future capital of the Company will be
applied to the exploitation of the Company's US.RF Wireless Internet access
products. It is these products upon which the Company's future is based.
(See "Business").
THE COMPANY
In July 1999, the Company changed its name to "USURF America, Inc.", from
"Internet Media Corporation". The Company was incorporated in the State of
Nevada on November 1, 1996, under the name "Media Entertainment, Inc.", to
act as a holding company in the wireless cable and community (low power)
television industries. Due to current market conditions in the wireless
cable industry, the Company has abandoned its efforts to develop its
wireless cable properties. In furtherance of its plan to focus on the
exploitation of its US.RF Wireless Internet access products and the
expansion of its other Internet services, the Company has assigned all of
its community television properties to New Wave Media Corp. ("New Wave"),
in exchange for 1,500,000 shares of such entity's common stock. The
Company's Board of Directors has declared a dividend with respect to all
1,500,000 New Wave shares. (See "Dividends").
The Company's outlook changed fundamentally in January 1999, when it
acquired CyberHighway, Inc., a Boise, Idaho-based ISP with approximately
30,000 dial-up subscribers. In addition to CyberHighway, the Company has
completed the following acquisitions: (1) in September 1998, the Company,
through its wholly-owned subsidiary, Santa Fe Wireless Internet, Inc.,
acquired the assets and going business of Desert Rain Internet Services
("DSRT"), a Santa Fe, New Mexico-based ISP; (2) in June 1999, the Company,
through its wholly-owned subsidiary, Santa Fe Wireless Internet, Inc.,
acquired Santa Fe Trail Internet Plus, Inc. ("SFTIP"), another Santa Fe,
New Mexico-based ISP; (3) in August 1999, the Company acquired the going
business known as "www.usurf.com"; (4) in August 1999, the Company, through
its wholly-owned subsidiary, USURF America (Alabama), Inc., acquired Net 1,
Inc., a Brewton, Alabama-based ISP, which acquisition is currently in
arbitration as the Company attempts to rescind the transaction (see
"Litigation"); (5) in August 1999, the Company acquired Premier Internet
Services, Inc., an Idaho Falls, Idaho-based ISP; (6) in November 1999, the
Company acquired the customer base of Cyber Mountain, Inc., a Denver,
Colorado-based ISP; and (7) in December 1999, the Company acquired certain
customers and related assets of CyberHighway of North Georgia, Inc., a
Demorest, Georgia-based ISP. In addition, the Company has executed an
agreement to acquire an ISP located in Pocatello, Idaho, and the Company is
currently negotiating to acquire other ISPs, with which no definitive
acquisition agreement has been executed.
While the Company intends to continue to seek growth in its dial-up
Internet access business, the Company has determined to commit
substantially all available current and any future capital to the
exploitation of its US.RF Wireless Internet access products. (See
"Business").
References herein to the "Company" include the Company's subsidiaries,
CyberHighway, Inc., Santa Fe Wireless Internet, Inc., and USURF America
(Alabama), Inc., unless the context requires otherwise. The Company's
headquarters is located at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809. Its telephone number is (225) 922-7744; its Internet web site is
www.usurf.com.
RISK FACTORS
When evaluating an investment in the Company, the risks and uncertainties
described below should be considered carefully. These risks and
uncertainties described are not the only risks and uncertainties faced by
the Company. Were any of the following risks actually to occur, the
Company's business, financial condition or results of operations could be
materially and adversely affected. In such case, the trading price of the
Company's Common Stock could decline, which could cause an investor to lose
of all or part of his investment in the Company's Common Stock.
Risks Concerning the Company
Limited Operating History; History of Losses. The Company has a limited
operating history and has never earned a profit from its operations. The
Company's operations, including the operations of its ISP subsidiaries and
proposed operations, are subject to all of the risks inherent in the
establishment of a new business, particularly one in the highly competitive
and rapidly evolving Internet industry. These risks include the Company's
ability (1) to achieve customer acceptance of the Company's US.RF Wireless
Internet access products, (2) to expand its subscriber base, wireless and
dial-up, and subscriber-related revenues, (3) to compete successfully in a
highly competitive market, (4) to gain access to sufficient capital with
which to support anticipated growth, (5) to recruit and train qualified
employees and (6) to upgrade the Company's network systems and
infrastructure. The Company cannot be certain that it will successfully
address any of these risks. In addition, the Company's business is subject
to general economic conditions, which may not be favorable in the future.
Even if the Company is successful in addressing these risks, there is no
assurance that the Company will ever earn a profit from its operations.
(See "Management's Discussion and Analysis of Financial Condition and
Results of Operations").
Going Concern Opinion. The Company's independent auditor, Weaver and
Tidwell, L.L.P., expressed, in its opinion on the Company's audited
financial statements for the year ended December 31, 1998, substantial
doubt about the Company's ability to continue as a going concern.
Reference is made to the financial statements of the Company included
elsewhere herein, and, specifically, to the Independent Auditor's Report
and Note 1 to the financial statements of the Company appearing elsewhere
herein.
Potential Pricing Pressure Due to Intense Competition. The Company faces
intense competition in conducting its business and this level of
competition will continue to increase for the foreseeable future. Many of
the Company's competitors include other ISPs with much larger subscriber
bases and greater resources. Further, a significant number of competitors
offer a broader variety of business services, and may have done so for
longer periods of time. Each local market in which the Company provides
Internet access is served by multiple Internet access providers. The
current and prospective competitors include may large companies, many of
which are better known than the Company and can be expected to possess
greater financial, technical and marketing resources than the Company.
(See "Business - Competition").
As a result of increased competition within the Internet industry, the
Company expects to encounter significant pricing pressure. The Company
cannot be certain that it will be able to offset the effects of any
competition-induced price reductions through an increase in the number of
its subscribers, increased revenues, cost reductions or otherwise, or that
the Company will have the resources, financial or otherwise, to compete
successfully.
Aggressive Growth Strategy May Strain Resources. The Company is attempting
to expand its Wireless Internet access business and its dial-up Internet
access business, under the "USURF America" trade name and has begun an
aggressive effort to increase its customer base, as well as to pursue
existing and potential market opportunities. The Company expects that its
planned rapid growth will place a significant strain on its managerial,
operational and financial resources. In particular, the Company's planned
Wireless Internet expansion will require significant capital with which to
purchase equipment necessary for the construction and implementation of
locations. The Company believes that the growth of its Wireless Internet
access business will be impeded primarily by a lack of capital, rather than
by a lack of customer acceptance.
In order to manage expected growth, the Company must improve its
operational systems, procedures and controls on a timely basis. Should
these systems not be effective in keeping pace with the Company's growth,
the quality and reliability of the Company's services may decline and
levels of customer satisfaction could be harmed.
Expected Fluctuations in Quarterly Operating Results. Due to its expected
growth, the Company anticipates that its revenues and operating results may
fluctuate significantly from quarter to quarter. Several factors are
likely to cause such fluctuations, including, without limitation, (1)
market acceptance of the Company's US.RF Wireless Internet access products
and enhanced versions of the Company's dial-up products and services, (2)
the rate of new subscriber acquisitions, (3) subscriber retention, (4)
changes in Company pricing policies or those of competitors, (5) capital
expenditures and other costs relating to the expansion of Company
operations, (6) the timing of new product introductions and service
announcements made by the Company or competitors, (7) personnel changes,
(8) the introduction of alternative technologies, (9) the effect of
potential acquisitions, (10) increased competition in the Company's
markets, and (11) promulgation of new and/or more restrictive governmental
regulations. No prediction as to the future operating results of the
Company can be made. (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations").
Potential Inability to Obtain Needed Expansion Capital. The Company's
ability to grow depends, in large measure, on its ability to expand the
market penetration of its dial-up and Wireless Internet access business,
which require significant equipment expenditures and advance expenditures
and commitments for leased telecommunications facilities and advertising.
Since its acquisition of CyberHighway (January 1999), the Company's
operations have provided a level of funds sufficient to permit the Company
to grow at a slow rate. In order for the Company to achieve its aggressive
growth plans, the Company will be required to obtain significant additional
capital, through debt or equity financing. There is no assurance that the
Company will be able to obtain such additional capital in the future on
terms acceptable to the Company, or at all. Should alternative sources of
financing be insufficient or unavailable, the Company would be required to
reduce the scope of its growth and operating plans in accordance with the
extent of available financing.
Dependence on Third-party Suppliers and Telecommunications Carriers. The
Company depends on third-party suppliers of hardware components and
telecommunications carriers to provide equipment and networking services.
The Company obtains its US.RF Wireless Internet-related equipment from a
single source, while it acquires its dial-up related hardware components
used in its network system from just a few sources, including
server/processors manufactured by Intel, modems manufactured by Lucent
Technologies and U.S. Robotics and high performance routers, which are
devices that receive and transmit data between different networks,
manufactured by Cisco Systems. In its dial-up operations, the Company
currently relies on a few local telephone companies and others, such as
U.S. West, Electric Lightwave and GST, to lease to it data communications
capacity via local telecommunications lines and leased long-distance lines.
The Company currently relies on NaviNet, Inc., ioNET, Inc., a division of
PSINet, Inc., and Electric Lightwave for a significant portion of its
Internet network, as well as Internet backbone access in most markets. The
Company's suppliers and telecommunications carriers also sell or lease
products and services to its competitors and may be, or in the future may
become, competitors to the Company. The anticipated expansion of the
Company's network infrastructure and other competitors' needs will continue
to place a significant demand on suppliers and telecommunications carriers.
The Company cannot be certain that its suppliers and telecommunications
carriers will continue to sell or lease their products and services to it
at commercially reasonable prices, or at all. Should the Company incur
difficulties in developing alternative sources of supply, if required, the
business, future financial condition or operating results of the Company
may be adversely affected. Moreover, failure of the Company's
telecommunications providers to provide the data communications capacity
required, for any reason, could cause interruptions in the Company's
ability to provide Internet access services to its customers, which may
materially and adversely affect the business, financial condition and
operating results of the Company.
Necessity of Expanding Network Infrastructure. The Company's network
infrastructure is composed of a complex system of routers, switches,
transmission lines and other hardware used to provide its subscribers with
Internet access and other services. The future success of the Company's
dial-up business will depend on the capacity, reliability and security of
this network infrastructure. The Company will have to expand and adapt its
network infrastructure as the number of subscribers and the amount and type
of information these subscribers transmit over the Internet increases. Such
network infrastructure expansion and adaptation will require substantial
financial, operational and management resources. There is no assurance
that the Company will be able to expand or adapt its network infrastructure
to meet additional demand or changing subscriber requirements on a timely
basis and at a commercially reasonable cost, or at all.
Network Capacity Constraints Can Impede Service to Subscribers. Capacity
constraints within the Company's network and those of its suppliers have
occurred in the past and will likely occur in the future, due to the
explosive growth of the Internet industry. Such constraints may prevent
subscribers from gaining access to a particular POP or may inhibit a
subscriber from connecting to system-wide services, such as e-mail and
newsgroup services. It is possible that the Company may, in the future,
experience delays in the delivery of networking components or systems from
third-party suppliers, which could have the effect of delaying the delivery
of service to customers or cause all incoming modem lines to become full
during peak times, resulting in busy signals for subscribers who are trying
to connect to the Company's network. Similar problems could occur, if the
Company is unable to expand the capacity of its information servers for
e-mail, newsgroups and the World Wide Web fast enough to keep up with the
demand from an expanding subscriber base. Any failure of the Company to
provide its customers with the requisite network capacity to enable them to
access readily the Internet would cause the Company's subscribers to
experience an overall slow-down in their Internet access, which more likely
than not would injure subscriber relations. Any such failure of the
Company to expand or enhance its network infrastructure on a timely basis
or adapt it to an expanding subscriber base, changing subscriber
requirements or evolving industry standards could cause the Company's
business, financial condition and operating results could to be materially
and adversely affected.
No Mirror Site; Service Disruptions Could Result in Subscriber
Cancellations. Substantially all of the Company's computer equipment,
including critical equipment dedicated to its Internet access services, is
presently located at a single facility in Boise, Idaho, and the Company has
not yet established a "mirror" site, that is, a redundant NOC that can
process dial-up customers, in the event the Boise NOC experiences service
interruption. The occurrence of a natural disaster, the failure of one or
more systems or the occurrence of other unanticipated problems at this NOC
could cause interruptions in Internet services. In the ISP industry,
extensive or multiple interruptions in Internet services are a primary
reason for customer decisions to cancel the use of a particular Internet
access service. Accordingly, any disruption of the Company's services, due
to system failure, could materially and adversely affect the Company'
business, financial condition and operating results.
Need to Adapt to Technology Trends and Evolving Industry Standards. The
dial-up Internet access market served by the Company is susceptible to
rapid changes, due primarily to technology innovations, as well as evolving
industry standards, changes in subscriber needs and frequent new service
and product introductions. New services and products based on new
technologies or new industry standards expose the Company to risks of
equipment obsolescence. The Company will be required to use leading
technologies effectively, continue to develop its technical expertise and
enhance its existing services on a timely basis to remain competitive in
this industry. While the development of the Company's proprietary Wireless
Internet access and other wireless technologies are expected to aid the
Company in its efforts to remain on the leading edge of Internet-related
technology, there is no assurance that this will be the case.
Specifically, there is no certainty that the Company will effectively
utilize new technologies in its operations.
The Company's ability to compete successfully in its markets also depends
on the continued compatibility of its services with products and systems
utilized and sold by various third parties. Although the Company intends
to support emerging standards in the Internet access market, as well as in
the enhanced business services market, there is no assurance that the
Company will be able to conform to these new standards in a timely fashion
and maintain a competitive position in the market.
Even though the Company's Wireless Internet access technology is a
leading-edge Internet access delivery system, there is no assurance that
this technology will permit the Company to remain competitive in its
markets. Recently, several companies have introduced cable modems, which
possess the ability to transmit data at substantially faster speeds than
the modems currently employed by the Company in its dial-up business, but
not at speeds faster than can be offered through the Company's US.RF
Wireless Internet access products. Nevertheless, though the Company will
continue to pursue the development of faster, more efficient Internet
access technologies, there is no assurance that the Company will be able to
support the costs associated with such product development efforts, which
could cause a materially adverse affect on the Company's operations.
Growth Plans Dependent on Continued Internet Growth. During the past five
or so years, the use of the Internet has grown exponentially. Although the
Company believes its US.RF Wireless Internet access technology is
positioned as a replacement for traditional, hard-wire-based Internet
access, a portion of the expected growth of the Company's business depends
on the continued growth of the Internet, the growth of the dial-up access
market, and the continued development of the Internet as a viable
commercial medium. If the use of the Internet does not continue to grow or
evolves in a way that the Company is unable to address effectively, it is
likely that the Company's business, financial condition and operating
results would be materially and adversely affected.
Uncertainty of Subscriber Retention. Because sales, marketing and other
costs of acquiring new subscribers are substantial in relation to the
monthly fees derived from such subscribers, the Company believes that its
long-term success depends largely on its ability to retain existing
subscribers, while continuing to attract new subscribers. The Company
intends to continue to invest significant resources in its wireless
technologies, network infrastructure and customer and technical support
capabilities, in order to continue to provide high levels of customer
service. There is no assurance that these efforts will maintain or improve
subscriber retention of the Company. The Company believes that intense
competition from competitors, some of which offer free hours of service or
other enticements for new subscribers, will continue to cause a small
percentage of its subscribers to switch to a competitor's service. In
addition, some new subscribers use the Internet only as a novelty and do
not become consistent users of Internet services and, therefore, may be
more likely to discontinue their service. These factors, among others,
adversely affect the Company's subscriber retention rates. Any decline in
subscriber retention rates could have a materially adverse effect on the
Company's business, financial condition and operating results.
Potential State and Federal Government Regulations. The Company provides
Internet access and other Internet-related services, in part, using
telecommunications services provided by carriers that are subject to the
jurisdiction of state and federal regulators. With the increasing
popularity and use of the Internet, state and federal regulators may, with
or without rational bases, adopt additional laws and regulations relating
to content, user privacy, pricing and copyright infringement. The Company
is unable to predict the impact, if any, that any such future regulation or
regulatory changes would have on its business. (See "Regulation").
The Company's US.RF Wireless Internet access products operate in
unregulated spectra, primarily in the 2400 MHz spectrum and the Company
expects that such spectrum will remain unregulated.
Potential Liability for Network Intrusions or Computer Viruses. Although
the Company has implemented, and will continue to implement, high-level
network security measures, its network and computer systems are somewhat
vulnerable to intrusions from "hackers", computer viruses or similar
disruptive problems caused by, or transmitted through, subscribers or other
Internet users. Any such disruptions could lead to interruptions, delays
or cessation in service to subscribers. Inappropriate use of the Internet
by third parties could also potentially jeopardize the security of
confidential information stored in the Company's computer systems or those
of subscribers, which may cause losses either to the Company or its
subscribers. The potential occurrence of such disruptions may deter
certain persons from subscribing to Company services. Company efforts to
alleviate any such problems caused by computer viruses or other breaches of
security likely would cause interruptions, delays or cessation in service
to subscribers, which could have a materially adverse effect on the
Company's business and operations.
As the volume of commercial transactions consummated over the Internet
increases, the Company will face an increase in potential liability arising
from network malfunctions or security breaches that impede the completion
of such transactions or permit completion of transactions at compromised
levels of security. It is possible that subscribers or others could assert
claims of liability against the Company as a result of any such network
malfunctions or security breaches. Moreover, until such time as more
comprehensive security technologies have been developed and implemented,
security and privacy concerns of existing and potential subscribers may
inhibit the growth of the Internet service industry, in general, and the
Company's subscriber base and revenues, in particular.
Acquisition of Internet Access Subscribers May Cause Subscriber
Cancellations. As part of the Company's growth strategy, the Company is
seeking to acquire select local, independent ISPs in certain key states.
Any such acquisition may appear to that ISP's customers as a change in
their ISP. This perceived change could result in subscriber cancellations,
in the short-term period following the acquisition, due to the lack of an
acquired subscriber's familiarity with the Company or due to billing issues
arising from poor record keeping or billing administration by the acquired
ISP. In acquiring an ISP, it is possible that the Company could encounter
difficulties in assimilating personnel and operating techniques of the
acquired ISP. Any such difficulties have the potential for disrupting the
Company's then-ongoing business and distracting the attention of
management, as well as resulting in unanticipated costs and difficulty in
maintaining Company operating and service standards, controls and
procedures. There can be no assurance given that the Company would succeed
in overcoming any of these risks or other problems associated with the
Company's growth strategy.
Potential Liability for Material Transmitted Over Company Network. Laws
relating to the liability of Internet access providers for information
carried on, or disseminated through, their networks are unsettled. The
Federal Telecommunications Act of 1996 imposes fines on any entity that
knowingly permits any telecommunications facility under such entity's
control to be used to make obscene or indecent material available to minors
via an interactive computer service. The Company is unable to predict
whether any claim under such federal statute, similar state statutes or
common law will be asserted against it, or, if asserted, whether it would
be successful. It is possible that, as the law in this area develops, the
Company may be required to expend substantial resources or discontinue
certain services to reduce its exposure to the potential imposition of
liability for information carried on, and disseminated through, its
network. Any costs incurred by the Company as a result of contesting any
such asserted claims or the consequent imposition of any liability could
materially and adversely affect the Company's business, financial condition
and operating results.
In addition, because materials may be downloaded by Company subscribers and
subsequently distributed to others, it is possible that persons could make
claims against the Company for defamation, negligence, copyright or
trademark infringement or other causes of action based on the nature,
content, publication and distribution of such materials. The Company also
could be exposed to liability with respect to the offering of third-party
content that may be accessible through its services, including links to web
sites maintained by Company subscribers or other third parties, or posted
directly to a Company web site, and subsequently retrieved by a third party
through the Company's service. It is also possible that, if any
third-party content provided through the Company's service contains errors,
third parties who access such material could make claims against the
Company for losses incurred in reliance on such information. Because the
Company offers e-mail services, it is exposed to other potential risks,
such as liabilities or claims resulting from unsolicited e-mail, lost or
misdirected messages, illegal or fraudulent use of e-mail or interruptions
or delays in e-mail service. Any such claims, whether such claims are with
or without merit, are likely to divert management's time and attention and
result in significant costs to investigate and defend.
New Product; Possible Lack of Consumer Acceptance. The Company intends to
be the first Wireless ISP of its kind in each of its proposed markets.
While the Company expects that its Wireless ISP service will be readily
accepted by consumers, as with any new product or service, there can be no
assurance that the Company's Wireless ISP service will be accepted by
consumers in commercially viable numbers.
Competition. The market for the provision of Internet access services is
extremely competitive and highly fragmented. As there are no significant
barriers to entry, the Company expects that competition will intensify. It
also believes that the primary competitive factors determining success as
an ISP are (1) a reputation for reliability and high-quality service, (2)
effective customer support, (3) access speed, (4) pricing, (5) effective
marketing techniques for customer acquisition, (6) ease of use and (7)
scope of geographic coverage. The Company believes that it can, and in the
future will, more effectively, compete in its markets, although there is no
assurance that the Company will be able to compete successfully in its
markets, such that the Company's business, operating results and financial
condition would not be materially and adversely affected.
Current and prospective competitors of the Company include many large,
nationally-known companies, such as America Online, Mindspring, Earthlink
and Flashnet, that possess substantially greater resources, financial and
otherwise, market presence and brand name recognition than does the
Company, including its subsidiaries. With respect to the Company's
Internet access and other Internet-related services, the Company currently
competes, or expects to compete, for the foreseeable future, with the
following: national ISPs, numerous regional and local ISPs, most of which
have significant market share in their markets; established on-line
information service providers, such as America Online, which provide basic
Internet access, as well as proprietary information not available through
public Internet access; providers of web hosting, co-location and other
Internet-based business services; computer hardware and software and other
technology companies that provide Internet connectivity with their
products; telecommunications companies, including global long distance
carriers, regional Bell operating companies and local telephone companies;
operators that provide Internet access through television cable lines;
electric utility companies; communications companies; companies that
provide television or telecommunications through participation in satellite
systems; and, to a lesser extent, non-profit or educational Internet access
providers. (See "Business - Competition").
Dependence on Management. The Company is dependent on its current
management for its success. In particular, the Company is dependent on the
efforts of its President, David M. Loflin, for its success. The Company
and Mr. Loflin have entered into an employment agreement, although no
key-man life insurance been purchased with respect to Mr. Loflin or any
other members of management.
Also, the Company's success is dependent upon its ability to attract and
retain qualified employees to meet the Company's future needs. The Company
does not expect any difficulty in attracting and retaining qualified
employees.
Control of the Company. As of January 24, 2000, the Company's directors
and executive officers owned approximately 47.34% of the Company's
outstanding shares of Common Stock, and certain of the officers and
directors of the Company, as well as other persons, have entered into a
voting agreement relating to the voting in elections of directors.
Currently, 6,025,903 shares, or approximately 47.42% of the outstanding
shares, are subject to this voting agreement. These shareholders will
continue to be able effectively to control the outcome of directors'
elections and thereby control the management policies of the Company, as
well as the outcome of corporate actions requiring shareholder approval by
majority action. Such ownership of Common Stock may have the effect of
delaying, deferring or preventing a change in control of the Company and
may adversely affect the voting rights of other holders of Common Stock.
(See "Management" and "Certain Transactions").
Indebtedness to Affiliates. The Company currently is indebted to its
President, David M. Loflin, in the amount of $409,926 for money loaned to
the Company, all of which is payable on demand, and approximately 60% of
which is evidenced by promissory notes and approximately 40% of which was
loaned to the Company on open account. All of such indebtedness bears
interest at 8% per annum. Mr. Loflin has advised the Company that he does
not intend to demand repayment of any portion of such indebtedness, until
such time as the Company is able to make such repayment without adversely
affecting its financial condition. However, should Mr. Loflin change his
current intention, the Company would be unable to repay Mr. Loflin, which
could have a materially adverse affect on the Company and its financial
condition.
Beginning August 1, 1999, the salaries of David M. Loflin and Waddell D.
Loflin, a Company Vice President and Secretary, began to accrue. Through
December 31, 1999, the accrued salaries of these officers totaled
approximately $105,000, and will continue to accrue at the rate of
approximately $21,000 per month, until such time as the payment of their
respective salaries will not have a materially adverse affect on the
financial condition of the Company. No prediction can be made as to when
Messrs. Loflin will be paid their accrued salaries. (See "Management's
Discussion and Analysis of Financial Condition and Results of Operations").
Conflicts of Interest. It is possible that conflicts of interest could
arise in the negotiation of the terms of any transaction between the
Company and its shareholders, officers, directors or affiliates. The
Company has no plans or arrangements, such as the hiring of independent
consultants or arbiters, for the resolution of disputes between the Company
and such persons if they arise. The Company and its shareholders could be
adversely affected, should such individuals choose to place their own
interests before those of the Company. No assurance can be given that
conflicts of interest will not cause the Company to lose potential
opportunities, profits or management attention. The Company could acquire
assets from management, principal shareholders or their affiliates or from
entities in which management, principal shareholders or their affiliates
may hold an interest. Such persons or entities could derive monetary or
other benefits from such transactions. Such benefits could include,
without limitation, the assumption of, or release from, liabilities
incurred by such persons or result in increased control of the Company by
such persons. It is possible that a portion of the shares of Common Stock
offered hereby could be issued to an affiliate of the Company, pursuant to
a business combination transaction. However, no prediction can be made in
this regard. Any such shares received by an affiliate would have the
effect of increasing the current shareholders' control of the Company. The
Board of Directors of the Company has adopted a policy regarding
transactions between the Company and any officer, director or affiliate,
including loan transactions, requiring that all such transactions be
approved by a majority of the disinterested members of the Board of
Directors and that all transactions be for a bona fide business purpose and
be structured on terms at least as favorable to the Company as could be
obtained from unaffiliated, independent third parties.
Need for Future Financing. To date, the Company has received a total of
$865,000 under four separate private offerings of units of Company
securities (shares of common stock and common stock purchase warrants), one
occurring in June 1998 ($340,000), one occurring in January 1999
($270,000), one occurring in May 1999 ($105,000) and one occurring in
November 1999 ($150,000). In addition, the Company received $337,290 from
the exercise of warrants during the third quarter of 1999. However, the
Company is in need of additional financing to exploit fully its business
opportunities. There is no assurance that the Company will be able to
locate such additional financing or, if found, that such financing would be
on terms favorable to the Company. (See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business").
Uncertainty of Significant Assumptions. The Company's plans for
implementing its proposed business operations and achieving profitability
from its intended operations are based on the experience, judgment and
certain assumptions of its management, and upon certain available
information concerning the communications industry, in general, and the
Company's proposed plan of operation, in particular. No independent market
studies have been conducted concerning the extent to which customers will
utilize the services and products to be offered by the Company, nor are any
such studies planned. There can be no assurance that the Company's plans
will materialize, or that the Company's assumptions will prove correct.
(See "Business").
Dependence on Protection of Proprietary Rights. The Company currently
relies on common law principles for the protection of its copyrights,
trademarks and trade secrets laws to protect our proprietary rights. The
Company is nearing completion of patent applications relating to certain
aspects of its US.RF Wireless Internet access technology and is nearing
completion of trademark applications relating to the "US.RF Wireless
Internet" brand name, the "Quick-Cell" brand name and the "USURF America"
brand name. There is no assurance that the Company's efforts to protect
its intellectual property rights have been or will, in the future, be
adequate to prevent the misappropriation of its technology or that third
parties, including competitors, will not independently develop technologies
that are substantially equivalent or superior to the Company's proprietary
technology.
Risks Concerning the Common Stock
Dilution. An investment in the Common Stock of the Company may result in
substantial and immediate dilution in such investment, due to the lower
book value per share of the Common Stock compared to the purchase price per
share of the Common Stock. No prediction can be made relating to the
actual dilution of an investment in the Common Stock of the Company,
inasmuch as dilution will, more than likely, be different for each business
combination exchange made under this Prospectus, as well as for each sale
of shares of the Selling Shareholder Stock made hereunder. (See "Dilution").
Possible Volatility of Market for Common Stock. The market prices for
securities of relatively new public companies have, historically, been
highly volatile. Future announcements concerning the Company or its
competitors, including operating results, technological innovations and
government regulations, could have a significant impact on the market price
of the Common Stock, increasing possible volatility.
Dividend Policy. The Company does not anticipate the payment of cash
dividends in the foreseeable future, but intends to re-invest any profits
which may be earned by the Company's business. However, the Company, during
1998, acquired shares of common stock of three private companies. The
Board of Directors of the Company has declared dividends as to all of the
shares of each of such companies. There is no assurance that shareholders
will benefit from the distribution of such dividends. (See "Dividends").
No Shareholder Approval Required for Acquisitions. It is likely that any
future transactions contemplated herein involving the issuance of shares of
the Acquisition Stock of the Company will be consummated without prior
approval of the shareholders of the Company. The Company's management, in
its sole discretion, will determine whether a proposed transaction is to be
consummated. There is no assurance that management's decisions will result
in a benefit to the Company. (See "Proposed Transactions" under "Business"
and "Management").
State Law Limitations on Director Liability for Monetary Damages. The
Company's Articles of Incorporation, as amended, substantially limit the
liability of the Company's directors to its shareholders for breaches of
fiduciary or other duties owed to the Company. (See "Management").
Risks Associated with Forward-Looking Statements. This Prospectus contains
certain forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act and the Company intends
that such forward-looking statements be subject to the safe harbors for
such statements under such law sections. The statements contained in this
Prospectus that are not historical fact are "forward-looking statements"
(as that term is defined in the referenced law sections), which can be
identified by the use of forward-looking terminology, such as "believes",
"expects", "intends", "may", "will", "should" or "anticipates" or the
negative thereof or other variations thereon or comparable terminology, or
by discussions of strategy that involve risks and uncertainties. The
Company's forward-looking statements include the plans and objectives of
management for future operations, including plans and objectives relating
to its Wireless Internet connection services, plans and objectives for
acquiring assets or businesses, plans and objectives for other lines of
businesses that the Company may enter and future economic performance of
the Company.
The forward-looking statements and associated risks set forth in this
Prospectus include or relate to: (i) ability of the Company to attract and
retain qualified technical, sales, marketing and administrative personnel
relating to the services it currently provides and intends to provide, (ii)
ability of the Company to market its services at competitive prices, (iii)
development of brand-name recognition and loyalty for the Company's
services, (iv) development of an effective sales staff, (v) market
acceptance of the Company's services, (vi) success of the Company's market
initiatives, (vii) expansion of sales in the industries to which the
Company provides its current and intended services, (viii) success of the
Company in forecasting demand for its current and intended services, (ix)
success of the Company in diversifying the Company's market to provide
services to large and small businesses, professionals and individuals, (x)
success of the Company in diversifying the types of services it offers to
customers, (xi) achievement of forecast operating margins dependent upon
price and efficient provision of services, (xii) availability of suitable
licenses or other access to intellectual property and protection for the
Company's services, (xiii) the ability of the Company to implement its
acquisition strategy and the success of that strategy, if and to the extent
it is implemented and (xiv) success of the Company in achieving increases
in net sales to reduce the cost of services sold and to decrease general,
administrative and development costs as a percentage of net sales. The
forward-looking statements are based on assumptions and judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the Company's
control. Accordingly, although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any such
assumption could prove to be inaccurate and therefore, there can be no
assurance that the results contemplated in forward-looking statements will
be realized. In addition, as disclosed elsewhere in the "Risk Factors"
section of this Prospectus, there are a number of other risks presented by
the Company's business and operations that could cause the Company's net
revenues or net loss, or growth in net revenues or net loss to vary
markedly from prior results or the results contemplated by the
forward-looking statements. Management decisions, including budgeting, are
subjective in many respects and periodic revisions must be made to reflect
actual conditions and business developments, the impact of which may cause
the Company to alter its marketing, capital investment and other
expenditures, which may adversely affect the Company's results of
operations and cash flows. In light of significant uncertainties inherent
in the forward-looking information included in this Prospectus, the
inclusion of such information should not be regarded as a representation by
the Company or any other person that the Company's objectives or plans will
be achieved.
Market Overhang; Restricted Securities. Following the effective date of
the Registration Statement of which this Prospectus forms a part and after
January 30, 2000, substantially all shares of Common Stock will be eligible
for resale to the public, pursuant to the provisions of Rule 144 of the
Rules and Regulations of the Commission, or otherwise. Such amount of
Common Stock represents a significant overhang on the market for the Common
Stock. Such overhang on the market for the Common Stock could, if a
substantial number of shares comprising such overhang were sold in a short
period of time, depress the then-current market price for the Common Stock
of the Company. However, no prediction as to the effect of such overhang
on the market for the Common Stock of the Company can be made.
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his or her
restricted stock for at least one year, including persons who may be deemed
"affiliates" of the Company, as that term is defined under the Act, would
be entitled to sell within any three-month period a number of shares that
does not exceed the greater of 1% of the then-outstanding shares of the
Company's Common Stock (approximately 127,000 shares based on the current
number of outstanding shares) or the average weekly trading volume of
trading on all national securities exchanges and/or reported through the
automated quotation system of a registered securities association of the
Company's Common Stock during the four calendar weeks preceding the filing
of the Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions and notice requirements, and
to the availability of current public information about the Company.
However, a person who is not deemed to have been an affiliate of the
Company at any time during the 90 days preceding a sale, and who has
beneficially owned his or her restricted shares for at least two years,
would be entitled to sell such shares under Rule 144 without regard to
certain of the requirements described above.
DILUTION
An investment in the Common Stock of the Company may result in substantial
and immediate dilution in such investment. With respect to a business
combination transaction contemplated herein, dilution is the reduction of a
purchaser's investment measured by the difference between the price per
share of Common Stock (as negotiated) in the exchange and the net tangible
book value per share following the exchange. No prediction can be made
relating to the actual dilution of an investment in the Common Stock of the
Company. (See "Selected Financial Data", as well as the Financial
Statements of the Company appearing elsewhere herein).
USE OF PROCEEDS
The Company will realize no cash proceeds from the issuance of shares of
the Acquisition Stock in any transaction contemplated herein. Similarly,
the Company will not receive any of the proceeds of sales of the shares of
Selling Shareholder Stock. However, should all of the currently
outstanding warrants of the Company be exercised, the Company would realize
cash proceeds of $1,346,013, which the Company would apply to the
exploitation of its US.RF Wireless Internet access products. (See
"Proposed Transactions" under "Business" and "Plan of Distribution").
TRADING AND MARKET PRICES
>From 1997 through October 1999, the Company's Common Stock was traded on
the NASD's OTC Bulletin Board under the symbol "USRF". The table below
sets forth, for the periods indicated, the high and low bid and asked
prices for the Company's Common Stock, as reported by the OTCBB:
High High Low Low
Quarter Ended: Bid Ask Bid Ask
December 31, 1997 $ .75 $ 1.625 $.0625 $.21875
March 31, 1998 $ 2.00 $ 3.00 $.03125 $.08
June 30, 1998 $ 2.00 $ 2.0625 $.8125 $.875
September 30, 1998 $ 1.50 $ 1.625 $.75 $.84375
December 31, 1998 $ 5.3125 $ 5.50 $.50 $.53125
March 31, 1999 $13.50 $13.75 $3.34375 $2.00
June 30, 1999 $ 7.375 $ 5.6875 $3.5625 $3.60
September 30, 1999 $ 8.8125 $ 8.875 $3.28125 $3.4375
These prices represented quotations between dealers without adjustment for
retail mark-ups, mark-downs or commissions, and may not have necessarily
represented actual transactions.
Beginning on October 15, 1999, the Company's Common Stock began to be
traded on the AMEX. Since that date, the closing price for the Company's
Common Stock has ranged from $2.75 per share to $10.375 per share. (See
"Trading Market for the Common Stock" under "Risk Factors - Risks
Concerning the Common Stock").
Potential investors should note that the Company's Common Stock, like many
newly-traded stocks, has experienced significant fluctuations in its price
and trading volume. No prediction with respect to the Company's Common
Stock can be made. (See "Possible Volatility of Market for Common Stock"
under "Risk Factors - Risks Concerning the Common Stock").
As of January 24, 2000, the number of record holders of the Common Stock of
the Company, excluding nominees and brokers, was approximately 1,096,
holding 12,707,977 shares.
DIVIDENDS
The Company has never paid cash dividends on its Common Stock. The Company
anticipates that any future earnings, of which there is no assurance, will
be retained for development of the Company's businesses, and, therefore, it
can be expected that no cash dividends on the Company's Common Stock will
be declared in the foreseeable future.
The Company has acquired shares of common stock of three private companies,
as follows: (1) the Company acquired 1,500,000 shares of New Wave Media
Corp., in exchange for all of the Company's community-television-related
assets; (2) the Company acquired 400,000 shares of Argo Petroleum
Corporation, in exchange for 10,000 shares of Company Common Stock; and (3)
the Company acquired 800,000 shares of Woodcomm International, Inc., in
exchange for 7,500 shares of Company Common Stock. The Board of Directors
of the Company has declared dividends as to all of the shares of each of
such companies, with record dates of December 1, 1998, January 15, 1999,
and January 31, 1999, respectively. There is no assurance that
shareholders will benefit from the payment of such dividends. None of the
three dividend distributions will occur unless and until a registration
statement relating to each distribution termination has been declared
effective by the Commission.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1998, and September 30, 1999 (unaudited). This table should
be read in conjunction with the financial statements of the Company
included herein.
As at As at
12/31/98 9/30/99
(unaudited)
Long-Term Debt $ 0 $ 4,660,221
Shareholders' Equity:
Common Stock - $.0001
par value; 100,000,000
shares authorized,
8,497,259 and
11,692,259 shares
issued, respectively 850 1,166
Additional Paid-in
Capital 2,874,189 24,508,377
Deficit Accumulated
During the Development
Stage (1,686,667) 5,247,322
Other (1,102,924) 2,345,945
Shareholders' Equity 84,588 16,915,416
Total Capitalization 84,588 21,575,637
SELECTED FINANCIAL DATA
The following selected financial data have been derived from the financial
statements of the Company, which financial statements are included
elsewhere herein. The selected financial data set forth below should be
read in conjunction with such financial statements, related notes and other
financial information included elsewhere in this Prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
STATEMENT OF OPERATIONS DATA - PRO FORMA
The following table sets forth the unaudited pro forma condensed statements
of operations of the Company and assumes the acquisition of CyberHighway
occurred on January 1, 1998. In the opinion of management, all adjustments
necessary to present fairly such unaudited pro forma condensed statements
of operations have been made.
Historical
USURF Cyber- Pro Forma Pro Forma
America Highway Adjustments Consolidated
Revenues $ 5,440 $2,449,156 $ - $ 2,454,596
Expenses
Internet access
cost - 510,036 - 510,036
Equipment cost - 326,488 - 326,488
Depreciation and
amortization 4,394 138,674 6,918,262(2) 7,061,330
General and
administrative 1,030,070 1,292,526 - 2,322,596
Selling - 110,397 - 110,397
Total operating
expense 1,034,464 2,378,121 6,918,262 10,330,847
Operating
income (loss) (1,029,024) 71,035 (6,918,262) (7,876,251)
Other income
(expense) ( 8,602) 6,960 - ( 1,642)
Income (loss)
before taxes (1,037,626) 77,995 (6,918,262) (7,877,893)
Income tax
benefit - - (1,753,563)(3) (1,753,563)
Net income
(loss) (1,037,626) 77,995 (5,164,699) (6,124,330)
Net income
(loss) per
share ($0.14) $31.51 ($0.84)
Weighted
average
number
of shares
outstanding 7,360,506 2,475 9,360,506
STATEMENT OF OPERATIONS DATA - HISTORICAL:
Cumulative
Nine Since
Months Inception
Ended Year Ended December 31, (12/28/95)
9/30/99 1998 1997 1996 to 12/31/98
(unaudited) (audited) (audited) (audited) (unaudited)
Revenue $2,047,364 $ 5,440 $ 596 $ 3,337 $ 9,373
Expenses 8,151,874 1,043,066 625,400 27,574 1,696,040
Net Loss 5,619,445 1,037,626 624,804 24,237 1,686,667
Loss per
share (.51) (0.14) (0.10) (0.04) (0.36)
Weighted
Average
Number
of Shares
Outstan-
ding 11,034,764 7,361,275 6,193,678 631,622 4,715,763
BALANCE SHEET DATA - PRO FORMA:
The following table sets forth the unaudited pro forma condensed balance
sheets of the Company and CyberHighway, as if the acquisition of
CyberHighway occurred on December 31, 1998:
Historical
USURF Cyber- Pro Forma Pro Forma
America Highway Adjustments Consolidated
Current assets $ 8,265 $ 306,018 $ - $ 314,283
Property and
equipment, net 247,267 408,558 (72,692)(1) 583,133
Other assets 170 13,480 - 13,650
Intangibles 34,207 - 20,827,477(1) 20,861,684
Total assets 289,909 728,056 20,754,785 21,772,750
Current
liabilities 191,552 282,892 - 474,444
Deferred tax
liability - - 5,260,690(1) 5,260,690
Stockholders'
equity 98,357 445,164 15,494,095(1) 16,037,616
Total liabilities
and stock-
holders'
equity 289,909 728,056 20,754,785 21,772,750
BALANCE SHEET DATA - HISTORICAL:
As at Year Ended December 31,
9/30/99 1998 1997
(unaudited) (audited) (audited)
Working Capital
(Deficit) $ (133,635) $ (240,806) $ (198,714)
Total Assets 22,063,067 333,659 236,256
Total Current
Liabilities 487,430 249,071 198,938
Shareholders'
Equity 16,915,416 84,588 37,318
- ------------
(1) To record the net assets purchased in connection with the CyberHighway
acquisition and the amount attributable to cost in excess of net assets
acquired based upon total purchase price of $15,940,000.
(2) Depreciation and amortization expense on acquired customer base,
goodwill and property and equipment have been computed by amortizing them
over their useful lives of 3 years.
(3) To record the income tax benefit based on temporary differences
related to acquired customer base and property and equipment.
RECENT CHANGE OF INDEPENDENT AUDITOR
On January 11, 2000, the Company dismissed Weaver and Tidwell, L.L.P. as
its independent auditor. At the time of such dismissal, there was no
disagreement with respect to any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.
On January 24, 2000, the Company engaged Postlethwaite & Netterville as the
Company's new independent auditor, which firm will audit the Company's
financial statements for the year ended December 31, 1999. The Company's
Audit Committee approved such change in independent auditor. The Company's
Current Report on Form 8-K, filed with the Commission on January 25, 2000,
wherein the change in independent auditor is reported, is incorporated
herein by this reference.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Background
In July 1999, the Company changed its name to "USURF America, Inc.", from
"Internet Media Corporation". The Company was incorporated on November 1,
1996, under the name "Media Entertainment, Inc.", to act as a holding
company in the wireless cable and community (low power) television
industries and acquired Winter Entertainment, Inc., a Delaware corporation
("WEI"), and Missouri Cable TV Corp., a Louisiana corporation ("MCTV"), to
this end. Due to current market conditions in the wireless cable industry,
the Company has abandoned its efforts to develop its wireless cable
properties. In furtherance of its plan to focus on the exploitation of its
Wireless Internet access products and expansion of its other Internet
services, the Company has assigned all of its community (low power)
television properties to New Wave Media Corp., in exchange for 1,500,000
shares of such entity's common stock. The Company's Board of Directors has
declared a dividend with respect to all 1,500,000 New Wave Media Corp. shares.
In September 1998, the Company, through its subsidiary, Santa Fe Wireless
Internet, Inc., a New Mexico corporation ("SFWI"), acquired the assets and
going business of Desert Rain Internet Services ("DSRT"), a Santa Fe, New
Mexico-based Internet Service Provider (ISP), for $25,000 in cash. In June
1999, the Company, through SFWI, acquired Santa Fe Trail Internet Plus,
Inc., a New Mexico corporation ("Trail"), another Santa Fe, New
Mexico-based ISP, for 100,000 shares of Company Common Stock. The
acquisition of Trail is reflected in the discussion below, with Trail's
operating results from the date of its acquisition, June 2, 1999, through
September 30, 1999, being included in this discussion. Until the
acquisition of Trail, the Company continued to operate DSRT under the
"Desert Rain Internet Services" trade name. Upon the acquisition of Trail,
the operations of DSRT were combined with those of Trail, and the Santa Fe,
New Mexico, operations of the Company operate under Trail's trade name. In
August 1999, the Company acquired the going business known as www.usurf.com
("usurf.com"), in consideration of 150,000 shares of Company common stock.
The acquisition of usurf.com is reflected in the discussion below, with
usurf.com's operating results from the date of its acquisition, August 14,
1999, through September 30, 1999. In August 1999, the Company, through its
subsidiary, CyberHighway, Inc., acquired Premier Internet Services, Inc.
("PISI"), an Idaho-based ISP, in consideration of 127,000 shares of Company
common stock. The acquisition of usurf.com is reflected in the discussion
below, with usurf.com's operating results from the date of its acquisition,
August 30, 1999, through September 30, 1999. In August 1999, the Company,
through its subsidiary, USURF America (Alabama), Inc., an Alabama
corporation ("USURF Alabama"), acquired Net 1, Inc. ("Net 1"), an
Alabama-based ISP, in consideration of 250,000 shares of Company common
stock. Because the Company has tendered the stock of Net 1 for rescission
of the acquisition transaction, none of the operating data or balance sheet
data associated with Net 1 is presented in the discussion below. The
Company is involved in arbitration of its demand for rescission. Although
the Company believes it will be successful on the merits of its claims, no
prediction as to the outcome of such arbitration can be made. See
"Litigation" for further discussion of this arbitration proceeding.
On January 29, 1999, the Company acquired all of the outstanding capital
stock of CyberHighway, Inc. ("CyberHighway"), a Boise, Idaho-based ISP with
approximately 27,000 subscribers, in exchange for 2,000,000 shares of
Company Common Stock. The results of operations discussed below include
the operations of CyberHighway from January 29, 1999, through September 30,
1999.
The Company's acquisition of CyberHighway fundamentally altered the
Company's outlook. Prior to this acquisition, the Company's growth plan
called for either (1) the acquisition of small, local ISPs located in
certain key cities, then essentially "plugging-in" the Company's US.RFTM
Wireless Internet access system into the acquired ISP's network system and
marketing the Wireless Internet access system or (2) the establishment of
strategic relationships by licensing local ISPs in certain key cities to
exploit the Company's US.RF Wireless Internet access products. This growth
strategy, while proving effective, proved also to be slow and relatively
expensive.
With the acquisition of CyberHighway, not only did the Company acquire
approximately 27,000 dial-up Internet access subscribers and a
state-of-the-art NOC, the Company also gained immediate access to customers
in over 230 markets in which a CyberHighway-owned or affiliate-ISP provides
Internet services.
Currently, the Company is negotiating for the acquisition of numerous other
ISPs located throughout the United States. There is no assurance that any
such proposed acquisition will be consummated.
Because the Company, WEI and MCTV were combined in a reorganization of
entities under common control, the presentation contained in the financial
statements of the Company has been prepared in a manner similar to the
pooling-of-interests method. The acquisitions of CyberHighway, Trail,
usurf.com and PISI were accounted for as purchases, not as pooling of
interests. In this regard, reference is made to the notes to the Company's
financial statements appearing elsewhere herein. The following discussion
reflects such financial statement presentation.
Recent Restructuring
In July 1999, the Company made sweeping changes to the management of its
largest subsidiary, CyberHighway. These changes included completely
replacing the board of directors and officers of CyberHighway, as well as a
significant workforce reduction. Additional personnel reductions have been
made. Certain business functions of the Company, including customer
support services, have been moved from the Boise NOC to the Company's Santa
Fe, New Mexico, POP. The changes in the management of CyberHighway were
made due to differing managerial philosophies. Under the prior management,
CyberHighway had, during May 1999, begun to sustain operating losses,
primarily due to the addition of numerous salaried salespersons, who failed
to produce sales revenues. The new management of CyberHighway instituted
the restructuring and personnel reductions as the only means by which it
could return CyberHighway to a positive cash flow position. In September
1999, CyberHighway's cash flow returned to a positive status, in line with
its 1998 cash flow results.
Present Business Focus
In October 1999, the Company's management determined to commit, for the
foreseeable future, all available capital to the exploitation of its US.RF
Wireless Internet access products. Also, the Company intends to continue
its pursuit of acquisitions of relatively small, local ISPs by which to
expand its customer base, as well as the acquisition of businesses
complimentary to the Company's core Internet access business.
Settlement Agreement
On November 30, 1999, the Company entered into a Settlement Agreement and
Mutual Release (the "Settlement Agreement'), which settled certain legal
proceedings in which the Company and CyberHighway, had been involved. The
parties to the Settlement Agreement were: the Company, CyberHighway, Julius
W. Basham, II, the Company's Chief Operating Officer and a director,
William Kim Stimpson and David W. Brown. Messrs. Stimpson and Brown are
former employees of CyberHighway.
Pursuant to the Settlement Agreement, certain legal proceedings have been
settled in full and the Company has delivered to Messrs. Basham, Stimpson
and Brown a total of 340,000 shares of Company Common Stock. Also, the
Company is required to pay the total sum of $43,325 for reimbursement of
attorneys' fees paid by Messrs. Basham, Stimpson and Brown
The 340,000 shares issued to Messrs. Basham, Stimpson and Brown pursuant to
the Settlement Agreement have been valued at $2.6875 per share, or
$913,750, in the aggregate. The price per share assigned to the issued
shares was the closing price of the Company's Common Stock, as reported by
The American Stock Exchange, on November 30, 1999. The $43,325.00 to be
paid by the Company as reimbursement of attorneys' fees all will be
expensed in the year to end December 31, 1999. With respect to the 340,000
shares to be issued, the Company will suffer a charge against earnings in
the amount of $913,750, or approximately $.07 per share, which amount will
be recognized by the Company in the year to end December 31, 1999. The
total charge against earnings resulting from the Settlement Agreement, for
the year to end December 31, 1999, will be $957,075.
Results of Operations
Subsequent to September 30, 1999. In December 1999, the Company's
President, David M. Loflin, loaned the Company a total of $200,000, which
loan is evidenced by a promissory note, bears interest at 8% per year and
is payable on demand. Mr. Loflin has advised the Company that he does not
intend to demand payment of such loan, until such time as repayment would
not adversely affect the Company's financial position. Approximately 50%
of the $200,000 obtained by the Company were used to purchase a portion of
the equipment needed to expand the capacity of the Company's Boise NOC to
handle up to 150,000 customers. The remainder of the funds were used for
operating expenses and for working capital.
Nine Months Ended September 30, 1999, versus Nine Months Ended September
30, 1998.
General. During the nine months ended September 30, 1998 ("Interim 98"),
the Company had nominal revenues. During the nine months ended September
30, 1999 ("Interim 99"), the Company had revenues of $2,047,364
(unaudited). This increase in revenues is primarily attributable to the
Company's acquisition of CyberHighway. As discussed above, during Interim
98, the Company determined to cease, for the foreseeable future, activities
in its Wireless Cable Segment, in addition to agreeing to dispose of all
community-television-related assets.
For Interim 99, the Company suffered a net loss of $5,619,445 (unaudited)
compared to a net loss of $847,083 (unaudited) for Interim 98. The
Company's net loss for Interim 98 is attributable in large measure to the
issuance of shares of Company common stock pursuant to various consulting
agreements, as well as the payment of accounts payable. During Interim 99,
however, the Company's net loss is attributable in large measure to the
amortization and depreciation of acquired customer bases and goodwill
($5,433,339 [unaudited]), while $1,212,366 (unaudited) in professional
fees, substantially all of which is attributable to stock issuances under
various consulting agreements, and $979,291 (unaudited) in salary and
commissions was expensed. During the last quarter of the year to end
December 31, 1999 ("Fiscal 99"), the Company will expense approximately
$670,000 of amortization of acquired customer bases and goodwill per month
and approximately $120,000 each month, due to stock issuances under various
consulting agreements. During Interim 99, the Company issued 500,000
shares of common stock under a consulting agreement, which shares were
valued at $4.00 per share, or $2,000,000, in the aggregate. Approximately
$33,000 will be expensed each month during the five year term of such
consulting agreement.
Subsequent to September 30, 1999, the Company has issued a total of 61,000
shares to three consultants, all of which shares were valued at $3.00 per
share. These consulting agreements are short-term in nature, two being for
a period of four months and one being for a period of six months. The
values of these consulting agreements will be expensed in equal monthly
amounts over their respective terms.
For the last quarter of Fiscal 99, the Company will, due to intangible
asset amortization and stock-for-services agreements, report a loss in line
with the loss sustained for Interim 99, while cash flow from operations
remained at levels similar to prior periods.
Internet Segment. During Interim 98, this segment generated no material
revenues and operated at a small loss. During Interim 99, this segment
generated all of the Company's revenues and is expected to do so for the
foreseeable future.
Community Television and Wireless Cable Segments. As described above, the
Company has, effective July 1, 1999, assigned all of its community
television properties to New Wave Media Corp. For Interim 98 and Interim
99, the Wireless Cable Segment had no activity. As described above, the
Company has determined to cease, for the foreseeable future, its Wireless
Cable activities.
Year Ended December 31, 1998, versus Year Ended December 31, 1997.
General. During the year ended December 31, 1997 ("Fiscal 97"),
substantially all of the Company's revenues were generated by the Community
Television Segment. During the year ended December 31, 1998 ("Fiscal 98"),
substantially all of the Company's revenues were generated by the Company's
Internet Segment. As discussed above, during Fiscal 98, the Company
determined to cease, for the foreseeable future, activities in its Wireless
Cable Segment, in addition to disposing of all community-television-related
assets.
For Fiscal 98, the Company suffered a net loss of $1,037,626 compared to a
net loss of $624,804 for Fiscal 97. The net loss for each such reporting
period is attributable in large measure to the issuance of shares of
Company common stock pursuant to various consulting agreements. During
Fiscal 98, a total of 1,655,759 shares were issued to consultants, which
shares have been valued for financial accounting purposes at $1,556,900, in
the aggregate. During Fiscal 98, $311,889 was expensed due to Fiscal 97
consulting agreements and $765,865 of the $1,556,900 Fiscal 98 consulting
agreements was expensed. During Fiscal 97, a total of 404,000 shares were
issued to consultants, which shares have been valued for financial
accounting purposes at $750,000, in the aggregate. During Fiscal 97,
$438,111 of such $750,000 was expensed. During Fiscal 99, the Company
expensed approximately $92,000 each month, due to the Fiscal 98 consulting
agreements. Also, in March 1998, the Company issued a total of 80,000
shares of common stock to certain of its directors. These shares were
valued at $.80 per share; prior to these issuances, the last closing bid
price for the common stock was $.56 per share.
Internet Segment. The Company formed the Internet Segment during Fiscal
97. During Fiscal 97, the Internet Segment did not generate any revenues
and incurred a net loss of approximately $9,200 for the period. During
Fiscal 98, this segment began to generate material revenues, following the
acquisition of DSRT, in September 1998. For all of Fiscal 98, this segment
operated at a small loss.
CyberHighway Discussion. For all of Fiscal 99, the Company expects that
its Internet Segment will operate at a modest loss due to one-time costs
associated with certain corporate restructuring at CyberHighway, during
July 1999, including attorneys' fees. For its fiscal years ended January
31, 1999, 1998 and 1997, CyberHighway had total revenues (audited) of
$2,449,156, $2,058,501 and $1,047,515, respectively. CyberHighway had
after tax profits (audited) of $77,995 for Fiscal 99 and $22,254 for Fiscal
98, while it incurred a net loss of $261,066 for Fiscal 97.
Pro Forma Company/CyberHighway Discussion. Assuming that the CyberHighway
acquisition had occurred on January 1, 1998, the Company would have had, on
a pro forma basis for Fiscal 98, total revenues of $2,454,596 (unaudited)
and a net loss of $6,124,330 (unaudited), which is primarily attributable
to the amortization of the acquired customer base. See the Notes to the
Company's financial statements included elsewhere herein.
Community Television Segment. For Fiscal 97, the Company's only revenues
were derived from the operations of its community television station in
Baton Rouge, Louisiana, call sign: K13VE, Channel 13, which station has
been engaged in broadcast operations since January 1996. For Fiscal 97,
the Community Television Segment had revenues of approximately $600 and a
net loss of approximately $2,700. During Fiscal 98, this segment had no
material revenues and suffered a nominal loss from operations. As
described above, the Company assigned all of its community television
properties to New Wave Media Corp.
Wireless Cable Segment. For Fiscal 97 and Fiscal 98, the Wireless Cable
Segment had no activity, other than to acquire certain assets. As
described above, the Company has determined to cease, for the foreseeable
future, its Wireless Cable activities.
Liquidity and Capital Resources
September 30, 1999. From its inception (November 1996) through June 1998,
the Company required little capital with which to operate and had,
throughout such period of time, a significant working capital deficit. In
June 1998, the Company obtained the first funds of a total of $340,000 in a
private offering of its securities, which drastically improved the
Company's financial condition. At September 30, 1999, the Company's
working capital deficit was $191,363 (unaudited) compared to a working
capital deficit of $240,806 at December 31, 1998. This improvement in the
Company's liquidity position is attributable to its acquisition of
CyberHighway and, more significantly, to its ability to obtain
approximately $730,000 from private sales of equity securities, during
Interim 99. In January 1999, the Company obtained $270,000 from the sale
of its securities; in May 1999, the Company obtained $105,000 from the sale
of its securities. Also, in June 1999, the Company received $310,000 from
the exercise of certain warrants. In August 1999, the Company received
$27,321 from the exercise of certain warrants. Given the recent personnel
reductions and other restructuring at CyberHighway, currently, the Company
is relatively liquid as it conducts is operations. However, as discussed
below, the Company continues to attempt to secure additional capital with
which to pursue fully its business objectives.
The Company's only long-term liability, a deferred tax liability item of
$4,352,451 (unaudited), arose upon the acquisition of CyberHighway. It is
possible that similar liability items may be added to the Company's balance
sheet, upon future acquisitions, although no prediction in this regard can
be made.
From inception through June 30, 1999, the Company's President, David M.
Loflin, loaned to the Company a total of approximately $249,000, which
funds were used primarily for operating expenses of the Company, $40,000 of
which has been repaid. During the three months ended September 30, 1999,
Mr. Loflin has loaned the Company a total of $62,000, which funds were used
primarily for one-time-only expenses associated with the restructuring of
CyberHighway, including legal fees. In December 1999, Mr. Loflin loan the
Company an additional $200,000, which funds are to be used primarily for
use in beginning the first phase of the Company's rollout of its US.RF
Wireless Internet access systems in ten as-yet unannounced markets and for
working capital. Currently, the Company owes Mr. Loflin a total of
$$399,926. The loans from Mr. Loflin bear interest at 8% per annum and are
payable on demand. The Company does not currently have funds available to
repay any of the amounts owed to Mr. Loflin. Mr. Loflin has advised the
Company that he does not intend to make further demand for repayment of
such loans for the foreseeable future. Nevertheless, should Mr. Loflin
make such demand for repayment, the Company could be unable to satisfy such
demand, which would have a materially adverse affect on the Company.
The Company suffered an extreme lack of liquidity, and attendant working
capital deficit, until June 1998, when it obtained the first funds of a
total of $340,000 received under a private offering of its equity
securities. With the infusion of funds, the Company was able to bring its
accounts current and to proceed with the acquisition of DSRT in Santa Fe,
New Mexico, which was acquired for $25,000 in cash. Until the acquisition
of CyberHighway in January 1999, the Company was unable to accumulate
working capital through operations; rather, the funds obtained in the June
1998 private offering provided working capital to the Company for the last
half of Fiscal 98.
Prior to the acquisition of CyberHighway and in January 1999, the Company
obtained $270,000 in a private offering of its equity securities. This
infusion of funds allowed the Company again to bring its accounts current
and to purchase equipment. In May 1999, the Company obtained $105,000 in a
private offering of its equity securities, which funds were applied to
operating expenses of the Company and the purchase of equipment. In June
1999, the Company received $310,000 from the exercise of certain warrants.
Approximately 40% of the funds received from the exercise of the warrants
was used for working capital and the balance of such funds was utilized for
the purchase of needed US.RF Wireless Internet equipment and other
Internet-related equipment. In August 1999, the Company received $27,321
from the exercise of certain warrants, which funds were used for working
capital.
Subsequent to September 30, 1999, the Company obtained $150,000 in a
private offering of its securities. In such offering, 50,000 units of
securities were sold for $3.00 per unit, each unit consisting of one share
of Common Stock and one warrant to purchase one share of Common Stock at an
exercise price of $6.00 per share. Such funds were used for operating
expenses and for the purchase of equipment.
Even with the recent influx of cash, the Company continues to seek capital
with which to implement, on a full-scale basis, its growth strategy.
Without access to additional capital, the Company's expected growth will be
significantly impeded.
In addition, the Company expects that, prior to the end of the first half
of 2000, warrants representing an additional approximately $1,700,000 will
be exercised, although there is no assurance that such will be the case.
Commitment to Wireless Internet Business. In October 1999, the Company's
management determined to apply, for the foreseeable future, all available
capital to the exploitation of the Company's US.RF Wireless Internet access
products. However, there is no assurance that the Company will obtain
sufficient capital with which to exploit fully its plan of business.
Growth Strategy; Proposed Acquisitions. During the past year, as the
Company has refined its growth strategy, it has determined that, for a
purveyor of Internet access to achieve the greatest growth and economies of
scale, it is necessary to offer traditional dial-up Internet access and the
Company's US.RF Wireless Internet access products. Thus, to reach more
Internet users, the Company will continue to provide high quality dial-up
Internet access service as it deploys its US.RF Wireless Internet products
in its markets. The Company's growth strategy is based on its ability to
offer high quality Internet access through traditional means,
telephone-line based dial-up service, and through its US.RF Wireless
Internet access products.
US.RF Wireless Internet Strategy. The Company is attempting to implement,
on a broad basis, a plan designed to establish its US.RF Wireless Internet
access systems in numerous selected markets throughout the United States.
The Company is currently negotiating for a nation-wide agreement with a
well-known Internet backbone provider, that would provide the Company with
an extremely cost-effective connection to the Internet, into which its
US.RF Wireless Internet access systems would connect. Currently, the
Company is in need of capital, in order to implement completely its growth
plan.
USURF America National Reseller Program. With recently secured local
dial-up Internet access agreements with national backbone providers, the
Company has launched its "USURF America" high-quality dial-up Internet
access service. The marketing of its dial-up access service is being
accomplished by resellers, through the Company's National Reseller Program.
The resellers of the Company's dial-up Internet access services will
receive continuing commissions for customers obtained through their
efforts. Due to unexpected delays in the national launch of this National
Reseller Program, the Company expects its National Reseller Program to
begin to yield significant subscriber growth during the first quarter of
2000 and to continue for the foreseeable future, as the Internet continues
its growth. There is no assurance that these efforts in expanding its
customer base will be successful.
ISP Acquisitions; Hub and Spoke Concept. The Company's growth strategy
includes the acquisition of relatively small local, independent ISPs in a
certain key city (or cities, depending on the size of a state) in each
state. Each of these acquired ISPs would be subsumed into the Company's
national Internet network and would serve as a hub for the Company's
operations in a particular state. For example, in a state with a small
population, the Company would acquire a single ISP to serve as the hub in
that particular state, whereas, in a heavily populated state with several
urban centers, the Company would likely acquire an ISP in each urban
center. An acquired ISP would serve as a hub to same-state Company-owned
ISPs, who would, through telephone-line connections, become spokes in the
Company's national Internet network. The Company believes that this hub
and spoke concept is one which will afford the Company the greatest
opportunity to achieve needed economies of scale in each of its markets.
Currently, the Company is negotiating for the acquisition of several other
ISPs located across the United States. There is no assurance that any of
such proposed acquisitions will be consummated.
Wireless Internet Joint Venture - Monroe, Louisiana. During the second
quarter of 1998, the Company entered into a joint venture agreement to
implement the Company's US.RF Wireless Internet access system in Monroe,
Louisiana. Because of internal problems with the Company's joint venture
partner, no joint venture operations have commenced. It is the Company's
expectation that, in the first half of 2000, it will take over the joint
venture operations and begin Wireless Internet service in Monroe. However,
no prediction in this regard can be made.
Community Television Stations. In furtherance of its plan to focus on the
exploitation of its Wireless Internet access products and expansion of its
other Internet services, the Company has assigned all of its community (low
power) television properties to New Wave Media Corp., in exchange for
1,500,000 shares of such entity's common stock. The Company's Board of
Directors has declared a dividend with respect to all 1,500,000 New Wave
Media Corp. shares.
Cash Flows from Operating Activities. During Interim 99, the Company's
operating activities used $425,815 (unaudited). The use of cash in the
current period is primarily due to the Company's net loss of $5,619,445
(unaudited), primarily resulting from depreciation and amortization of
$5,433,339 (unaudited). The Company also recognized non-cash consulting
fees of $1,125,1773 (unaudited) on stock issued for services. The Company
also suffered deferred income taxes associated with its acquisition of
CyberHighway of $1,183,920 (unaudited). During Interim 98, the Company's
operations used cash of $341,484 (unaudited). The use of cash in the prior
period was primarily due to the Company's net loss of $847,083 (unaudited),
which includes non-cash consulting fees of $553,874 (unaudited) on stock
issued for services. The Company recognized approximately $140,000 for
consulting services performed for stock each month during the last quarter
of Fiscal 99. The Company expects that its operations will provide a
modest of amount of cash during the first half of 2000, though not at
levels that would offset the recognition of non-cash consulting fees. No
prediction in this regard can be made.
Cash Flows from Investing Activities. Investing activities of the Company
during Interim 99 used $221,887 (unaudited), all of which is attributable
to capital expenditures of $423,295 (unaudited), which is offset by cash
acquired in acquisitions of $186,318 (unaudited) and proceeds from the
disposal of fixed assets of $15,090 (unaudited). The Company's investing
activities during Interim 98 used $30,000 (unaudited), $25,000 of which was
used to acquire DSRT and $5,000 of which was for the purchase of equipment.
Although significant purchases of equipment are expected to be made by the
Company during the first half of 2000, the Company's management is unable
to predict the level of such equipment purchases, due to its inability to
predict levels of available capital for such use. It is not expected that
investing activities will provide cash during the first half of 2000.
Cash Flows from Financing Activities. Financing activities of the Company
provided $727,926 (unaudited) in cash during Interim 99, compared to
Interim 98 when financing activities provided $348,941 (unaudited) in cash.
In the current period, the sale of equity securities for $732,321
(unaudited) in cash provided the great majority of the cash provided by the
Company's financing activities, while $62,000 in cash was derived from
shareholder loans. Substantially all of the cash during the prior period
was the result of sales of Company common stock in a private offering. The
Company continues to seek additional capital with which to pursue its
entire business objectives. However, no prediction as to the level of such
cash can be made by management, nor can any assurance be made that any cash
will be provided by financing activities.
December 31, 1998. From its inception (November 1996) through June 1998,
the Company required little capital with which to operate and had,
throughout such period of time, a significant working capital deficit. In
June 1998, the Company obtained the first funds of a total of $340,000 in a
private offering of its securities, which drastically improved the
Company's financial condition. At December 31, 1998, the Company's working
capital deficit was $240,806 compared to a working capital deficit of
$198,714 at December 31, 1997. Since inception, the Company's President,
David M. Loflin, has loaned to the Company a total of $439,926, which funds
were used primarily for operating expenses of the Company, $40,000 of which
has been repaid. Such loans bear interest at 8% per annum and are payable
on demand. The Company does not currently possess funds necessary to repay
any of the funds to Mr. Loflin. Mr. Loflin has advised the Company that he
does not intend to make further demand for repayment of such loans for the
foreseeable future. Nevertheless, should Mr. Loflin make such demand for
repayment, the Company could be unable to satisfy such demand, which would
have a materially adverse affect on the Company.
The Company suffered an extreme lack of liquidity, and attendant working
capital deficit, until June 1998, when it obtained the first funds of a
total of $340,000 received under a private offering of its equity
securities. With the infusion of funds, the Company was able to bring its
accounts current and to proceed with the acquisition of DSRT in Santa Fe,
New Mexico, which was acquired for $25,000 in cash. During Fiscal 98, the
Company was unable to accumulate working capital through operations;
rather, the funds obtained in the private offering provided working capital
to the Company for the last half of Fiscal 98.
In January 1999, the Company obtained $270,000 in a private offering of its
equity securities. This infusion of funds allowed the Company again to
bring its accounts current and to purchase needed equipment. However, the
Company continues to seek capital with which to implement, on a full-scale
basis, its growth strategy. Without access to additional capital, the
Company's expected growth will be significantly impeded.
CyberHighway Discussion. During the last fiscal year of CyberHighway, it
operated from a position of liquidity. CyberHighway's current liquidity is
a result of profitable operations for the 18 months preceding January 31,
1999. At January 31, 1999, CyberHighway had working capital of $25,992, a
figure that periodically moves upward, depending on the timing of receipt
of accounts receivable. CyberHighway had a working capital deficit of
$72,553 at January 31, 1998. After January 31, 1999, CyberHighway began to
operate at a small, but increasing loss, until the Company changed
management of CyberHighway, in July 1999. In September 1999, the
operations of CyberHighway showed results in line with historical results.
A 30% reduction in work force is the primary reason for CyberHighway's
quick turn-around, and further personnel reductions are expected to be
made. However no precise level of personnel reductions has been determined.
Pro Forma Company/CyberHighway Discussion. Assuming that the CyberHighway
acquisition had occurred on January 1, 1998, the Company would have had, on
a pro forma basis, a working capital deficit of $217,680 (unaudited), total
assets of $21,816,500 (unaudited), total liabilities of $5,792,653
(unaudited) and shareholders' equity of $16,023,847 (unaudited). See the
Notes to the Company's financial statements included elsewhere herein.
Cash Flows from Operating Activities. During Fiscal 98, the Company's
operations used $305,999 in cash compared to cash used of $112,120 during
Fiscal 97. The use of cash in operations is a result of the lack of
revenues compared to the operating expenses of the Company, and the
increased use of cash during Fiscal 98 reflects the Company's increased
activities compared to the prior period.
Cash Flows from Investing Activities. During Fiscal 98, investing
activities of the Company used cash of $49,702 compared to $19,964 in
Fiscal 97. During Fiscal 97, cash used by investing activities was for the
acquisition of licenses and equipment , while cash used in investing
activities during Fiscal 98 was for the acquisition of equipment and the
customer base of DSRT. Investing activities did not provide any cash
during Fiscal 99.
Cash Flows from Financing Activities. For Fiscal 98, financing activities
provided $362,933 in cash, $30,133 of which is attributable to loans from
the Company's President and $332,800 of which is attributable to the
private sale of equity securities of the Company. During Fiscal 97,
financing activities provided $117,582, $66,282 through loans from the
Company's President and $50,000 from the private sale of shares of Company
Common Stock. During Fiscal 99, financing activities (sales of equity
securities) provided substantially all of the Company's cash
Non-Cash Investing and Financing Activities. During Fiscal 98, non-cash
investing and financing activities included the issuance of 1,655,759
shares of Company Common Stock issued in consideration of consulting and
legal services to be performed, valued at $1,556,900. During Fiscal 97,
non-cash investing and financing activities included the issuance of
404,000 shares of common stock issued in consideration of consulting and
legal services to be performed, valued at $750,000. No prediction can be
made with respect to the Company's future non-cash investing and financing
activities.
CyberHighway Discussion. For fiscal years ended January 31, 1999 and 1998,
CyberHighway's operating activities provided $266,246 and $89,993 in cash,
respectively. In Fiscal 98, net income ($77,995), depreciation and
amortization ($138,674) and a change in accounts payable ($81,829)
comprised most of the cash provided by the operating activities of
CyberHighway. In Fiscal 97, net income ($22,254) and depreciation and
amortization ($115,784) comprised most of the cash provided by the
operating activities of CyberHighway.
For fiscal years ended January 31, 1999 and 1998, CyberHighway's investing
activities used $198,072 and $125,069 in cash, respectively. During both
periods, cash was used for capital expenditures.
For fiscal years ended January 31, 1999 and 1998, CyberHighway's financing
activities provided $52,366 and $18,604 in cash, respectively. For Fiscal
98, proceeds from stock subscriptions receivable comprised all of the cash
provided by the financing activities of CyberHighway. For Fiscal 97,
proceeds from sales of common stock comprised all of the cash provided by
the financing activities of CyberHighway.
Management's Plans Relating to Future Liquidity
With the recent $200,000 loan from the Company's President, the
restructuring of CyberHighway, the receipt of $395,000 under private
offerings during Interim 99, the receipt of $337,321 from the exercise of
warrants, and the receipt of $150,000 under a private offering in November
1999, the Company has become relatively liquid and current operations will
be sufficient to maintain the Company's liquidity. Also, the Company
expects that, prior to the end of the first half of 2000, warrants
representing an additional approximately $1,700,000 will be exercised,
although there is no assurance that such will be the case. However, the
Company's current operations, including the operations of its subsidiaries,
will not be sufficient, on their own, to provide expansion capital with
which the Company would be able to pursue its growth strategy on a
full-scale basis. Although the Company continues to seek capital with
which to implement its complete business objectives, there is no assurance
that the Company will ever secure capital necessary for its planned expansion.
Capital Expenditures
For all of 2000, the Company expects to apply substantially all of its
available capital to (1) the purchase of US.RF Wireless Internet equipment
and the construction of local US.RF Wireless Internet access systems and/or
(2) the acquisition of one or more existing local, independent ISPs, into
which the Company can essentially "plug-in" its US.RF Wireless Internet
access system. The Company currently is seeking between two and three
million dollars with which to implement its growth strategy. Although the
Company expects that it will be able to secure sufficient expansion
capital, there is no assurance that such will be the case.
Year 2000 Issues
The Company experienced no problems related to Year 2000 issues. In its
efforts in becoming completely Year 200 compliant, the Company incurred
expenses of approximately $75,000.
CERTAIN STATEMENTS CONTAINED IN THIS "MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" ARE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995 AND ARE, THUS, PROSPECTIVE. SUCH FORWARD-LOOKING STATEMENTS
ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM FUTURE RESULTS EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE MOST SIGNIFICANT OF SUCH
RISKS, UNCERTAINTIES AND OTHER FACTORS IS THE COMPANY'S ABILITY TO OBTAIN
CAPITAL IN AMOUNTS NECESSARY FOR IT TO ACCOMPLISH ITS PLAN FOR THE
EXPLOITATION OF ITS US.RF WIRELESS INTERNET ACCESS PRODUCTS, AS WELL AS
CONSUMER ACCEPTANCE OF SUCH PRODUCTS.
REGULATION
US.RF Wireless Internet Access. The Company's US.RF Wireless Internet
access products operate in unregulated spectra, primarily in the 2400 MHz
spectrum and the Company expects that such spectra will remain unregulated.
Regulation of Internet Access Services. The Company provides Internet
access, in part, using telecommunications services provided by third-party
carriers. Terms, conditions and prices for telecommunications services are
subject to economic regulation by state and federal agencies. The Company,
as an Internet access provider, is not currently subject to direct economic
regulation by the Federal Communications Commission or any state regulatory
body, other than the type and scope of regulation that is applicable to
businesses generally. In April 1998, the Federal Communications Commission
reaffirmed that Internet access providers should be classified as
unregulated "information service providers" rather than regulated
"telecommunications providers" under the terms of the Federal
Telecommunications Act of 1996. As a result, the Company is not subject to
federal regulations applicable to telephone companies and similar carriers
merely because it provides its services using telecommunications services
provided by third-party carriers. To date, no state has attempted to
exercise economic regulation over Internet access providers.
Governmental regulatory approaches and policies to Internet access
providers and others that use the Internet to facilitate data and
communication transmissions are continuing to develop and, in the future,
the Company could be exposed to regulation by the Federal Communications
Commission or other federal agencies or by state regulatory agencies or
bodies. In this regard, the Federal Communications Commission has
expressed an intention to consider whether to regulate providers of voice
and fax services that employ the Internet, or IP, switching as
"telecommunications providers", even though Internet access itself would
not be regulated. The Federal Communications Commission is also considering
whether providers of Internet-based telephone services should be required
to contribute to the universal service fund, which subsidizes telephone
service for rural and low income consumers, or should pay carrier access
charges on the same basis as applicable to regulated telecommunications
providers. To the extent that the Company engages in the provision of
Internet or Internet protocol-based telephony or fax services, it may
become subject to regulations promulgated by the Federal Communications
Commission or states with respect to such activities. No assurance can be
given that such regulations, if adopted, would not adversely affect the
Company's ability to offer certain enhanced business services in the future.
Regulation of the Internet. Due to the increasing popularity and use of
the Internet by broad segments of the population, it is possible that laws
and regulations may be adopted with respect to the Internet pertaining to
content of Web sites, privacy, pricing, encryption standards, consumer
protection, electronic commerce, taxation, and copyright infringement and
other intellectual property issues. No one is able to predict the effect,
if any, that any future regulatory changes or developments may have on the
demand for the Company's Internet access or other Internet-related
services. Changes in the regulatory environment relating to the Internet
access industry, including the enactment of laws or promulgation of
regulations that directly or indirectly affect the costs of
telecommunications access or that increase the likelihood or scope of
competition from national or regional telephone companies, could materially
and adversely affect the Company's business, operating results and
financial condition.
BUSINESS
History
In July 1999, the Company changed its name to "USURF America, Inc.", its
name having been Internet Media Corporation. The Company was incorporated
on November 1, 1996, under the name "Media Entertainment, Inc.", to act as
a holding company in the wireless cable and community (low power)
television industries. Due to current market conditions in the wireless
cable industry, the Company has abandoned its efforts to develop its
wireless cable properties. In furtherance of its plan to focus on the
exploitation of its Wireless Internet Access products and expansion of its
other Internet services, the Company has assigned all of its community (low
power) television properties to New Wave Media Corp., in exchange for
1,500,000 shares of such entity's common stock. The Company's Board of
Directors has declared a dividend with respect to all 1,500,000 New Wave
Media Corp. shares.
In September 1998, the Company, through a wholly-owned subsidiary, Santa Fe
Wireless Internet, Inc. ("SFWI"), acquired the assets and going business of
Desert Rain Internet Services ("DSRT"), a Santa Fe, New Mexico-based
Internet Service Provider (ISP) with approximately 140 customers, for
$25,000 in cash. The Company has transferred the customers of DSRT onto
its Internet network.
In January 1999, the Company acquired all of the outstanding capital stock
of CyberHighway, a Boise, Idaho-based ISP with approximately 27,000
subscribers, at that time, in exchange for 2,000,000 shares of Company
Common Stock.
In June 1999, the Company, through SFWI, acquired Santa Fe Trail Internet
Plus, Inc., another Santa Fe, New Mexico-based ISP, with approximately
2,000 customers, in exchange for 100,000 shares of Company Common Stock.
In August 1999, the Company, through a wholly-owned subsidiary, USURF
America (Alabama), Inc. ("USURF Alabama"), acquired Net 1, Inc., an
Alabama-based ISP, with approximately 1,500 customers, in exchange for
250,000 shares of Company Common Stock. This transaction is currently the
subject of arbitration, wherein the Company is seeking to rescind the
entire transaction. (See "Litigation").
In August 1999, the Company, through CyberHighway, acquired Premier
Internet Services, Inc., an Idaho Falls, Idaho-based ISP, which was an
affilate-ISP in the CyberHighway network. This acquisition was made for
127,000 shares of Company Common Stock.
In November 1999, the Company acquired the customer base of Cyber Mountain,
Inc., a Denver, Colorado-based ISP, which was an affilate-ISP in the
CyberHighway network. This acquisition was made for 25,000 shares of
Company Common Stock.
In December 1999, the Company acquired a portion of the customer base of
CyberHighway of North Georgia, Inc., a Demorest, Georgia-based ISP, which
was an affilate-ISP in the CyberHighway network. This acquisition was made
for 53,000 shares of Company Common Stock.
In July 1999, the Company acquired the business known as www.usurf.com, an
Internet e-commerce web portal. The Company has integrated this business
into its e-commerce site, "www.e-tail.com".
References herein to the "Company" include CyberHighway, Inc., Santa Fe
Wireless Internet, Inc. and USURF America (Alabama), Inc., unless the
context requires otherwise.
Current Overview
In recent months, the Company has negotiated contracts with two companies
that serve as Internet backbone providers, NaviNet and IONet, a subsidiary
of PSINet, Inc. These agreements, plus an existing agreement with Electric
Lightwave, have, in effect, transformed the Company from a regional ISP to
a national ISP, an ISP that can provide dial-up Internet access in the vast
majority of the 100 largest metropolitan statistical areas in the United
States. With these agreements in place, the Company announced its National
Reseller Program for its dial-up Internet access service, marketed under
the "USURF America" brand name. It is expected that the impact of this
effort will begin to appear during the first quarter of 2000. Through the
National Reseller Program and through acquisitions of local, independent
ISPs, the Company intends to continue to seek growth in its dial-up
Internet access business.
Nevertheless, all available current and future capital of the Company will
be applied to the exploitation of the Company's US.RF Wireless Internet
access products. It is these products upon which the Company's future is
based.
Corporate Growth Strategy
General. During the past year, as the Company has refined its growth
strategy, it has determined that, for a provider of Wireless Internet
access to achieve the greatest growth and economies of scale, it is
necessary to offer traditional dial-up Internet access as a means to
facilitate the implementation of the Company's US.RF Wireless Internet
products. Thus, to reach more Internet users, the Company will continue to
provide high quality dial-up Internet access service, as it deploys its
Wireless Internet products in its markets. The Company's growth strategy
is based on its ability to offer high quality Internet access through
traditional, telephone-line-based dial-up service, while focusing
substantially all of its resources on the exploitation of its Wireless
Internet access products.
US.RF Wireless Internet Strategy. The Company has selected ten as-yet
unannounced markets in the United States in which it will construct a US.RF
Wireless Internet access system. Each system will require between four and
six weeks to construct, during which period of time sales will be
aggressively pursued. With the recent $200,000 loan from the Company's
President, the Company is capable of constructing the ten planned Wireless
Internet access systems and obtaining at least 1,000 US.RF Wireless
Internet customers. The Company expects all ten of the planned systems to
be operational by the end of March 2000. US.RF Wireless Internet access
systems will be constructed in as many additional cities as the Company's
available capital will permit. Should the Company obtain a significant
equity funding, the rate of expansion would be significantly faster than it
would be, should the Company be forced to rely on available cash flow from
operations with which to expand. There is no assurance that the Company
will obtain a significant equity investment or that its operations will
provide cash flow with which to expand.
ISP Acquisitions; Hub and Spoke Concept. The Company's growth strategy
includes the acquisition of relatively small local, independent ISPs in a
certain key city (or cities, depending on the size of a state) in each
state. Each of these acquired ISPs would become a USURF America ISP and
would serve as a hub for the Company's operations in a particular state.
For example, in a state with a small population, the Company would acquire
a single ISP to serve as the hub in that particular state, whereas, in a
heavily populated state with several urban centers, the Company would
likely acquire an ISP in each urban center. An acquired ISP would serve as
a hub to same-state USURF America ISPs, who would, through telephone-line
connections, become spokes in the USURF America network system. The
Company believes that this hub and spoke concept is one which will afford
the Company the greatest opportunity to achieve needed economies of scale
in each of its markets.
Proposed Transactions
The Company intends to search actively for business combinations, which may
be in the form of mergers, stock-for-stock exchanges or stock-for-assets
acquisitions. While no specific criteria for evaluating potential
combination partners have been established by the Company, it is the
intention of the Company's management to pursue combination transactions
with private businesses with a history of earnings or a potential for
future growth, or both. The Company intends to utilize the shares of
Acquisition Stock to which this Prospectus relates in consummating any such
transaction. As of the date of this Prospectus, the Company had not agreed
to acquire any particular privately-held enterprises involving shares of
the Acquisition Stock to which this Prospectus relates. There can be no
assurance that the Company will be able to consummate a business
combination, or acquisition, through use of the Acquisition Stock. (See
"Plan of Distribution").
Industry Background
Growth of the Internet; the World Wide Web. The Internet, commonly known
as the World Wide Web, or simply the Web, is a collection of connected
computer systems and networks that link millions of public and private
computers to form, essentially, the largest computer network in the world.
The Internet has experienced rapid growth in recent years and is expected
to continue its impressive growth, based on estimated increases in the
numbers of Web users, Web traffic and the number of Web sites.
International Data Corporation estimates that there were over 38 million
Web users in the United States and over 68 million worldwide at the end of
1997. International Data Corporation projects that the number of Web users
will increase to over 135 million in the United States and over 319 million
worldwide by the end of 2002. In April 1998, the U.S. Department of
Commerce estimated that traffic on the Internet is doubling every 100 days.
It is estimated that the number of Web sites in the United States will
increase from approximately 450,000 in 1997 to nearly four million in 2002.
The following factors, in the Company's estimation, are primarily
contributing to the Internet's continued rapid growth: (1) the Internet has
become, on a global scale, an accepted communication medium, enabling
people to obtain and share information and conduct business electronically,
(2) the proliferation of affordable personal computers, (3) advances in the
performance and speed of personal computers, modems and networking
components, (4) improvements in telecommunication network infrastructures,
(5) ease of access to the Internet and (6) the increasing use of the
Internet by businesses as a competitive tool.
Internet Access. Internet access services represent the means by which
ISPs interconnect business and consumer users to the Internet's resources.
Access services vary from dial-up modem access, like that provided by the
Company, for individuals and small businesses to high speed dedicated
transmission lines for broadband access by large organizations to Wireless
Internet access systems, like the Company's US.RF Wireless Internet
products. An ISP provides Internet access either by developing a
proprietary network infrastructure or by purchasing access service from a
wholesale access vendor, or through a combination of both. The rapid
development and growth of the Internet have resulted in a highly
competitive and fragmented industry consisting of approximately 4,500 ISPs
in the United States, with most having customer bases of less than 5,000
subscribers. The vast majority of U.S.-based ISPs conduct their operations
within a single city or state, with just a small number of ISPs, such as
EarthLink and MindSpring, providing nationwide coverage. Due to the
disparity between the large number of smaller ISPs with limited resources
and the emergence of a limited number of national ISPs with their
associated economies of scale, the ISP industry is expected to undergo
substantial consolidation.
Electronic Commerce Over the Internet. The Internet has created a new
communication and sales channel that enables businesses to interact with
large numbers of geographically dispersed consumers and other businesses.
With the recent growth of the Internet, there have emerged many companies
that focus solely on the Internet as the medium for selling products or
delivering services directly to purchasers, bypassing traditional wholesale
and retail channels. Moreover, businesses are implementing sophisticated
Web sites to effect electronic commerce initiatives that offer competitive
advantages. These businesses are deploying an expanding variety of
Internet-enabled applications, ranging from Web-site marketing and
recruiting programs to on-line customer interaction systems,
telecommunications services, integrated purchase order and "just-in-time"
inventory solutions for key customers and suppliers. These on-line
capabilities require increasingly complex Web sites and accompanying
support operations. In addition, advances in on-line security and payment
mechanisms are more adequately addressing consumers' concerns associated
with conducting transactions over the Internet, thereby prompting more
consumers and businesses to use the Internet as a medium for commerce.
Also, businesses continue to offer an ever-greater selection of electronic
commerce services. International Data Corporation estimates that the
number of consumers buying goods and services on the Internet will grow
from 17.6 million in 1997 to over 128 million in 2002, and that the total
value of goods and services purchased over the Internet by consumers and
businesses will increase from approximately $12 billion in 1997 to over
$425 billion by 2002.
Contract Internet Operations. Electronic commerce, or e-commerce, is
growing at an explosive pace. More and more businesses are placing greater
emphasis on their Internet transaction and communication abilities and
operations. Increasingly, traditional businesses, as well as
Internet-based businesses, require non-congested and scalable Internet
operations that will permit them to engage in digital communication and
commercial transactions anywhere in the world, via the Internet.
Due to constraints posed by the lack of technical personnel with Internet
skills or experience, the high cost of advanced networking equipment and
the complexity of innovative Web solutions, many businesses do not possess,
internally, resources required to develop, maintain and update their
Internet facilities and systems, to maintain standards required for these
companies to conduct high levels of Internet-based business. As a result
of these constraints and other factors, many businesses are seeking to
contract out, or "outsource", their Internet facilities and systems
requirements as the preferred means for establishing and maintaining
electronic commerce solutions. To this end, the Company expects an
increasing demand is developing for:
1. Dedicated and broadband Internet access services to support
reliable, high speed and/or constantly connected Internet access and
communication;
2. Web hosting and co-location services which enable businesses to
obtain equipment, technical expertise and infrastructure for their Internet
needs on an outsourced basis; and
3. Electronic commerce solutions to sell goods and services on the Web
in a transactionally-secure environment.
By outsourcing Internet facilities and systems needs, businesses can then
focus on improving their business results, rather than expending financial
resources on additional staff and Internet-related assets necessary to
support their Internet operations.
Internet Service Opportunities. The number of businesses and consumers
accessing the Internet is expected to continue to increase significantly in
the foreseeable future. According to Forrester Research, the market for
providing access to the Internet for businesses and consumers is expected
to be approximately $18.4 billion in 2000. Additionally, as businesses and
consumers are developing greater levels of comfort in the use of the
Internet for electronic commerce, businesses are increasingly implementing
sophisticated electronic commerce solutions which, in turn, require
significantly greater bandwidth and other business services. In response
to this demand, an increasing number of ISPs are attempting to augment
their basic Internet access services with a wide range of business
services. According to International Data Corporation, the market for Web
hosting and Internet security business services is the fastest growing
segment of the Internet services market, with revenues expected to increase
from approximately $350 million in 1997 to approximately $7 billion in 2000.
The Company believes that ISPs that offer both Internet access to broad
segments of the population and that offer a broad selection of business
services will be positioned to attain greater economies of scale through
lower network expansion and marketing costs on a per-subscriber basis. The
Company's management believes that only a few national ISPs will be in a
position to benefit fully from this continued growth in Internet usage.
It is the Company's opinion that the ISPs that will be in a position to
benefit most from the expected continued growth of the Internet likely will
be characterized by their (1) ability to respond quickly to market demands,
(2) ability to provide reliable coverage on a nationwide basis, (3)
superior technical skills and customer support capabilities, (4) electronic
commerce expertise and business services capabilities, (5) brand name
recognition and the ability to exploit multiple marketing channels and (6)
relatively lower network costs.
Wireless Internet
General. "Wireless Internet" is a new type of communications spectrum
recently designated by the FCC. Wireless Internet access requires a
transmission facility maintained by an ISP employing such a wireless system
and the user's modem equipped with an antenna. Wireless Internet
capability allows users to access the Internet from a stationary computer
or from a mobile, lap-top computer located within the Wireless ISP's
transmission area; that is, a user can travel in a car, bus, train, etc.,
within the Wireless ISP's transmission area and maintain constant Internet
access. The Company believes that businesses, particularly service
businesses, once made aware of the Company's Wireless Internet access
technology, will readily subscribe to the Company's Wireless ISP service,
although no assurance can be made in this regard, inasmuch as the Company's
Wireless Internet technology has only recently begun to be deployed.
The Company's proprietary Wireless Internet Access System is marketed under
the "US.RF Wireless Internet System" (US.RF stands for United States Radio
Frequency) and "Quick-Cell" trade names.
The US.RF Quick-Cell Wireless Internet access system is a turn-key,
plug-and-play, system that is capable of delivering customers Internet
access at burstable T-1 equivalent speeds, at prices that range from 40% to
60% below those charged for traditional T-1 hardwire Internet access
service. Each Quick-Cell system consists of one US.RF Quick-Cell, one
US.RF server modem and five US.RF wireless, two-way customer modems, all of
which can be deployed in less than one week. Additional Quick-Cells can be
added to a local system on an as-needed basis. Currently, the Company's
Quick-Cell Wireless Internet access system is in use in Santa Fe, New Mexico.
Once the Company determines to construct a full-scale Wireless Internet
access system in a particular market, the construction of a full-scale
system, one that covers an area 12 miles in diameter, takes approximately
four to six weeks.
US.RF Wireless Internet Access System. The Company's proprietary US.RF
Wireless Internet Access System operates primarily within a broadcast
signal in the 2400 MHz band using two-way modems outfitted with antennae.
Thus, the Company's US.RF Wireless Internet Access System differs
substantially in design from the Wireless Internet access available through
cellular telephones and differs substantially from traditional
telephone-line-based ISPs, because there is no reliance on hard wire to
transfer data. Yet, the Company's management believes the Company's US.RF
Wireless Internet System is capable of greater utility at lower cost than
these other modes of Internet access.
It is the belief of the Company's management that the Company's US.RF
Wireless Internet System provides the following competitive advantages for
attracting potential consumer and business customers over other Internet
access modes:
Speed. The Company's US.RF Wireless Internet Access System provides a
minimum data transmission speed of 64kbs, with data transmission speed
capability of up to 10 Mbs.
Lower Cost. The Company's US.RF Wireless Internet Access System will,
depending on the particular market and desired Internet access speed,
offered at costs between 20% to 60% less than available hard-wire Internet
access (that is, less than monthly ISP charges plus monthly telephone line
charges) currently offered by local telephone companies. In addition, the
Company's US.RF Wireless Internet Access System offers significant savings
over cellular-telephone-based Internet access methods, inasmuch as the
Company's US.RF Wireless Internet Access System is offered on a monthly
flat-rate charge rather than a per-minute charge.
No Telephone Company Involvement. Because the Company's US.RF Wireless
Internet Access System does not utilize telephone lines, Company customers
will not be required to incur the expense of a hard-wire telephone line
through which to access the Internet. The Company believes this
characteristic is especially appealing to business customers. Also, in the
many areas where there appears to exist disdain for the local telephone
company, the Company believes it will be able to gain customers, at least
in part, by emphasizing the fact that the local telephone company will no
longer be needed for Internet access.
Security/Encryption. The Company's US.RF Wireless Internet Access
System is designed to allow the encryption (scrambling) of its broadcast
signal, thereby offering a high degree of security to potential customers,
particularly business customers who wish to transmit confidential
information over the Internet. As designed, such encryption capability
does not add significantly to the cost of the Company's US.RF Wireless
Internet Access System to its customers.
Mobility. The Company's US.RF Wireless Internet Access System is able
to permit service personnel of a business to file contemporaneous reports,
request and receive technical assistance and perform other computer-based
functions from a customer's place of business or from a service vehicle,
even if the service vehicle is traveling to its next destination. The
Company believes this mobility feature, coupled with the high-speed data
transmission feature, will be attractive to potential customers, especially
business customers.
Ethernet/Networking Capability. The Company's US.RF Wireless Internet
Access System is compatible with existing so-called "ethernet" systems.
Generally, an ethernet can be described as a self-contained network of
desk-top computers, often located in the same building, through which
individual computer users can communicate electronically (i.e., via
e-mail), as well as access the Internet. The Company is capable of
designing and installing an ethernet system in any existing building by
installing a wireless communications system that links all computers,
including computers that are to remain linked via hard wire, to one
another and provides all computer users access to the Internet. The
Company believes that its ability to provide a wireless ethernet system at
substantially lower cost than that of a hard-wire ethernet system will be a
competitive advantage. There is, however, no assurance in this regard.
The Company believes that its US.RF Wireless Internet Access System is able
to satisfy any other special requirements of a potential customer, without
significantly adding to the system's cost to that customer. However, there
can be no assurance that such will be the case.
The Company's US.RF Wireless Internet Access System is being marketed to
the business sector, as well as home-based Internet users.
Potential Future Applications. Currently, it is the Company's long-term
objective to offer a full array of video entertainment via its US.RF
Wireless Internet Access System. The Company believes its plans are easily
achievable, due to the fact that the Company's Internet connection can be
routed to the user's television, using existing, relatively inexpensive
technology. Assuming market conditions permit, the Company expects that,
by the year 2005, each of its Wireless Internet systems would be able to
offer its subscribers many video services, including some services that,
given the rapid evolution of technology, may not currently exist. The
video entertainment services that the Company expects to be able to offer
include:
Movies. The Company believes that it will be able to offer an
ever-expanding movie list, all of which would be available, in real time,
at any time, upon request of the subscriber. It is expected that each
movie would be sold, or "rented", to subscribers at a cost that would be
less than the same movie were it to be rented from the local video rental
store. The primary impediment to the Company's offering this service is
its lack of capital with which to acquire necessary equipment, as well as
digitized copies of the desired movies.
Pay-Per-View Events. The Company believes that the Company will be able
to offer to its subscribers access to pay-per-view events, such as concerts
and sporting events, including boxing matches, such as are currently
available from time to time through local cable television systems. The
primary impediment to the Company's offering this service is its lack of
capital with which to purchase necessary equipment, including satellite
dishes.
"Cable" Television. Although the Company expects that consumer
acceptance will be sluggish at first, the Company believes that, with
adequate capital for equipment and advertising, as well as consumer
education, the Company will be able to provide a competitive offering of
"cable" television channels that would be equal to those offered by any
local cable television company and direct broadcast satellite systems. It
is quite possible that market forces will dictate that this type of service
would not be introduced to consumers for the foreseeable future. No
prediction in this regard can be made.
The foregoing services that may be offered in the future by the Company
remain in the development stage and no introduction date has been set by
the Company's management. All of the services described appear to be
feasible after initial tests, due to the high-speed data transmission
capabilities of the Company's Wireless Internet system. Additional
applications are currently being developed by the Company. No prediction
as to when any or all of these services will be ready for commercial
exploitation.
Current Markets. The Company's US.RF Quick-Cell Wireless Internet access
system is operating in Santa Fe, New Mexico, and the Company currently is
completing construction of a full-scale US.RF Wireless Internet access
system there. It is expected that construction of the Santa Fe system will
be completed by the end of December 1999. The Company has a Wireless
Internet customer waiting list of over 300 in Santa Fe, and these customers
have begun to be placed onto the US.RF Wireless Internet access system.
The Company has begun constructing US.RF Wireless Internet access systems
in ten as-yet unannounced. The Company anticipates that construction of
all ten of these systems will be completed by the end of March 2000,
although there is no assurance that this will be the case.
Early in 1999, the Company licensed several independent ISPs to operate the
Company's US.RF Quick-Cell Wireless Internet access systems. The Company
has, since such time, determined not to pursue the licensing of independent
ISPs, in favor of its plan to own and operate all US.RF Wireless Internet
access systems. The licensed Quick-Cell system in Casper, Wyoming,
operated for a period of three months, but was discontinued, due to the
sale of the licensee's ISP business. The Santa Fe, New Mexico, licensee
was acquired by the Company in June 1999.
Competition; Consumer Acceptance. The Company's Wireless Internet business
faces the same severe competition for market share as does the Company's
dial-up Internet access business, particularly in the larger markets of the
U.S. In addition to the competitive factors described below, the Company's
Wireless Internet products potentially must also overcome an initial lack
of consumer acceptance, given the new and relatively unproven
(commercially) nature of the Company's Wireless Internet products. (See "
Competition" hereunder for a more complete discussion of competitive
factors that are expected to impact the Company's business).
Other Wireless Products. In January 1998, the Company delivered its first
proprietary Wireless DataLink System. The Company's Wireless DataLink
System was delivered to the Baton Rouge refinery of one of the largest
international oil companies, the refinery being the second largest in the
U.S. The Company's Wireless DataLink System was purchased to replace an
existing hard-wire (T-1 telephone line) data transmission system. The
Company's Wireless DataLink System transfers data at the rate of 2
megabytes per second. Since such time, the Company's management has
determined to focus all available resources on the development of its
Wireless Internet products, as a more efficient means of achieving
short-term profitability. As the Company begins to achieve success in
implementing its growth strategy, the Company expects to begin to devote
resources, if available, to the exploitation of these other proprietary
wireless products. The Company believes its Wireless DataLink System can
address, on a wide-spread basis, the needs of businesses to transmit
ever-increasing volumes of data. However, there is no assurance that the
Company will ever possess sufficient resources to exploit its Wireless
DataLink System or that the Company's Wireless DataLink System will achieve
wide-spread acceptance.
Dial-up Overview
The Company is a high quality, full service ISP, offering its services,
directly and through affiliate-ISPs, to residential and business customers
located in over 230 cities, in 12 states. The Company has approximately
30,000 dial-up customers, including several thousand business customers.
The Company's Internet services include dial-up access, high speed access
and other value-added services, as well as Wireless Internet access to
approximately 90 customers. Because CyberHighway began offering wireless
Internet service before its being acquired by the Company, the wireless
Internet system employed by CyberHighway is not the Company's US.RF
Wireless Internet access system. However, the Company will, over time,
transfer all of its current wireless Internet customers onto the Company's
US.RF Wireless Internet access system.
Customers and Markets
The Company provides Internet access to approximately 30,000 customers,
nearly all of which utilize its dial-up Internet access services. The
largest concentration of customers is in Idaho, where approximately 65% of
Company customers reside. The bulk of the remaining Internet access
customers of the Company are located as follows: 10% in Wyoming, 5% in
Georgia, 5% in Oregon, 5% in Nevada, and3% in Arizona, with the remaining
subscriber base spread among various other markets, including Denver,
Colorado, and Jackson, Mississippi.
With the Company's existing agreements with NaviNet, PSINet and Electric
Lightwave, all Internet backbone providers, the Company's management
believes that its growth plan will extend the Company's potential customer
base to include residents in nearly all of the largest 300 markets in the
United States. Based on data collected from certain of the Company's
subscribers, the Company believes that its subscribers tend to reflect the
typical Internet user composite which, according to published surveys,
indicates that over half of Internet users are male, approximately 50% are
between the ages of 25 and 45, about one-third are college graduates and
the average reported annual income of users is substantially higher than
the median U.S. level.
To date, business customers have generally consisted of small and
medium-sized businesses. However, with the introduction of the Company's
US.RF Wireless Internet access products, the Company has begun to place a
strong emphasis on the acquisition of larger business customers.
Sales and Marketing
Historically, CyberHighway's sales and marketing strategy was comprised of
three components: (1) direct response marketing, (2) affiliate-ISP program
and (3) corporate direct sales. Direct response marketing and the
affiliate-ISP program were responsible for most of CyberHighway's growth in
its subscriber base. However, the affiliate-ISP program has been
abandoned. The Company, instead, in taking a more national approach
founded upon its agreements with national Internet backbone providers, has
launched a National Reseller Program, with respect to its USURF America
dial-up Internet access service. Participating resellers receive monthly
per customer residuals from the Company, as compensation for their sales
efforts. The Company has received over 400 inquiries from prospective
resellers. The Company expects that its National Reseller Program to be
fully underway during the first quarter of 2000.
The Company has begun, and will continue, to place increasing emphasis on
marketing its Internet services to businesses. The Company's US.RF
Wireless Internet products are an important part of this effort. The
Wireless Internet products permit the Company to compete effectively in its
markets on sales of dedicated and high bandwidth Internet access services
to business customers.
The Company engages in a variety of direct response marketing and various
promotional activities to stimulate consumer awareness of its Internet
access services. These marketing efforts are directed both to consumers
who have not previously subscribed to Internet access services and to
Internet users who may switch to the Company's service, after learning of
its affordability and reliability. Radio advertising and direct mail
distribution have been the principal media used for direct response
marketing to solicit new subscribers. Recently, the marketing focus for
the Company's dial-up Internet service was changed to the National Reseller
Program structure described above. The Company believes this strategy is
the most cost-effective way to develop its dial-up Internet access
business, while permitting the Company to concentrate substantially all of
its resources on the exploitation of the US.RF Wireless Internet access
products.
Because it is the Company's belief that a consumer's selection of an
Internet service provider is most often influenced by a personal referral,
the Company strives always to deliver superior customer service and
support. Historically, CyberHighway has achieved high levels of customer
satisfaction that have led to positive customer referrals.
Affiliate-ISP Program
>From its inception, CyberHighway employed an affiliate marketing program, a
technique designed to generate rapid expansion of CyberHighway's subscriber
base. Under this program, an existing ISP entered into a license agreement
with CyberHighway, wherein the local ISPs obtained the right to use the
"CyberHighway" brand name and the local ISP allowed the connection of a
Kbps-speed frame relay data circuit to connect from the local ISP's POP to
CyberHighway's NOC. In effect, under this license arrangement,
CyberHighway handles the local ISP's "backroom" operations, that is,
hardware and system management, thereby allowing the local ISP's personnel
to concentrate on marketing functions. In addition to certain monthly
circuit fees, the local ISP pays CyberHighway a monthly per-customer
royalty. These per-customer royalties average approximately $2.00.
The Company has determined to attempt to acquire as many of the
CyberHighway affiliate-ISPs as possible. To this end, the Company has,
during 1999, acquired three affilate-ISPs and has executed definitive
acquisition agreements with one other. An acquisition agreement with
respect to an additional ISP has been terminated by the terms of the
acquisition agreement. There is no assurance that the Company will be able
to acquire additional affiliate-ISPs.
Customer Service and Support
The Company is committed to the highest levels of customer satisfaction.
Indeed, CyberHighway's history of high customer satisfaction, as measured
by a low customer turn-over rate, was one of the most important factors in
the Company's decision to acquire CyberHighway. The Company believes that
maintaining high levels of customer satisfaction will remain as a key
competitive factor that differentiates the Company from other purveyors of
Internet-related services. The Company regularly reviews network
utilization rates, and refines and expands its network capabilities as
necessary, to ensure high levels of network performance and reliability.
The Company maintains customer support for telephone inquiries seven days a
week, with technical personnel available to address customer questions and
concerns. The Company intends to begin to offer customer support 24 hours
per day, in the near future. The Company intends to continue to dedicate
the resources necessary to ensure that service calls are promptly answered
and addressed by a customer support representative, and that customer
issues are resolved promptly. Customers also can access customer support
services through e-mail correspondence or access trouble-shooting tips and
configuration information, as well as network status and performance
reports, on the Company's Web site.
Consumer and business customers have very different support needs, as do
Wireless Internet customers, especially as to technical requirements and
the sophistication of the user who makes the customer service inquiry. As
the Company's subscriber base grows, it intends to implement a tiered
customer support system, where simple technical problems or other
miscellaneous issues would be handled by non-technical support staff and
complex and/or time sensitive technical questions would be referred to the
trained technical support staff for resolution.
Network Infrastructure
The Company has designed its network and related systems to provide fast
and reliable, high-quality Internet access services, while minimizing the
capital investment needed for infrastructure development. CyberHighway
continues to re-evaluate its network's structure and design so as to
achieve maximum capacity with available resources. The Company intends to
seek innovative, cost-saving measures as it expands its network, which is
expected to provide maximum flexibility to the Company as it pursues its
growth strategy. The Company further believes that it will be able to take
advantage of market opportunities as they may develop, whether due to
technological advances or regulatory changes. The Company's objective is
to minimize both network costs and exposure to technological obsolescence
of equipment. The Company believes its agreements with NaviNet, PSINet and
Electric Lightwave for Internet backbone access greatly enhance its ability
to accomplish these objectives.
The Company's current network consists of a state-of-the-art NOC located in
Boise, Idaho, through which all subscribers, whether from company-owned or
affiliate-ISPs, log onto the Internet. These facilities support the
Company's POPs. The Company has designed a "mirror" NOC site, which would
provide redundancy to the Company's network and greatly enhance the
reliability of the Company's network. The Company will be able to
construct this "mirror" site, only at such time as it obtains a significant
equity funding.
The Company will continue to monitor capacity demands on its network, so
that network resources will continue to expand ahead of market demands.
Network Operations Center
The Company's Network Operation Center (NOC) monitors network traffic,
quality of services and security issues, as well as the performance of the
equipment located at each company-owned and affiliate-ISP POPs, to ensure
reliable service. The Company's NOC is comprised of state-of-the-art
equipment and an uninterruptible power supply. The Company's NOC currently
possesses excess capacity, to the extent that an additional 10,000
subscribers could be added to the Company's network without having to add
equipment or telephone lines. The Company's NOC is staffed 24 hours a day,
seven days a week, with technical and network security personnel. When an
intruder, or "hacker", enters the Company's network, the network security
personnel are able to monitor the intruder's activities, create a report
about such activities and provide such information to customers who may
have had their proprietary information tampered with by the intruder. To
date, neither the Company nor any customer has incurred any material loss
due to the efforts of hackers.
Network Design
Each Company-owned POP includes modern hardware, along with routing
equipment and associated leased-telephone-line interface devices. Modems
are interconnected to switched telephone networks serving the local area,
and high-speed telephone lines connect the POP router to other sites within
its network. The hardware and software deployed at each facility permits
analysis of the performance of the network and performance of limited
maintenance from the Boise, Idaho, NOC. The Company's network is designed
with high levels of redundancy as a means of increasing network
reliability, so as to avoid single points of system failure.
Strategic Relationships
The Company has entered into agreements with NaviNet, Inc., ioNET, Inc., a
division of PSINet, Inc., and Electric Lightwave, with respect to such
companies' providing Internet backbone access throughout their respective
networks. Together, these companies provide Internet backbone access in a
great majority of U.S. markets. The Company pays these providers a monthly
per-customer fee, which fees fluctuate, depending on the number of Company
customers that utilize such firms' access services. The services provided
by these firms to the Company are transparent to customers of the Company,
that is, Company customers appear to access the Internet directly through a
Company-owned POP. These agreements are key to the Company's ability to
offer national dial-up access to its customers. The Company continues to
negotiate with other Internet backbone service providers, in an attempt to
achieve better pricing alternatives.
Other Internet Services
In addition to the services usually offered by ISPs, the Company offers a
Web site that facilitates e-commerce for its customers. This Web site is
known as "e-tail.com". During 2000, the Company will attempt to direct
significant Internet traffic to this site, although no assurance in this
regard can be made. The Company will, in the future, have its e-tail.com
operations begin to specialize in business-to-business e-commerce
transactions, in addition to its offering desirable products to consumers.
The Company has determined to focus on business-to-business Internet
solutions, due to its belief that this sector has not, historically, been
well served by Internet access and Internet-related service providers.
There is no assurance that the Company's efforts in this regard will be
successful.
Competition
The market for the provision of Internet access services is extremely
competitive and highly fragmented. Among the Company's national
competitors, such as America Online, Mindspring, Earth Link and Flashnet,
the Company competes against local, independent ISPs in each of its
markets. As there are no significant barriers to entry, the Company
expects that competition will intensify. It also believes that the primary
competitive factors determining success as an ISP are (1) a reputation for
reliability and high-quality service, (2) effective customer support, (3)
access speed, (4) pricing, (5) effective marketing techniques for customer
acquisition, (6) ease of use and (7) scope of geographic coverage.
The Company believes that it can, and in the future will, more effectively,
compete in its markets, due to (1) its commitment to providing fast and
reliable, high-quality Internet access and other Internet-related services,
as well as exemplary customer service and support, and (2) the Company's
US.RF Wireless Internet products, which are designed to be highly cost
competitive and are expected to be well received in each of its markets.
Nevertheless, there is no assurance that the Company will be able to
compete successfully in its markets.
Current and prospective competitors of the Company include many large,
nationally-known companies that possess substantially greater resources,
financial and otherwise, market presence and brand name recognition than
does the Company, including its subsidiaries. With respect to the
Company's Internet access and other Internet-related services, the Company
currently competes, or expects to compete, for the foreseeable future, with
the following: national ISPs, numerous regional and local ISPs, most of
which have significant market share in their markets; established on-line
information service providers, such as America Online, which provide basic
Internet access, as well as proprietary information not available through
public Internet access; providers of web hosting, co-location and other
Internet-based business services; computer hardware and software and other
technology companies that provide Internet connectivity with their
products; telecommunications companies, including global long distance
carriers, regional Bell operating companies and local telephone companies;
operators that provide Internet access through television cable lines;
electric utility companies; communications companies; companies that
provide television or telecommunications through participation in satellite
systems; and, to a lesser extent, non-profit or educational Internet access
providers.
With respect to potential competitors, the Company believes that
manufacturers of computer hardware and software products, media and
telecommunications companies and others will continue to enter the Internet
services market, which will serve to intensify competition. In addition,
as more consumers and businesses increase their Internet usage, the Company
expects existing competitors to increase further their emphasis on Internet
access and electronic commerce initiatives, resulting in even greater
competition for the Company in its markets. The ability of competitors or
others to enter into business combinations, strategic alliances or joint
ventures, or to bundle their services and products with Internet access,
could place the Company at a significant competitive disadvantage.
Moreover, the Company expects to face competition in the future from
companies that provide connections to consumers' homes, such as
telecommunications providers, cable companies and electrical utility
companies. For example, recent advances in technology have enabled cable
television operators to offer Internet access through their cable
facilities at significantly higher speeds than existing analog modem
speeds. Such companies could include Internet access in their basic bundle
of services or offer such access for a nominal additional charge. Any such
developments could materially and adversely affect the Company's business,
operating results and financial condition.
Properties
General. The Company, including its subsidiaries, owns all of the
equipment necessary to conduct its ISP operations, including, without
limitation, servers, routers and modems. In addition, the Company owns
office equipment necessary to conduct its business.
The Company leases approximately 650 square feet for its executive offices
in Baton Rouge, Louisiana, for a monthly rental of $776. CyberHighway
leases three separate facilities in the Boise, Idaho, area. The monthly
rental payments for such facilities total approximately $3,500. SFTIP
leases approximately 500 square feet in Santa Fe, New Mexico, for a monthly
rental of approximately $500.
Wireless Cable Properties. The Company currently holds the rights to
wireless cable channels in Poplar Bluff, Missouri, Lebanon, Missouri, Port
Angeles, Washington, The Dalles, Oregon, Sand Point, Idaho, Fallon, Nevada,
and Astoria, Oregon. The Company has, for the foreseeable future,
abandoned its efforts to develop its wireless cable properties into
operating wireless cable systems, due to current market conditions.
Rather, the Company intends to develop such properties into operating
Wireless Internet systems, at such time as two-way data transmission on
such frequencies is permitted.
Intellectual Property
The Company is nearing completion of patent applications relating to its
Wireless Internet access system, which patent applications are to be filed
as soon as they have been completed. Although the Company believes its
Wireless Internet access system, or aspects thereof, to be patentable,
there is no assurance that a patent or patents will be granted with respect
to the Company's invention. Also, no assurance can be given that the steps
taken by the Company will be adequate to prevent misappropriation of the
Company's proprietary Wireless Internet technologies or that third parties,
including competitors, will not independently develop technologies that are
substantially equivalent or superior to the Company's proprietary Wireless
Internet technologies.
The Company is preparing U.S. trademark applications for the following
Company trademarks: "US.RF Wireless Internet", "US.RF Quick-Cell" and
"USURF America".
The Company has received authorization to use the products of each
manufacturer of software that is bundled in its software for users with
personal computers operating on the Windows or Macintosh platforms. While
certain of the applications included in the Company's start-up kit for
Internet access services subscribers are shareware that it has obtained
permission to distribute or that are otherwise in the public domain and
freely distributable, certain other applications included in the Company's
start-up kit have been licensed where necessary. The Company's currently
intends to maintain or negotiate renewals of all existing software licenses
and authorizations as necessary, although there is no assurance that such
renewals will be available on acceptable terms, if at all. The Company may
also enter into licensing arrangements for other applications, in the future.
Employees
The Company, including subsidiaries, currently has 24 employees, including
four officers of the Company. Substantially all of the Company's hourly
employees are employed by CyberHighway. The Company's President, David M.
Loflin, Vice President, Waddell D. Loflin, the Company's Vice President -
Corporate Development, James Kaufman and the Company's Vice President -
U.S. Internet Operations, Darrell Davis, have entered into employment
agreements with the Company. Mr. Kaufman may receive a part of his
compensation in shares of Common Stock of the Company, in the Company's
discretion. Mr. Basham, pursuant to a settlement agreement, resigned as
Chief Operating Officer on January 4, 2000. (See "Certain Transactions").
None of the employees of the Company, or any subsidiary, is covered by any
collective bargaining agreement, nor has the Company, or any subsidiary,
ever experienced a work stoppage. The Company believes its relations with
employees to be good. Much of the future success of the Company will
depend, in large measure, upon the ability of the Company to continue to
attract and retain highly skilled technical, sales, marketing and customer
support personnel.
MANAGEMENT
Directors and Officers
The following table sets forth the officers and directors of the Company as
of the date of this Prospectus.
Name Age Position(s)
David M. Loflin(1) 41 President and Director
Waddell D. Loflin(1) 49 Vice President, Secretary
and Director
Julius W. Basham, II 51 Director
Darrell D. Davis 35 Vice President - U.S. Internet
Operations
James Kaufman 35 Vice President - Corporate
Development
Richard N. Gill 41 Director
Ross S. Bravata 40 Director
Michael Cohn 41 Director
- ------------
(1) David M. Loflin and Waddell D. Loflin are brothers.
The current officers and directors of the Company serve until the next
annual meeting or until their respective successors are elected and
qualified. All officers serve at the discretion of the Board of Directors.
Family relationships between the Company's officers and directors are
noted above. Certain information regarding the backgrounds of each of the
officers and directors of the Company is set forth below.
David M. Loflin, President and Director of the Company, has, for more than
the past five years, owned and operated Gulf Atlantic Communications, Inc.
("Gulf-Atlantic"), a Baton Rouge, Louisiana-based wireless technology firm
specializing in development of wireless cable systems and broadcast
television stations. Gulf Atlantic has designed, constructed and operated
two wireless cable systems: (1) Baton Rouge, Louisiana, and (2) Selma,
Alabama. Mr. Loflin developed and currently operates one television
station, WTVK-TV11, Inc. (a Warner Brothers Network affiliate), Channel 11
in Baton Rouge, Louisiana. For over ten years, Mr. Loflin has served as a
consultant for Wireless One, one of the largest wireless communications
firms in the United States. Mr. Loflin is a member of the Wireless Cable
Association International and the Community Broadcasters Association.
Waddell D. Loflin, Vice President, Secretary and Director of the Company,
has, for more than the past five years, served as Vice President of
Operations and Treasurer of Gulf Atlantic Communications, Inc. and
WTVK-TV11, Inc., both in Baton Rouge, Louisiana. In addition, Mr. Loflin
serves as Production Manager and Film Director for WTVK-TV11, Inc. Mr.
Loflin served as General Manager for Baton Rouge Television Company, Baton
Rouge, Louisiana, a wireless cable system, where he directed the
development and launch of such wireless cable system. Also, Mr. Loflin has
devoted over five years to demographic research relating to the wireless
cable industry. Mr. Loflin is a member of the Wireless Cable Association
International and the Community Broadcasters Association. Mr. Loflin holds
a B.A. degree in Social Sciences from Oglethorpe University, Atlanta, Georgia.
James Kaufman, Vice President - Corporate Development, received a B.S.
degree in Journalism from the University of Colorado, Boulder, Colorado.
From 1994 to 1995, Mr. Kaufman was a registered representative with D.E.
Fry, a Denver, Colorado-based broker-dealer. From 1995 to 1996, Mr.
Kaufman was a registered representative with A.G. Edwards, a St. Louis,
Missouri-based broker-dealer. From 1997 to February 1999, Mr. Kaufman
served as Director of Corporate Development for B. Edward Haun & Company, a
Denver, Colorado-based investment banking and research firm.
Darrell D. Davis, Vice President - U.S. Internet Operations, owned and
operated Santa Fe Trail Internet Plus, Inc., a Santa Fe, New Mexico-based
ISP, from 1996 to June 1999, when such firm was acquired by the Company.
From 1994 to 1996, Mr. Davis was employed by Galaxy Computer Services,
Santa Fe, New Mexico. In 1995, Mr. Davis declared Chapter 7 bankruptcy.
Julius W. Basham, II, Director of the Company, served as Chief Operating
Officer of the Company from January 1999 to January 4, 2000. Mr. Basham
served as President and a director of CyberHighway, Inc., the Company's
wholly-owned subsidiary, from January 1996 to July 1999. From 1981 through
December 1995, Mr. Basham was President and owner of ProData, Inc., a data
processing contracting and consulting company.
Richard N. Gill, Director of the Company, has, for more than the past five
years, served as Chairman of the Board, President and General Manager of
Campti-Pleasant Hill Telephone Company, Inc., a Pleasant Hill,
Louisiana-based independent telecommunications company involved in the
cellular telephone service industry, the wireless cable industry and the
Internet service provider industry. Mr. Gill currently serves on the Board
of Directors of Artcrete, Inc., and is on the Advisory Board of Peoples
State Bank, Pleasant Hill, Louisiana. Mr. Gill currently serves as a
member of the Industry Telecommunication Advisory Committee for the
Electrical Engineering Department at the University of Southwestern
Louisiana, Lafayette, Louisiana. Mr. Gill is a past-Chairman and current
member of the Louisiana Telephone Association. Mr. Gill is also a member
of the United States Telephone Association and the National Telephone
Cooperative Association.
Ross S. Bravata, Director of the Company, has, since 1981, worked for
Novartis (formerly Ciba Corporation), in various positions, and currently
serves as a Senior Control Systems Technician. In such capacity, Mr.
Bravata supervises the service and maintenance of electronic
instrumentation. Since 1988, Mr. Bravata has served as a director and
principal financial officer of CG Federal Credit Union, Baton Rouge,
Louisiana. Also, Mr. Bravata has, since its inception in 1994, served as a
director of Trinity's Restaurant, Inc., in Baton Rouge, Louisiana.
Michael Cohn, Director of the Company, has, for over 20 years, owned and
operated Arrow Pest Control, Inc., Baton Rouge, Louisiana. In addition,
Mr. Cohn owns Arrow Pest Control of New Orleans, Wilson and Sons
Exterminating in Mobile, Alabama, and Premier Termite and Pest Control in
Florida.
Executive Committee
The Board of Directors of the Company has created an Executive Committee to
facilitate Company management between meetings of the full Board of
Directors. David M. Loflin, Waddell D. Loflin and Ross S. Bravata comprise
the Executive Committee of the Board of Directors.
The Company's Bylaws (Section 5.1) provide that the Executive Committee has
the authority to exercise all powers of the Board of Directors, except the
power to declare dividends; to issue stock, except that the Executive
Committee shall have the power to issue (1) an unlimited number of shares
of stock in business and/or asset acquisition transactions and (2) up to
25,000 shares of stock to an employee of the Company or a subsidiary, in
connection with any such employee's employment, to recommend to
shareholders any action requiring their approval; and to change the
membership of any committee, fill the vacancies thereon or discharge any
committee. The Executive Committee has taken action by unanimous written
consent in lieu of a meeting seven times, since its creation.
Audit Committee
In September 1999, the Company's Board of Directors created an Audit
Committee of the Board of Directors, consisting of three members, the
majority of whom shall be outside directors. The initial members of the
Audit Committee are David M. Loflin, Michael Cohn and Richard N. Gill. The
Audit Committee has the responsibility to review the Company's internal
controls, accounting policies and financial reporting practices, to review
the financial statements, the arrangements for, and scope of, the
independent audit as well as the results of the audit arrangement and to
review the services and fees of the independent auditors, their
independence and recommend to the Board of Directors for its approval and
for the ratification by the Company's shareholders the engagement of the
independent auditors of the Company to serve the following year in
examining the accounts of the Company. The Audit Committee has held one
meeting, since its creation, wherein it approved the recent change in the
Company's independent auditor. (See "Recent Change of Independent Auditor").
Executive Compensation
The following table sets forth in summary form the compensation received
during each of the Company's last three completed fiscal years by the Chief
Executive Officer of the Company and each executive officer of the Company
who received total salary and bonus exceeding $100,000 during any of the
last three fiscal years.
Long-
term
Compen-
Other sation All
Annual Awards Other
Compen- of Stock Compen-
Principal Salary Bonus sation Options sation
Position Year $ $ $ # $
David M. 1998 $55,000 $ -0- $ -0- -0- $ -0-
Loflin 1997 -0- -0- -0- -0- -0-
President 1996 -0- -0- -0- -0- -0-
(Princi-
pal Exec-
cutive
Officer
and Prin-
cipal Fin-
ancial
Officer)
Compensation of Directors
In March 1998, four of the Company's directors, Waddell Loflin, Ross S.
Bravata, Richard N. Gill and Michael Cohn, were issued 20,000 shares each
of Company Common Stock as a bonus for their services as directors, which
shares were valued at $.80 per share. On the date of such issuances, the
most recent closing bid price of the Common Stock of the Company was $.56
per share.
Employment Contracts and Termination of Employment and Change-in-Control
Agreements. Until 1998, the Company's President, David M. Loflin, and Vice
President, Waddell D. Loflin, served since the Company's inception without
compensation. During 1998, these officers received salaries of $55,000 and
$48,000, respectively.
In August 1999, each of Messrs. Loflin entered into an employment agreement
with the Company. Since such time, Messers. Loflin have accrued their
salaries ($150,000 and $100,000 per year, respectively) until such time as
the Company is able to pay such salaries. The Company's Vice President -
Corporate Development, James Kaufman, and the Company's Vice President -
U.S. Internet Operations, Darrell Davis, have entered into employment
agreements with the Company. Mr. Kaufman may receive as part of his
compensation in shares of Common Stock of the Company, in the Company's
discretion.
The Company has no compensatory plan or arrangement that results or will
result from the resignation, retirement or any other termination of an
executive officer's employment with the Company and its subsidiaries or
from a change in control of the Company or a change in an executive
officer's responsibilities following a change-in-control.
Option/SAR Grants in Last Fiscal Year. The Company did not grant any
options to any person during the fiscal year ended December 31, 1998. The
Company has never granted any stock appreciation rights ("SARs"), nor does
it expect to grant any SARs in the foreseeable future.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company became subject to the provisions of Sections 16(a) of the
Securities Exchange Act of 1934 on October 14, 1999. Section 16(a)
requires directors, executive officers and persons who own more than 10% of
the outstanding Common Stock of the Company to file with the Commission an
Initial Statement of Beneficial Ownership of Securities (Form 3) and
Statements of Changes of Beneficial Ownership of Securities (Form 4).
Directors, executive officers and greater-than-10% shareholders are
required by Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, and based on a review of the copies of such
reports furnished to the Company or representations that no other reports
were required, the Company believes that all of its directors, executive
directors and greater-than-10% beneficial owners filed their respective
Form 3 reports, such Form 3 reports having been filed late. However, the
Form 3 report of Darrell Davis, an officer of the Company, has not yet been
filed. In addition, Form 4 reports for Michael Cohn, a director of the
Company, and Darrell Davis, an officer of the Company, are due and have not
yet been filed.
Indemnification of Directors and Officers
Article X of the Articles of Incorporation of the Company provides that no
director or officer of the Company shall be personally liable to the
Company or its shareholders for damages for breach of fiduciary duty as a
director officer; provided, however, that such provision shall not
eliminate or limit the liability of a director or officer for (1) acts or
omissions which involve intentional misconduct, fraud or a knowing
violation of law or (2) the payment of dividends in violation of law. Any
repeal or modification of Article X shall be prospective only and shall not
adversely affect any right or protection of a director or officer of the
Company existing at the time of such repeal or modification for any breach
covered by Article X which occurred prior to any such repeal or
modification. The effect of Article X of the Company's Articles of
Incorporation is that Company directors and officers will experience no
monetary loss for damages arising out of actions taken (or not taken) in
such capacities, except for damages arising out of intentional misconduct,
fraud or a knowing violation of law, or the payment of dividends in
violation of law.
As permitted by Nevada law, the Company's Bylaws provide that the Company
will indemnify its directors and officers against expense and liabilities
they incur to defend, settle or satisfy any civil, including any action
alleging negligence, or criminal action brought against them on account of
their being or having been Company directors or officers unless, in any
such action, they are judged to have acted with gross negligence or willful
misconduct. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
or persons controlling the Company pursuant to the foregoing provisions,
the Company has been informed that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
CERTAIN TRANSACTIONS
Founders
In November 1996, the Company's officers purchased a total of 1,800,000
shares of Company Common Stock for cash at $.10 per share, a total
consideration of $1,800. Specifically, David M. Loflin, President and a
director of the Company, purchased 1,600,000 shares and Waddell D. Loflin,
Vice President, Secretary and a director of the Company, purchased 200,000
shares of Company Common Stock.
Loans by Officers
Since its formation, the Company has obtained loans and advances on open
account from David M. Loflin in a total amount of $439,926. These loans
and advances bear interest at eight percent per annum and are payable on
demand. To date, $40,000 of such indebtedness have been repaid to Mr.
Loflin. Mr. Loflin has advised the Company that he does not intend to
demand further payment of any such loans and advances until such time as
repayment would not adversely affect the financial position of the Company.
Subscription Agreements
Effective December 20, 1996, the Company entered into a Subscription
Agreement with its President, David M. Loflin, whereby the Company issued
1,578,512 shares of Common Stock to Mr. Loflin in exchange for assignments
of licenses and leases of licenses of television channels and wireless
cable television channels and options to acquire such assets, as follows:
Monroe/Rayville, Louisiana (channel 26), Natchitoches, Louisiana (channel
38), Port Angeles, Washington (channels H1-2-3), Astoria, Oregon (channels
H2-3), Sand Point, Utah (channels B1-2-3; C1-2-3), The Dalles, Oregon
(channels B1-2-3; C1-2-3), and Fallon, Nevada (channels E1-2-3-4; H3)
The assets acquired by the Company under such Subscription Agreement were
valued at $1,826,873, which value was determined pursuant to a market
report and appraisal as of December 20, 1996 (the "Appraisal"), delivered
to the Company by Broadcast Services International, Inc., Sacramento,
California. (See "Appraisal" hereunder for a full discussion of the
Appraisal). Mr. Loflin's total acquisition costs of the assets underlying
such Subscription Agreement are unknown. Accordingly, the financial
statements of the Company attribute no value to such assets. See the
second paragraph under "Appraisal" hereinbelow for a discussion of Mr.
Loflin's acquisition costs of the assets vis-a-vis the appraised value of
such assets.
Effective December 20, 1996, the Company entered into a Subscription
Agreement with its Vice President, Waddell D. Loflin, whereby the Company
issued 104,249 shares of Common Stock to Mr. Loflin in exchange for an
assignment of the license of television channel 36 in Bainbridge, Georgia.
The assets acquired by the Company under such Subscription Agreement were
valued at $120,652, which value was determined pursuant to the Appraisal.
Mr. Loflin's acquisition costs of the assets underlying such Subscription
Agreement are unknown. Accordingly, the financial statements of the
Company attribute no value to such assets. See the second paragraph under
"Appraisal" hereinbelow for a discussion of Mr. Loflin's acquisition costs
of the assets vis-a-vis the appraised value of such assets.
Reorganizations
Effective December 31, 1996, the Company entered into an Agreement and Plan
of Reorganization (the "WEI Reorganization") among the Company, Winter
Entertainment, Inc., a Delaware corporation (WEI), and David M. Loflin, as
WEI's sole shareholder, pursuant to which transaction WEI became a
wholly-owned subsidiary of the Company. WEI owns and operates K13VE
Channel 13 in Baton Rouge, Louisiana. Under the WEI Reorganization, Mr.
Loflin received 227,336 shares of Company Common Stock in exchange for his
shares of WEI common stock. The shares of WEI common stock acquired by the
Company in the WEI Reorganization were valued at $263,106, which value was
determined pursuant to the Appraisal. WEI's acquisition costs relating to
the rights to K13VE Channel 13 were $6,750. In addition, WEI has
capitalized a total of $10,587 in exploiting such channel rights, including
station construction costs. See the second paragraph under "Appraisal"
hereinbelow for a discussion of WEI's acquisition costs relating to K13VE
Channel 13 vis-a-vis the appraised value thereof.
Effective December 31, 1996, the Company entered into an Agreement and Plan
of Reorganization (the "MCTV Reorganization") among the Company, Missouri
Cable TV Corp., a Louisiana corporation (MCTV), and the shareholders of
MCTV, pursuant to which transaction MCTV became a wholly-owned subsidiary
of the Company. MCTV owns licenses and leases of licenses of wireless
cable television channels in Poplar Bluff, Missouri, which system is ready
for broadcast operations, and Lebanon, Missouri, which system has yet to be
developed. Under the MCTV Reorganization, David M. Loflin, as a
shareholder of MCTV, received 1,179,389 shares of Company Common Stock in
exchange for his shares of MCTV common stock. The shares of MCTV common
stock acquired by the Company from Mr. Loflin in the MCTV Reorganization
were valued at $1,364,553. Also under the MCTV Reorganization, Ross S.
Bravata, a director of the Company, received, as a shareholder of MCTV,
42,887 shares of Company Common Stock in exchange for his shares of MCTV
common stock. The shares of MCTV common stock acquired by the Company from
Mr. Bravata were valued at $49,620. In addition, Michael Cohn, a director
of the Company, received, as a shareholder of MCTV, 53,608 shares of
Company Common Stock in exchange for his shares of MCTV common stock. The
shares of MCTV common stock acquired by the Company from Mr. Cohn were
valued at $62,024. The value of the shares of MCTV common stock acquired
by the Company from Messrs. Loflin, Bravata and Cohn under the MCTV
Reorganization was determined pursuant to the Appraisal. MCTV acquired
substantially all of its assets from Mr. David Loflin, whose acquisition
costs of such assets were $179,611. The other shareholders of MCTV
received their shares of MCTV common stock for nominal consideration.
Since acquiring its assets from Mr. Loflin, MCTV has capitalized an
additional $22,722 in exploiting such assets. See the second paragraph
under "Appraisal" hereinbelow for a discussion of Mr. Loflin's acquisition
costs relating to MCTV's assets vis-a-vis the appraised value thereof.
Securities Purchases
In March 1997, one of the Company's directors, Michael Cohn, purchased
20,000 shares of Company Common Stock for cash in the amount of $50,000.
At the time of such transaction, Mr. Cohn was not a director of the Company.
In January 1999, Mr. Cohn purchased 30,000 units of Company securities in a
private offering, at a purchase of $4.50 per unit, or $135,000 in the
aggregate. Each unit purchased by Mr. Cohn consisted of one share of
Company Common Stock and one Common Stock Purchase Warrant to purchase one
share of Company Common Stock at an exercise price of $7.00 per share. Mr.
Cohn purchased units on the same terms and conditions as were offered to
unaffiliated investors.
In November 1999, Mr. Cohn purchased 50,000 units of Company securities in
a private offering, at a purchase of $3.00 per unit, or $150,000 in the
aggregate. Each unit purchased by Mr. Cohn consisted of one share of
Company Common Stock and one Common Stock Purchase Warrant to purchase one
share of Company Common Stock at an exercise price of $7.00 per share. Mr.
Cohn purchased units on the same terms and conditions as were offered to
unaffiliated investors.
Stock Bonus
In March 1998, four of the Company's directors, Waddell Loflin, Ross S.
Bravata, Richard N. Gill and Michael Cohn, were issued 20,000 shares each
of Company Common Stock as a bonus for their services as directors, which
shares were valued at $.56 per share. On the date of such issuances, the
most recent closing bid price of the Common Stock of the Company was $.56
per share.
Employment Agreements
In June 1999, the Company entered into an employment agreement with David
M. Loflin, the Company's President. The employment agreement with Mr.
Loflin is for a term of seven years. Mr. Loflin receives $150,000 per
year, under the terms of his employment agreement. However, Mr. Loflin has
agreed to defer payment of his salary until such time as the Company is
able to pay it. As of the date of this Prospectus, Mr. Loflin had deferred
salary in the amount of $87,500.
In June 1999, the Company entered into an employment agreement with Waddell
D. Loflin, the Company's Vice President and Secretary. The employment
agreement with Mr. Loflin is for a term of seven years. Mr. Loflin
receives $100,000 per year, under the terms of his employment agreement.
However, Mr. Loflin has agreed to defer payment of his salary until such
time as the Company is able to pay it. As of the date of this Prospectus,
Mr. Loflin had deferred salary in the amount of $58,000.
In October 1999, the Company entered into an employment agreement with
Darrell Davis, the Company's Vice President - U.S. Internet Operations.
The employment agreement with Mr. Davis is for a term of five years. Mr.
Davis receives $86,000 per year, under the terms of his employment agreement.
In March 1999, the Company entered into an employment agreement with James
Kaufman, the Company's Vice President - Corporate Development. The
employment agreement with Mr. Kaufman is for a term of one year. Under the
terms of his employment agreement, Mr. Kaufman receives $120,000 per year,
up to 80% of which is payable in shares of Company Common Stock, at the
Company's discretion, based on the market price for the Company's Common
Stock.
In January 1999, the Company entered into an employment agreement with
Julius W. Basham, II, a director of the Company and the Company's former
Chief Operating Officer. Pursuant to the terms of a settlement agreement,
Mr. Basham resigned as Chief Operating Officer on January 4, 2000. (See
"Settlement Agreement" hereunder).
Voting Agreement
On January 29, 1999, David W. Loflin, Waddell D. Loflin, Julius W. Basham,
David W. Brown and Wm. Kim Stimpson entered into a Voting Agreement,
whereby all of such persons are required to vote all shares owned by them
for David M. Loflin, Waddell D. Loflin and Julius W. Basham in all
elections of directors of the Company, for a period of five years.
Currently, 6,025,903 shares are subject to this voting agreement.
Settlement Agreement
On November 30, 1999, the Company entered into a Settlement Agreement and
Mutual Release (the "Settlement Agreement"), which settled certain legal
proceedings in which the Company and CyberHighway, had been involved. The
parties to the Settlement Agreement were: the Company, CyberHighway, Julius
W. Basham, II, the Company's Chief Operating Officer and a director,
William Kim Stimpson ("Stimpson") and David W. Brown ("Brown").
Pursuant to the Settlement Agreement, the following legal proceedings have
been settled in full: (1) David W. Brown, Plaintiff v. USURF America, Inc.
and Cyberhighway, Inc., Defendants, in the District Court of the Fourth
Judicial District of the State of Idaho, in and for the County of Ada,
Civil Case No. CV OC 9904230D; (2) Julius W. Basham, II, Individual
Plaintiff, David W. Brown, William Kim Stimpson, Individuals, Involuntary
Party Plaintiffs v. USURF America, Inc., formerly known as Internet Media,
Inc., in the District Court of the Fourth Judicial District of the State of
Idaho, in and for the County of Ada, Civil Case No. CVOC 9904382D; and (3)
David W. Brown, Claimant v. Cyberhighway, Inc., Respondent, Industrial
Commission, State of Idaho, IDOL 3362-1999.
Other material terms of the Settlement Agreement include the following: (1)
each and every of the claims made in the legal proceedings described above
by Basham, Stimpson and Brown, as the case may be, are dismissed with
prejudice and any other potential claims of Basham, Stimpson and Brown
against the Company and/or CyberHIghway are released; (2) the Company and
CyberHighway released any and all claims against Basham, Stimpson and
Brown, and each of them; (3) Basham, Stimpson and Brown each reaffirmed
their existing Agreements Not to Compete, with the exception that Brown is
now able to seek any employment opportunity, except that Brown remains
prohibited from working for any person or entity engaged in the 2.4 GHz
Wireless Internet access industry; (4) Basham, Stimpson and Brown each
reaffirmed their existing Confidentiality Agreements in their entirety; (5)
prior to January 1, 2000, the Company shall deliver to the escrow holder
appointed in the Settlement Agreement a total of 340,000 shares of its
common stock, as follows: 215,000 shares in the name of Basham; 34,000
shares in the name of Stimpson; and 91,000 shares in the name of Brown; (6)
prior to January 1, 2000, the Company shall deliver to the escrow holder
appointed in the Settlement Agreement orders of dismissal with respect to
each of the legal proceedings described above; (7) prior to January 7,
2000, Basham shall deliver to the escrow holder appointed in the Settlement
Agreement his written resignation as Chief Operating Officer of the
Company; (8) the Settlement Agreement shall become null and void, should
any of the requirements described in paragraphs 6 or 7 not be met; (9)
beginning December 1, 1999, the Company and CyberHighway shall, as
reimbursement for attorneys fees incurred by Basham, Stimpson and or Brown,
pay the total sum of $43,325.00, in 10 equal installments payable every
other week, to the trust account of the law firm of Givens Pursley, Boise,
Idaho; (10) each of Basham, Stimpson and Brown acknowledged that a Voting
Agreement, dated as of January 29, 1999, among Basham, Stimpson, Brown,
David M. Loflin, President of the Company, and Waddell D. Loflin, Vice
President and Secretary of the Company, remained in full force and effect;
(11) nothing contained in the Settlement Agreement is construed as an
admission of liability by any party to the Settlement Agreement. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion on the financial impact to the Company of the
Settlement Agreement. The Board of Directors of the Company determined
that entering into the Settlement Agreement was in the best interest of the
Company.
H + N Partners
During 1998, the Company issued a total of 187,000 shares of its Common
Stock to H + N Partners, a fictitious name division of B. Edward Haun &
Company, a Denver, Colorado-based investment banking and research firm in
which James Kaufman, Vice President - Corporate Development of the Company,
was a partner. Mr. Kaufman received a portion of the shares issued to H +
N Partners. 37,000 of such shares were valued at $2.00 per share and
150,000 of such shares were valued at $2.50 per share. All of such shares
were the subject of effective registration statements filed with the SEC.
Mr. Kaufman was not an officer of the Company at the time of the stock
issuances to H + N Partners.
Also during 1998, in connection with a private offering of Company
securities, the Company issued to H + N Partners 56,667 warrants to
purchase a like number of shares of Company Common Stock at an exercise
price of $1.25 per share and 56,667 warrants to purchase a like number of
shares of Company Common Stock at an exercise price of $1.50 per share.
The shares underlying these warrants possess demand rights of registration.
Mr. Kaufman was not an officer of the Company at the time of the warrant
issuances to H + N Partners.
Appraisal
Background. The Appraisal was delivered to the Company by Broadcast
Services International, Inc., a Sacramento, California-based communications
appraisal firm. The report of BSI was based on 1990 Census Data. With
respect to the wireless cable markets, the engineering studies relied upon
by BSI indicate the number of households within the broadcast radius using
the 1200 MHZ frequency. The 1200 MHZ frequency was assumed, due to BSI's
experience that, given all of the variables that may be present in a
market-by-market system build-out, the actual benchmark performance is more
truly reflected by using the higher (1200 MHZ) frequency, such that the
signal attenuation is not over-stated. Valuation formulas for the wireless
cable markets of the Company were based on initial public offerings within
the wireless cable industry during the past three years. The formulas used
in evaluation of the Company's broadcast channels are based on recent sales
and market evaluation techniques employed by the Community Broadcasters
Association, among others.
Use of Appraisal. At the Company's inception, the Company's Board of
Directors adopted a plan that provided that the initial capitalization of
the Company be 6,000,000 shares of Common Stock. 1,800,000 of such shares
were sold as founders' stock and 360,000 shares were sold to a public
company for distribution as a dividend. The balance of such shares,
3,840,000 shares, were to be utilized to acquire the Company's assets,
which assets were acquired pursuant to the Subscription Agreements with Mr.
David Loflin and Mr. Waddell Loflin, the WEI Reorganization and the MCTV
Reorganization. The Board of Directors utilized the Appraisal as a means
to allocate the 3,840,000 shares among the assets underlying the referenced
Subscription Agreements, the WEI Reorganization and the MCTV
Reorganization, as follows:
Shares of
Appraised Common Historical
Value of Stock Cost
Transaction Assets Acquired Issued of Assets
- ----------- --------------- --------- ----------
Subscription
Agreement with
David M. Loflin $1,826,873 1,578,512 Unknown
Subscription
Agreement with
Waddell D.
Loflin 120,652 104,249 Unknown
WEI Reorganization 263,106 227,336 $ 17,337
MCTV Reorganization 2,233,555 1,929,903 $179,611
Total $4,444,186 3,840,000 $196,948
The apparent $1.157 per share value was determined by dividing the
3,840,000 shares of Company Common Stock allocated by the Board of
Directors for asset acquisition into the $4,444,186 total appraised value
of the assets acquired. The Board of Directors utilized this apparent per
share value for corporate purposes, that is, the determination of
consideration received for the issuance of shares of Common Stock.
However, the independent appraiser did not value the shares of Company
Common Stock issued in consideration of the assets acquired. Rather, the
independent appraiser valued only the assets acquired by the Company in the
various transactions. The $1.157 per share figure was utilized by the
Board of Directors primarily as a means of allocating the 3,840,000 shares
among the four asset acquisition transactions consummated in completing its
plan for the initial capitalization of the Company. Thus, the $1.157
figure, while utilized in two ways by the Board of Directors, was
determined arbitrarily by the Board of Directors and is not based on any
accounting or other financial criteria.
The appraised value of the assets described above bears no relationship to
the costs of such assets to the affiliates from whom they were acquired.
PRINCIPAL SHAREHOLDERS
On the date of this Prospectus, there were 12,707,977 shares of Company
Common Stock issued and outstanding. The following table sets forth
certain information regarding the beneficial ownership of Company Common
Stock as of the date of this Prospectus, and after giving effect to (1) the
issuance of all 2,000,000 shares of the Acquisition Stock in business
combination transactions and (2) the issuance of all 330,477 shares of
Common Stock underlying currently outstanding options and warrants of the
Company, by (i) persons known to the Company to be beneficial owners of
more than 5% of the Common Stock of the Company, (ii) each of the Company's
officers and directors and (iii) the officers and directors of the Company
as a group.
Name and
Address of Shares Owned Percent Shares Owned Percent
Beneficial Owner Beneficially Owned(1) Beneficially Owned(2)
- ---------------- ------------ -------- ------------ --------
David M. Loflin(3) 3,565,903 28.01% 3,565,903 23.71%
8748 Quarters
Lake Road
Baton Rouge,
Louisiana 70809
Waddell D. Loflin(3) 120,000 * 120,000 *
8748 Quarters
Lake Road
Baton Rouge,
Louisiana 70809
Julius W.
Basham, II(3) 1,609,000 12.66% 1,609,000 10.70%
6176 Laurelwood
Drive
Reno, Nevada 89509
James Kaufman 452,000 3.55% 452,500 3.00%
665 W. Velarde
Drive
Thousand Oaks,
California 91360
Darrell Davis 70,000 * 70,000 *
8748 Quarters
Lake Road
Baton Rouge,
Louisiana 70809
Richard N. Gill 20,000 * 20,000 *
8748 Quarters
Lake Road
Baton Rouge,
Louisiana 70809
Ross S. Bravata 32,000 * 32,000 *
8748 Quarters
Lake Road
Baton Rouge,
Louisiana 70809
Michael Cohn 217,000(4) 1.71% 137,000(5) *
8748 Quarters
Lake Road
Baton Rouge,
Louisiana 70809
All officers and
directors as a
group (8 persons) 6,085,903 46.71% 6,085,903 40.49%
- ------------
* Less than 1%.
(1) Based on 13,038,454 shares outstanding, assuming the issuance of all
330,477 shares underlying currently exercisable warrants of the Company,
but prior to the issuance of any shares of the Acquisition Stock.
(2) Based on 15,038,454 shares outstanding, assuming the issuance of all
330,477 shares underlying currently exercisable warrants of the Company and
all 2,000,000 shares of the Acquisition Stock.
(3) All of the shares owned by this shareholder are subject to a Voting
Agreement among David W. Loflin, Waddell D. Loflin, Julius W. Basham, II,
David W. Brown and Wm. Kim Stimpson, whereby all of such persons are
required to vote all shares owned by them for David M. Loflin, Waddell D.
Loflin and Julius W. Basham, II, in all elections of directors of the
Company, for a period of five years from January 29, 1999. (See "Certain
Transactions - Voting Agreement").
(4) 80,000 of such shares have not been issued, but underlie currently
exercisable warrants of the Company.
(5) Assumes all 80,000 shares underlying warrants of the Company owned by
Mr. Cohn are purchased and sold pursuant to this Prospectus.
LITIGATION
In September 1999, the Company tendered the acquired shares of capital
stock of Net 1, Inc. for rescission. The Company made such tender of
rescission, due to numerous and material misrepresentations made by Net 1,
Inc. and its principals. The Company had intended to commence arbitration
to pursue its rescission claim. However, one of the former owners of Net
1, Inc., Knud Nielsen, III, has instituted arbitration, through the
American Arbitration Association, and is seeking to enforce certain
registration rights associated with a portion of the shares of Company
Common Stock received by him in the acquisition transaction.
Now, the Company will present its rescission claim as a counterclaim in the
pending arbitration proceeding. The counterclaim will be made against Net
1, Inc. and its former owners, including Mr. Nielsen, wherein the Company
will seek to rescind the acquisition transaction that occurred in August
1999, and recover the 250,000 shares of common stock issued by it in
connection with such acquisition. The Company will allege fraud and the
failure to make statements necessary to make statements made not
misleading. Although the Company believes it will be successful on the
merits of such action, no prediction in this regard can be made.
PLAN OF DISTRIBUTION
The shares of Acquisition Stock to which this Prospectus relates are to be
offered by the Company from time to time in business combination
transactions involving the issuance of shares of the Acquisition Stock. It
is the Company's intention to search actively for business combinations,
which may be in the form of mergers, stock-for-stock exchanges or
stock-for-assets acquisitions. The Company will not derive cash proceeds
from any such issuances of shares of the Acquisition Stock. The Company
has made no commitments for a business combination as of the date of this
Prospectus involving the issuance of shares of the Acquisition Stock to
which this Prospectus relates. The price per share of the Acquisition
Stock will be negotiated on a transaction-by-transaction basis and no
prediction as to the actual negotiated price can be made. (See "Dilution").
The Selling Shareholder Stock subject hereto are being offered for sale by
the Selling Shareholders. Consequently, the Selling Shareholders will
receive the proceeds from the sale of the Selling Shareholder Stock
pursuant to this Prospectus. The shares of Selling Shareholder Stock may
be sold to purchasers, from time to time, in privately negotiated
transactions directly by, and subject to, the discretion of the Selling
Shareholders. The Selling Shareholders may, from time to time, offer their
respective shares of the Selliing Shareholder Stock for sale through
underwriters, dealers or agents, who may receive compensation in the form
of commissions from the Selling Shareholders and/or the purchasers of such
shares for whom they act as agents. The Selling Shareholders and any
underwriter, dealer or agent who participates in the distribution of the
shares of the Selling Shareholders may be deemed to the "underwriters"
under the Securities Act and any profit on the sale of such shares by any
of them and any discounts, commissions or concessions received by any such
underwriters, dealers or agents may be deemed to be underwriting
compensation under the Securities Act. The Selling Shareholders may also
sell the shares of Selling Shareholder Stock owned by them pursuant to Rule
144 under the Securities Act, if Rule 144 is available for such resales.
At the time of a particular offer of shares of the Selling Shareholder
Stock is made by or on the behalf of a Selling Shareholder, a Prospectus
and, to the extent required, a Prospectus Supplement, will be distributed,
which will set forth the number of shares being offered and the terms of
the offering, including the name or names of any underwriters, dealers or
agents, the purchase price paid by any underwriter for such shares
purchased from the Selling Shareholders, any discounts, commissions and
other items constituting compensation from the Selling Shareholders,
discounts commissions or concessions allowed, reallowed or paid to dealers,
and the proposed selling price to the public. The shares of the Selling
Shareholder Stock may be sold from time to time in one or more
transactions: (i) at an offering price which is fixed or which may vary
from transaction to transaction depending upon the time of sale or (ii) at
prices otherwise negotiated at the time of sale. Such prices will be
determined by the Selling Shareholders or by agreement between the Selling
Shareholders and their respective underwriters. In order to comply with
the applicable securities laws, if any, of certain states, the Securities
may be offered or sold in such states through registered or licensed
brokers or dealers in those states. In addition, in certain states, such
securities may not be offered or sold unless they have been registered or
qualified for sale in such states or an exemption from such registration or
qualification requirement is available and is complied with. Under
applicable rules and regulations promulgated under the Exchange Act, any
person engaged in a distribution of securities may not simultaneously bid
for or purchase securities of the same class for a period of two business
days prior to the commencement of such distribution. In addition and
without limiting the foregoing, the Selling Shareholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Rules 10b-5 and Regulation M, in
connection with transactions in shares of the Selling Shareholder Stock
during effectiveness of the Registration Statement of which this Prospectus
is a part. All of the foregoing may affect the marketability of such
securities. The Company has agreed to pay all of the expenses incident to
the registration of the foregoing securities (including registration
pursuant to the securities laws of certain states) other than: (i) any fees
or expenses of any counsel retained by any Selling Shareholder and any
out-of-pocket expenses incurred by any Selling Shareholder or any person
retained by any Selling Shareholder in connection with registration of the
Selling Shareholder Stock and (ii) commissions, expenses, reimbursements,
and discounts of underwriters, dealers, or agents, if any.
SELLING SHAREHOLDERS
The following table assumes that each Selling Shareholder is offering for
sale shares of Common Stock previously issued or issuable by the Company.
The Company has agreed to pay all expenses in connection therewith (other
than brokerage commissions and fees and expenses of counsel of the
respective Selling Shareholders). None of the Selling Shareholders has
ever held any position with the Company or had any other material
relationship with the Company. The following table sets forth the
beneficial ownership of the shares of the Selling Shareholder Stock by each
person who is a Selling Shareholder. The Company will not receive any
proceeds from the sale of shares of the Selling Shareholder Stock by the
Selling Shareholders.
Shares
of
Common Shares
Stock of
Bene- Common
fic- Stock Percentage Owned
Name of ally Being Before After
Beneficial Owner Owned Offered Offering(1) Offering(2)
- ---------------- ------ ------- ----------- -----------
Dennis A. Faker 150,000 50,000 * *
Jeanne Rowzee 30,000 10,000 * *
Albert Gottlieb 30,000 10,000 * *
Rogers Family Trust 45,000 15,000 * *
Barbara V. Schiller 90,000 30,000 * *
Delaware Charter
Guarantee & Trust
Company f/b/o
Clarence Yim IRA 60,000 20,000 * *
Delaware Charter
Guarantee & Trust
Company f/b/o
R. Logan Kock IRA 60,000 20,000 * *
H + N Partners 113,334(3) 113,334 * *
Centex Securities,
Inc. 12,143(4) 12,143 * *
Terry Lewis 21,857 21,857 * *
Michael Cohn 217,000(5) 130,000 1.71% *
Walter C. Schiller 20,000(6) 10,000 * *
Michael R. Van
Geons 20,000(7) 10,000 * *
Harry P. Kunecki
Trust 10,000(8) 5,000 * *
Frank L. Leyba 10,000(9) 5,000 * *
Shelter Capital,
Ltd. 50,000(10) 25,000 * *
Walter Engler 20,000(11) 10,000 * *
Alan Taylor 122,405 31,750 * *
CyberHighway of
North Georgia,
Inc. 53,000 53,000 * *
Mark Bove 150,000 30,000 1.15% *
Darrell Davis
and Deanna
Davis 70,000 21,000 * *
Roger Davis
and Gloria Davis 30,000 9,000 * *
Peter Rochow 30,000 30,000 * *
Nostas/Faessel
Group 30,000 30,000 * *
JF Mills/Worldwide 6,000 6,000 * *
The Research
Works, Inc.(12) 60,000(12) 60,000 * *
Cyber Mountain,
Inc. 25,000 25,000 * *
- ------------
(1) Based on 13,038,454 shares outstanding, assuming the issuance of a
total of 330,477 shares of Common Stock that can be acquired by any person
pursuant to any option, warrant or other right within 60 days of the date
of this Prospectus, all of which are deemed outstanding for the purpose of
computing the percentage of existing shares beneficially owned by each
person listed, but prior to the issuance of the 2,000,000 shares of the
Acquisition Stock.
(2) Based on 15,038,454 shares outstanding, assuming the issuance of all
330,477 shares of Common Stock that can be acquired by any person pursuant
to any option, warrant or other right within 60 days of the date of this
Prospectus, all of which are deemed outstanding for the purpose of
computing the percentage of existing shares beneficially owned by each
person listed, and all 2,000,000 shares of the Acquisition Stock.
(3) All of these shares underlie currently exercisable warrants of the
Company; none of such shares has been issued.
(4) All of these shares underlie currently exercisable warrants of the
Company; none of such shares has been issued.
(5) 80,000 of these shares underlie currently exercisable warrants of the
Company; only 137,000 of such shares have been issued.
(6) 10,000 of these shares underlie currently exercisable warrants of the
Company; only 10,000 of such shares have been issued.
(7) 10,000 of these shares underlie currently exercisable warrants of the
Company; only 10,000 of such shares have been issued.
(8) 5,000 of these shares underlie currently exercisable warrants of the
Company; only 5,000 of such shares have been issued.
(9) 5,000 of these shares underlie currently exercisable warrants of the
Company; only 5,000 of such shares have been issued.
(10) 25,000 of these shares underlie currently exercisable warrants of the
Company; only 25,000 of such shares have been issued.
(11) 10,000 of these shares underlie currently exercisable warrants of the
Company; only 10,000 of such shares have been issued.
(12) All of these shares underlie currently exercisable warrants of the
Company; none of such shares has been issued.
DESCRIPTION OF SECURITIES
Authorized Capital Stock
The authorized capital stock of the Company consists of One Hundred Million
(100,000,000) shares of Common Stock, $.0001 par value per share. The
following description of certain provisions of the Common Stock of the
Company does not purport to be complete and is subject to, and qualified in
its entirety by, the provisions of the Company's Articles of Incorporation,
as amended.
Description of Common Stock
As of the date of this Prospectus, there were 12,707,977 shares of Company
Common Stock outstanding. An additional 330,477 shares of Common Stock
have been reserved for issuance pursuant to various warrants issued by the
Company. Each share of Common Stock is entitled to one (1) vote at all
meetings of shareholders. All shares of Common Stock are equal to each
other with respect to liquidation rights and dividend rights. There are no
preemptive rights to purchase any additional shares of Common Stock, nor
are there any subscription, conversion or redemption rights applicable to
the Common Stock. The Articles of Incorporation of the Company, as
amended, prohibit cumulative voting in the election of directors. The
absence of cumulative voting means that holders of more than 50% of the
shares voting for the election of directors can elect all directors if they
choose to do so. In such event, the holders of the remaining shares of
Common Stock will not be entitled to elect any director. A majority of the
shares entitled to vote, represented in person or by proxy, constitutes a
quorum at a meeting of shareholders. In the event of liquidation,
dissolution or winding up of the Company, holders of shares of Common Stock
will be entitled to receive, on a pro rata basis, all assets of the Company
remaining after satisfaction of all liabilities. All outstanding shares of
Common Stock are fully paid and non-assessable.
Transfer Agent and Registrar
The Company has retained Securities Transfer Corporation, Dallas, Texas, as
transfer agent and registrar for the Common Stock of the Company.
LEGAL MATTERS
The law firm of Newlan & Newlan, Lewisville, Texas, has acted as legal
counsel for the Company in connection with the Registration Statement of
which this Prospectus forms a part and related matters. As of the date of
this Prospectus, the partners of the firm of Newlan & Newlan owned a total
of 235,000 shares of Company Common Stock.
EXPERTS
The financial statements of the Company included in this Prospectus and
Registration Statement have been audited by Weaver and Tidwell, L.L.P.,
independent auditor, for the period indicated in its report thereon which
appear elsewhere herein and in the Registration Statement. The financial
statements audited by Weaver and Tidwell, L.L.P., have been included in
reliance on its reports given as its authority as an expert in accounting
and auditing.
On January 11, 2000, Weaver and Tidwell, L.L.P. was dismissed as the
Company's independent auditor. (See "Recent Change of Independent Auditor").
INDEX TO FINANCIAL STATEMENTS
Page
USURF AMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheet as at September
30, 1999 (unaudited), and December 31, 1998
Consolidated Statement of Operations for the
Three Months Ended September 30, 1999 and
1998 (unaudited), and the Nine Months Ended
September 30, 1999 and 1998 (unaudited)
Consolidated Statement of Cash Flows for the
Nine Months Ended September 30, 1999 and
1998 (unaudited)
Notes to Consolidated Financial Statements
INTERNET MEDIA CORPORATION (NOW USURF
AMERICA, INC.) AND SUBSIDIARIES
Independent Auditor's Report
Consolidated Balance Sheets as at December 31,
1998 and 1997
Consolidated Statements of Operations for the
Years Ended December 31, 1998, 1997 and 1996,
and Cumulative Since Inception (December 28,
1995) to December 31, 1998
Consolidated Statements of Changes in Stock-
holders' Equity for the Years Ended December
31, 1998, 1997 and 1996, and the Period From
Inception (December 28, 1995) to December
31, 1998
Consolidated Statements of Cash Flows for the
Years Ended December 31, 1998, 1997 and
1996, and Cumulative Since Inception (December
28, 1995) to December 31, 1998
Notes to Consolidated Financial Statements
CYBERHIGHWAY, INC.
Independent Auditor's Report
Balance Sheets as of January 31, 1999 and 1998
Statements of Operations for the Years Ended
January 31, 1999, 1998 and 1997
Statements of Changes in Stockholders' Equity
for the Years Ended January 31, 1999,
1998 and 1997
Statements of Cash Flows for the Years Ended
January 31, 1999, 1998 and 1997
Notes to Financial Statements
PRO FORMA FINANCIAL STATEMENTS
USURF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
12/31/98 9/30/99
(audited) (unaudited)
ASSETS
CURRENT ASSETS
Cash $ 7,232 $ 87,456
Accounts receivable 1,033 221,576
Due from affiliate 0 1,614
Inventory 0 32,150
Prepaid expenses 0 22,253
Deposits 0 0
---------- ----------
Total current
assets 8,265 365,049
PROPERTY AND EQUIPMENT,
net of accumulated
depreciation of $1,412
and $472,234,
respectively 247,267 1,425,253
INVESTMENTS 43,750 54,260
INTANGIBLES
Licenses and rights to
leases of licenses, net
of accumulated
amortization 34,207 76,932
Acquired customer base,
net of accumulated
amortization of $0
and $3,526,211
respectively 0 12,851,404
Goodwill, net of
accumulated
amortization of $0
and $1,770,263
respectively 0 6,368,172
---------- ----------
34,207 19,296,678
---------- ----------
Total assets $333,659 $20,669,006
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable -
current portion 0 15,605
Leases payable -
current portion 0 0
Accounts payable -
trade 0 93,069
Customer deposits 0 1,787
Accounts payable -
affiliate 10,069 10,069
Property dividends
payable 57,519 57,519
Taxes payable 0 731
Accrued expenses 19,652 73,357
Accrued interest -
majority stockholder 15,416 20,561
Notes payable to
majority stockholder 146,415 209,926
Deferred revenue 0 73,788
---------- ----------
Total current
liabilities 249,071 556,412
LONG-TERM LIABILITIES
Deferred tax liability 0 4,352,451
---------- ----------
Total
liabilities 249,071 4,908,863
STOCKHOLDERS' EQUITY
Common stock, $.0001
par value, 100,000,000
shares authorized,
8,497,259 and
11,819,259 shares
issued and
outstanding,
respectively 850 1,182
Additional paid-in
capital 2,874,189 25,043,684
Deficit accumulated
during the
development stage (1,686,667) (7,306,112)
Subscriptions
receivable (860) (860)
Deferred consulting (1,102,924) (1,977,751)
---------- ----------
84,588 15,760,143
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $333,659 $20,669,006
The Notes to Consolidated Financial Statements are an integral part of
these statements.
USURF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
(unaudited) (unaudited)
Revenue $ 781,282 $ 3,200 $2,047,364 $ 3,200
Cost of
Goods Sold (216,021) 0 (687,895) 0
Gross
Profit 565,261 3,200 1,359,469 3,200
Operating
Expenses
Depreciation
and amorti-
zation 2,086,017 345 5,433,339 1,035
Professional
fees 381,879 108,205 1,212,366 393,349
Rent 35,920 7,203 88,837 7,318
Salary and
commissions 369,276 113,128 979,291 113,816
Contract
services 64,839 0 64,839 0
Advertising 35,024 0 88,273 0
Other 95,718 199,888 284,929 334,765
Total
Operating
Expenses 3,068,673 428,769 8,151,874 850,283
Loss from
opera-
tions (2,503,417) (425,569) (6,792,405) (847,083)
Other income
(expense)
Interest
expense (3,725) 0 (9,758) 0
Loss before
income tax (2,507,137) (425,569) (6,802,163) (847,083)
Income tax
benefit 448,347 0 1,182,718 0
Net loss $(2,058,790) $(425,569)$(5,619,445) $(847,083)
Net loss
per
common
share (0.17) (.059) (0.51) (.12)
Weighted
average
number
of shares
out-
stand-
ing 11,784,748 7,201,922 11,034,764 7,057,000
The Notes to Consolidated Financial Statements are an integral part of
these statements.
USURF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended Nine Months Ended
9/30/99 9/30/98
(unaudited) (unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss $(5,619,445) $(847,083)
Adjustment to
reconcile net loss
to net cash used
in operating
activities
Depreciation and
amortization 5,433,339 1,035
Recognition of
services per-
formed for
stock 1,125,173 553,874
Deferred income
taxes (1,183,920) 0
Due from
affiliate (1,614) 0
Loss on
disposal 280 0
Accounts
receivable (126,941) 0
Inventory 38,575 0
Deposits 0 0
Customer
deposits 1,787 0
Taxes payable 731 0
Other assets (38,420) 0
Deferred revenue 9,446 0
Accounts payable -
trade (91,584) (65,106)
Prepaid expenses (8,773) 0
Accrued expenses 35,551 5,988
Net cash used
in operating
activities (425,815) (341,484)
CASH FLOWS FROM
INVESTING ACTIVITIES
Proceeds on disposal
of fixed assets 15,090 0
Purchase of business 0 (25,000)
Cash acquired in
acquisitions 186,318 0
Capital expenditures (423,295) (5,000)
Net cash used
in investing
activities (221,887) (30,000)
CASH FLOWS FROM
FINANCING ACTIVITIES
Payments on notes
payable (55,673) 0
Payments on capital
lease obligations (722) 0
Increase in note
payable to
stockholder 62,000 8,941
Issuance of common
stock for cash 395,000 340,000
Warrants exercised 337,321 0
Payment on note
payable - stockholder (10,000) (30,000)
Net cash provided
by financing
activities 727,926 348,941
Net increase
(decrease)
in cash 80,224 (22,543)
Cash, beginning of period 7,232 37,394
Cash, end of period 87,456 14,852
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
In January 1999, the Company acquired all of the stock of CyberHighway,
Inc. by issuing 2,000,000 shares of stock valued at approximately
$16,000,000. In addition, 325,000 shares were issued in payment of a
finder's fee arising out of this acquisition, which shares were valued at
approximately $2,600,000. This acquisition was accounted for as a purchase
business combination.
In June 1999, the Company entered into a five-year investor relations
consulting agreement by issuing 500,000 shares of stock valued at $2,000,000.
In June 1999, the Company acquired all of the stock of Santa Fe Trail
Internet Plus, Inc. by issuing 100,000 shares of stock valued at $400,000.
This acquisition was accounted for as a purchase business combination.
In August 1999, the Company acquired all of the stock of Premier Internet
Services, Inc. by issuing 127,000 shares of stock valued at $508,000. This
acquisition was accounted for as a purchase business combination.
In August 1999, the Company acquired the going business known as
www.usurf.com by issuing 150,000 shares of stock valued at $600,000. This
acquisition was accounted for as a purchase business combination.
In August 1999, the Company acquired all of the stock of Net 1, Inc. by
issuing 250,000 shares of stock valued at $1,000,000. Because the Company
has tendered the stock of Net 1, Inc. for rescission of the acquisition
transaction, none of the operating data or balance sheet data associated
with Net 1, Inc. is presented.
The Notes to Consolidated Financial Statements are an integral part of
these statements.
USURF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Nine Months Ended September 30, 1999
(Unaudited)
Note 1. Nature of Business, Organization and
Basis of Presentation
USURF America, Inc. (USURF) was incorporated in the State of Nevada on
November 1, 1996, as Media Entertainment, Inc., changed its name to
Internet Media Corporation in July 1998, and again changed its name to the
current name in July 1999. USURF was incorporated to operate as a holding
company in the wireless cable television and community (low power)
television industries, as well as other segments of the communications
industry. In 1998, the Company changed its focus to concentrate in the
Internet industry, including the Wireless Internet industry. The Company
has ceased efforts to develop the wireless cable and low power television
business areas and has announced that assets from the low power activities
will be distributed to shareholders in 1999. Therefore, management has not
provided separate segment information in these financial statements.
Effective December 31, 1996, IMC acquired all of the outstanding common
stock of Winter Entertainment, Inc., a Delaware corporation incorporated on
December 28, 1995 (WEI), and Missouri Cable TV Corp., a Louisiana
corporation incorporated on October 9, 1996 (MCTV). WEI operates a
community television station in Baton Rouge, Louisiana; MCTV owns wireless
cable television channels in Poplar Bluff, Missouri, which system has been
constructed and is ready for operation, and Lebanon, Missouri. The
acquisition of WEI and MCTV by USURF was accounted for as a reorganization
of companies under common control. The assets and liabilities acquired
were recorded at historical cost in a manner similar to a pooling of
interests. Effective October 8, 1998, the Company formed Santa Fe
Wireless Internet, Inc., a New Mexico corporation (SFWI), to hold the
assets acquired from Desert Rain Internet Services (DSRT), an Internet
Service Provider (ISP). SFWI was organized to operate as an Internet
Service Provider (ISP). The acquisition of DSRT was accounted for as a
purchase whereby the cost is allocated to the assets acquired.
In January 1999, the Company acquired all of the outstanding capital stock
of CyberHighway, Inc., an Idaho corporation, in exchange for shares of
Company common stock. This acquisition was accounted for as a purchase.
In June 1999, the Company acquired, by merger, Santa Fe Trail Internet
Plus, Inc., a New Mexico corporation ("Trail"), in exchange for shares of
Company common stock. This acquisition was accounted for as a purchase.
In August 1999, the Company acquired, by merger, Premier Internet Services,
Inc., an Idaho corporation ("PISI"), in exchange for shares of Company
common stock. This acquisition was accounted for as a purchase.
In August 1999, the Company acquired the going business known as
www.usurf.com ("usurf.com"), in exchange for shares of Company common
stock. This acquisition was accounted for as a purchase.
In August 1999, the Company acquired, by merger, Net 1, Inc., an Alabama
corporation ("Net 1"), in exchange for shares of Company common stock.
Because the Company has tendered the stock of Net 1, Inc. for rescission of
the acquisition transaction, none of the operating data or balance sheet
data associated with Net 1, Inc. is presented. The Company is involved in
arbitration of its demand for rescission.
Note 2. Interim Consolidated Financial Statements
In the opinion of management, the accompanying consolidated financial
statements for the nine months ended September 30, 1999 and 1998, reflect
all adjustments (consisting only of normal recurring adjustments) necessary
to present fairly the financial condition, results of operations and cash
flows of the Company, including subsidiaries, and include the accounts of
the Company and all of its subsidiaries. All material inter-company
transactions and balances are eliminated.
The financial statements included herein have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC"). Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. It is suggested that these
unaudited financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on
Form 10-KSB filed with the SEC. Certain reclassifications and adjustments
may have been made to the financial statements for the comparative period
of the prior fiscal year to conform with the 1998 presentation. The
results of operations for the interim periods are not necessarily
indicative of the results to be obtained for the entire year.
Note 3. Acquisitions
Effective December 31, 1996, the Company acquired WEI and MCTV by issuing
2,157,239 shares of common stock in exchange for all the common stock of
each company. The majority shareholder of the Company was also the sole
shareholder of WEI and the majority shareholder of MCTV. Therefore, the
acquisitions have been accounted for at historical cost in a manner similar
to a pooling of interests. The consolidated statement of operations
includes the Company and its predecessors WEI and MCTV from inception of WEI.
Effective January 29, 1999, the Company acquired CyberHIghway, which
acquisition has been accounted for as a purchase and not as a pooling of
interests.
Effective June 2, 1999, the Company acquired Trail, which acquisition has
been accounted for as a purchase and not as a pooling of interests.
Effective August 14, the Company acquired usurf.com, which acquisition has
been accounted for as a purchase and not as a pooling of interests.
Effective August 30, 1999, the Company acquired PISI, which acquisition has
been accounted for as a purchase and not as a pooling of interests.
Effective August 20, 1999, the Company acquired Net 1. Because the Company
has tendered the stock of Net 1, Inc. for rescission of the acquisition
transaction, none of the operating data or balance sheet data associated
with Net 1, Inc. is presented. The Company is involved in arbitration of
its demand for rescission.
Note 4. Notes Payable to Shareholder
September 30, 1999
(unaudited)
Notes payable to majority
stockholder, interest
accrues at 8%, due on
demand and unsecured $209,926
Note 5. Stock Issuances
During the nine months ended September 30, 1999, the Company issued shares
of common stock, as follows:
A. In January 1999, 60,000 shares were issued in a private offering, which
shares were sold for cash at a price of $4.50 per share, or $270,000 in the
aggregate.
B. In January 1999, 2,000,000 shares were issued in exchange for all of
the capital stock of CyberHighway, which shares were valued at $7.97 per
share, or $16,000,000 in the aggregate.
C. In February 1999, 325,000 shares were issued in payment of a finder's
fee arising out of the Company's acquisition of CyberHighway, which shares
were valued at $7.97 per share, or $2,600,000 in the aggregate.
D. In May 1999, 35,000 shares were issued in a private offering, which
shares were sold for cash at a price of $3.00 per share, or $105,000.
E. In June 1999, the Company received $310,000 from the exercise of
warrants, whereby the Company issued 155,000 shares of common stock upon
such warrant exercise. The warrant exercise price of the warrants exercised
was $2.00 per share.
F. In June 1999, the Company entered into an Investor Relations Agreement
with a consultant to the Company. Under its agreement with the consultant,
the Company has issued 500,000 shares of common stock, which shares were
valued at $4.00 per share, or $2,000,000 in the aggregate. The term of the
agreement is five years. The $2,000,000 in compensation is to be amortized
over the entire term of the agreement.
G. In June 1999, 100,000 shares were issued in the acquisition of Trail,
which shares were valued at $4.00 per share, or $400,000 in the aggregate.
H. In July 1999, 150,000 shares were issued in the acquisition of
usurf.com, which shares were valued at $4.00 per share, or $600,000 in the
aggregate.
I. In August 1999, 127,000 shares were issued in the acquisition of PISI,
which shares were valued at $4.00 per share, or $508,000 in the aggregate.
J. Also in August 1999, 250,000 shares were issued in the acquisition of
Net 1, which shares were valued at $4.00 per share. However, because the
Company has tendered the stock of Net 1 for rescission of the acquisition
transaction, none of the operating data or balance sheet data associated
with Net 1 is presented. The Company is involved in arbitration of its
demand for rescission. Although the Company believes it will be successful
on the merits of its claims, no prediction as to the outcome of such
arbitration can be made.
Note 6. Subsequent Events
In November 1999, the Company issued 50,000 shares in a private offering,
which shares were sold for $3.00 per share. A like number of warrants,
exercisable at $6.00 per share, were issued to the purchaser of such
shares. Michael Cohn, a director of the Company, purchase such securities.
Mr. Cohn's purchase was made in connection with a private offering of
securities made by the Company to other persons who have no affiliation
with the Company.
INDEPENDENT AUDITOR'S REPORT
To the Board of Director's and Stockholders
Internet Media Corporation
We have audited the accompanying consolidated balance sheets of Internet
Media Corporation and subsidiaries, (a development stage company) as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the years
ended December 31, 1998, 1997 and 1996, and the period from inception
(December 28, 1995) to December 31, 1998. These consolidated financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Internet Media Corporation and subsidiaries as of December 31,
1998 and 1997, and the consolidated results of their operations and their
cash flows for the years ended December 31, 1998, 1997 and 1996, and the
period from inception (December 28, 1995) to December 31, 1998, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed
in Note 1 to the financial statements, the Company is in the development
stage and has insignificant operating revenue. In addition, the Company
has limited capital resources and a loss from operations since inception,
all of which raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also
discussed in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
April 9, 1999
INTERNET MEDIA CORPORATION
AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 and 1997
1998 1997
ASSETS
CURRENT ASSETS
Cash $ 7,232 $ -
Accounts receivable 1,033 224
Total current assets 8,265 224
PROPERTY AND EQUIPMENT,
net of accumulated
depreciation of $1,412
and $706, respectively 247,267 210,472
INVESTMENTS 43,750 -
INTANGIBLES
Organization costs, net
of accumulated amorti-
zation of $435 and $134,
respectively - 435
Licenses and rights to
leases of licenses, net
of accumulated amorti-
zation of $4,475 and
$2,625, respectively 34,207 25,125
34,207 25,560
OTHER ASSETS 170 -
TOTAL ASSETS $ 333,659 $ 236,256
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Checks issued in excess
of deposits $ - $ 116
Notes payable to
majority stockholder 146,415 116,282
Accounts payable and
accrued expenses 19,652 65,636
Accounts payable -
affiliate 10,069 10,069
Property dividends
payable 57,519 -
Accrued expenses -
majority stockholder 15,416 6,835
Total current
liabilities 249,071 198,938
STOCKHOLDERS' EQUITY
Common stock, $.0001
par value, 100,000,000
shares authorized,
8,497,259 and 6,424,000
shares issued and
outstanding1998 and
1997, respectively 850 642
Additional paid-in
capital 2,874,189 998,466
Deficit accumulated
during the development
stage (1,686,667) ( 649,041)
Subscriptions receivable ( 860) ( 860)
Deferred consulting (1,102,924) ( 311,889)
84,588 37,318
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 333,659 $ 236,256
The Notes to Consolidated Financial Statements are an integral part of
these statements.
INTERNET MEDIA CORPORATION
AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Cumulative
Since
Inception
(December
28,1995) to
December
Years Ended December 31, 31, 1998
1998 1997 1996
Revenue $ 5,440 $ 596 $ 3,337 $ 9,373
Expenses:
Depre-
ciation
and
amorti-
zation 4,394 2,721 1,450 8,565
Profes-
sional
fees 813,517 530,669 15,238 1,359,424
Rent 15,823 11,877 1,820 29,520
Salary 154,924 44,733 4,691 204,348
Other 45,806 29,385 3,555 78,746
Total
oper-
ating
expen-
ses 1,034,464 619,385 26,754 1,680,603
Oper-
ating
loss (1,029,024) ( 618,789) ( 23,417) (1,671,230)
Other
income
(ex-
pense)
Inter-
est
ex-
pense ( 8,602) ( 6,015) ( 820) ( 15,437)
Net
loss ($1,037,626) ($624,804) ($ 24,237) ($1,686,667)
Net loss
per
share ($0.14) ($0.10) ($0.04) ($0.36)
Weighted
average
number
of
shares
out-
stand-
ing 7,361,275 6,193,678 631,622 4,715,763
The Notes to Consolidated Financial Statements are an integral part of
these statements.
INTERNET MEDIA CORPORATION
AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
AND PERIOD FROM INCEPTION (December 28, 1995)
TO DECEMBER 31, 1998
Defi-
cit
Accu-
mul-
ated
Dur-
ing
the Subs- Def-
Addi- Dev- crip- erred
tional elop- tions Con-
Common Stock Paid-in ment ceiv- sul-
Shares Amount Capital Stage able ting
------ ------ ------- ----- ----- -----
BAL-
ANCE,
DEC-
EM-
BER
28,
1995 - $ - $ - $ - $ - $ -
Iss-
uance
of
com-
mon
stock
for
fut-
ure
serv-
ices 227,336 23 17,314 - - -
Net
loss - - - - - -
BAL-
ANCE,
DEC-
EM-
BER
31,
1995 227,336 23 17,314 - - -
Iss-
uance
of
com-
mon
stock
for
as-
sets 1,929,903 193 179,418 - - -
Iss-
uance
of
com-
mon
stock
for
sub-
scr-
ip-
tion
re-
ceiv-
able 2,160,000 216 1,944 - (2,160) -
Iss-
uance
of
com-
mon
stock
for
as-
sign-
ment
of
lic-
enses
and
lea-
ses 1,682,761 168 ( 168) - - -
Net
loss - - - (24,237) - -
BAL-
ANCE,
DEC-
EM-
BER
31,
1996 6,000,000 600 198,508 (24,237) (2,160) -
Issu-
ance
of
com-
mon
stock
for
fu-
ture
serv-
ices 404,000 40 749,960 - - (750,000)
Pay-
ment
on
sub-
scrip-
tion
re-
ceiv-
able - - - - 1,300 -
Iss-
uance
of
com-
mon
stock
for
cash 20,000 2 49,998 - - -
Rec-
ogni-
tion
of
ser-
vices
per-
formed
for
stock - - - - - 438,111
Net
loss - - - (624,804) - -
BAL-
ANCE,
DEC-
EM-
BER
31,
1997 6,424,000 642 998,466 (649,041) (860)(311,889)
Iss-
uance
of
com-
mon
stock
for
fu-
ture
ser-
vices 1,655,759 166 1,556,734 - - (1,556,900)
Iss-
uance
of
com-
mon
stock
for
cash 400,000 40 332,760 - - -
Iss-
uance
of
com-
mon
stock
for
in-
vest-
ments 17,500 2 43,748 - - -
Dec-
lared
divi-
dends - - (57,519) - - -
Rec-
ogni-
tion
of
ser-
vices
per-
formed
for
stock - - - - - 765,865
Net
loss - - - (1,037,626) - -
BAL-
ANCE,
DEC-
EM-
BER
31,
1998 8,497,259 850 2,874,189 (1,686,667) (860)(1,102,924)
The Notes to Consolidated Financial Statements are an integral part of
these statements.
INTERNET MEDIA CORPORATION
AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cumulative
Since
Inception
(December
28, 1995)
Years Ended December 31, to December
1998 1997 1996 31, 1998
CASH
FLOWS
FROM
OPER-
AING
ACTIV-
ITIES
Net
loss ($1,037,626) ($ 624,804) ($ 24,237)($1,686,667)
Adjust-
ments
to re-
con-
cile
net
loss
to net
cash
used in
opera-
ting
activi-
ties
Depre-
cia-
tion 1,658 706 706 3,070
Amort-
iza-
tion 2,736 2,014 745 5,495
Recog-
ni-
tion
of
serv-
ices
per-
formed
for
stock 765,865 438,111 - 1,203,976
Changes
in
assets
and
liab-
ilities,
net of
effects
from
pur-
chase
of
Santa
Fe
Acc-
ounts
re-
ceiv-
able (809) 86 (310) (1,033)
Other
assets (300) - - (300)
Checks
issued
in excess
of dep-
osits (116) 116 - -
Customer
deposits 1,787 - - 1,787
Accounts
payable
and acc-
ruals (39,194) 71,651 10,889 43,346
Net cash
used in
operating
acti-
vities (305,999) (112,120) (12,207) (430,326)
CASH
FLOWS
FROM
INVEST-
ING
ACTIV-
ITIES
Purchase
of
equip-
ment (25,605) (14,964) (6,722) (47,291)
Purchase
of net
assets
of Santa
Fe, net
of cash
acquired (24,666) - - (24,666)
Payment
of org-
aniza-
tion
costs 569 - (569) -
Purchase
of lic-
enses and
rights to
leases
of lic-
enses (-) (5,000) (16,000) (21,000)
Net cash
used in
invest-
ing acti-
vities (49,702) (19,964) (23,291) (92,957)
CASH
FLOWS
FROM
FINAN-
CING
ACTIV-
ITIES
Increase
in note
payable
to maj-
ority
stock-
holder $30,133 $66,282 $50,000 $146,415
Sale of
common
stock 332,800 50,000 - 382,800
Payment
of sub-
scrip-
tions
receiv-
able - 1,300 - 1,300
Net cash
provided
by finan-
cing acti-
vities 362,933 117,582 50,000 530,515
Net incr-
ease (de-
crease)
in cash 7,232 (14,502) 14,502 7,232
CASH,
BEGINNING
OF PERIOD - 14,502 - -
CASH,
END OF
PERIOD $7,232 $ - $14,502 $7,232
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Noncash investing and financing activities for the year ended December 31,
1998 and 1997 include 1,655,759 and 404,000 shares issued for consulting
and legal services to be performed valued at $1,556,900 and $750,000,
respectively. In addition, in December 1998, the Company authorized
issuance of 17,500 shares of common stock for investments in the common
stock of two privately held companies valued at $43,750. The Company then
declared a property dividend payable which will be paid by distribution of
the investments to the Company's shareholders. The property dividends
payable are recorded as a liability at December 31, 1998.
Also, in December 1998, the Company authorized the formation of a new
subsidiary to hold the Company's community television related assets with a
net book value of $13,769. The Company then declared a property dividend
payable, which will be paid by distribution of the company's investment in
the new subsidiary to the Company's shareholders. The property dividend
payable is recorded as a liability at December 31, 1998.
Noncash investing and financing activities for the year ended December 31,
1996 include $179,611 of equipment given as paid-in capital by majority
stockholders, subscriptions receivable of $2,160 for services rendered, and
$16,737 in exchange for common stock to majority stockholder.
The Notes to Consolidated Financial Statements are an integral part of
these statements.
INTERNET MEDIA CORPORATION
AND SUBSIDIARIES
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS, ORGANIZATION
AND BASIS OF PRESENTATION
Internet Media Corporation (IMC) was incorporated as Media Entertainment,
Inc. in the State of Nevada on November 1, 1996, to operate as a holding
company in the wireless cable television and community (low power)
television industries, as well as other segments of the communications
industry. In 1998 the Company changed it's focus to concentrate in the
wireless internet communications industry. The Company has ceased efforts
to develop the wireless cable and low power business areas and has
announced that assets from the low power activities will be distributed to
shareholders in 1999. Therefore, management has not provided separate
segment information in these financial statements.
Effective December 31, 1996, IMC acquired all of the outstanding common
stock of Winter Entertainment, Inc., a Delaware corporation incorporated on
December 28, 1995 (WEI), and Missouri Cable TV Corp., a Louisiana
corporation incorporated on October 9, 1996 (MCTV). WEI operates a
community television station in Baton Rouge, Louisiana; MCTV owns wireless
cable television channels in Poplar Bluff, Missouri, which system has been
constructed and is ready for operation, and Lebanon, Missouri. Effective
October 8, 1998, the Company formed Santa Fe Wireless Internet, Inc. (Santa
Fe), a New Mexico corporation, to hold the assets acquired from Desert Rain
Internet Services. Santa Fe was organized to provide wireless internet
access. The acquisition of WEI and MCTV by IMC was accounted for as a
reorganization of companies under common control. The assets and
liabilities acquired were recorded at historical cost in a manner similar
to a pooling of interests. The acquisition of Santa Fe was accounted for
as a purchase whereby the cost is allocated to the assets acquired.
Therefore, these financial statements include the operations of IMC and its
predecessors from inception of WEI on December 28, 1995. WEI had no
operations or cash flows for the period ended December 31, 1995.
The financial statements have been prepared on a going concern basis, which
contemplates realization of assets and liquidation of liabilities in the
ordinary course of business. Since the Company is in the development
stage, it has limited capital resources, insignificant revenue and a loss
from operations since its inception. The appropriateness of using the
going concern basis is dependent upon the Company's ability to obtain
additional financing or equity capital and, ultimately, to achieve
profitable operations. The uncertainty of these conditions raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Management plans to raise capital by obtaining financing and, eventually,
through public offerings. Management intends to use the proceeds from any
borrowings to acquire and develop markets to implement its Wireless
Internet Access System and sell its service. The Company believes that
these actions will enable the Company to carry out its business plan and
ultimately to achieve profitable operations.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include all the accounts
of IMC and its wholly owned subsidiaries, WEI, MCTV and Santa Fe. All
intercompany transactions and balances have been eliminated in the
consolidation. The consolidated group is referred to as the "Company".
Broadcast Equipment
Equipment is recorded at cost. Depreciation is calculated using a
straight-line method over the estimated useful lives of the assets, ranging
from 3 to 15 years.
Cash Equivalents
The Company considers all highly liquid investments with original
maturities of ninety days or less from the date of purchase to be cash
equivalents.
Revenue
Revenue is recognized in the period services are provided.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
New Accounting Pronouncements
The Financial Accounting Standards Board (FASB) has issued Financial
Accounting Standards (SFAS) No. 130 Reporting Comprehensive Income. This
statement requires an enterprise to display total comprehensive income
(total nonowner changes in equity) in a full set of financial statements.
Currently the Company has no items to be reported as "other comprehensive
income".
In addition, FASB has issued SFAS No. 131 Disclosures about Segments of an
Enterprise and Related Information. This statement requires a "management
approach" as opposed to an industry approach in defining operations to be
shown as separate segments. Currently, the Company plans to operate in one
segment.
The Company has adopted SFAS No. 130 and No. 131 for its fiscal year
beginning January 1, 1998. There were no significant changes in financial
statement presentation as a result of implementing these new accounting
standards.
Loss Per Common Share
The basic loss per common share has been computed by dividing the net loss
by the weighted average number of shares of common stock outstanding
throughout the period. Calculation of diluted loss per common share - is
not presented because the effects of potential common stock issuable upon
exercise of stock options and contingently issuable shares would be
antidilutive.
Amortization
Licenses and rights to leases of licenses are being amortized on a
straight-line basis over the license and lease rights periods of 5 to 15
years.
Long-lived Assets
The Company follows the provisions of the Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 121
Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of. Long-lived assets and certain identifiable
intangibles to be held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The Company continuously
evaluates the recoverability of its long-lived assets based on estimated
future cash flows and the estimated liquidation value of such long-lived
assets, and provides for impairment if such undiscounted cash flows are
insufficient to recover the carrying amount of the long-lived assets.
Advertising
The Company expenses advertising costs as incurred. During the years ended
December 31, 1998, 1997 and 1996, the Company incurred $940, $0 and $0,
respectively, in advertising costs.
Investments
Investments include minority interests held in two non-public companies
recorded at cost, which approximates fair value.
NOTE 3. ACQUISITIONS
Effective December 31, 1996, the Company acquired WEI and MCTV by issuing
2,157,239 shares of common stock in exchange for all the common stock of
each company. The majority stockholder of the Company was also the sole
stockholder of WEI and the majority stockholder of MCTV. Therefore, the
acquisitions have been accounted for at historical cost in a manner similar
to a pooling of interests.
Effective October 8, 1998, the Company acquired Santa Fe by purchasing all
of its common stock for $25,000. The acquisition has been accounted for as
a purchase whereby the cost is allocated to the assets acquired.
Disclosure of what operations would have been as if the transaction had
occurred at the beginning of the period are not shown due to the
transaction being immaterial to the financial statements taken as a whole.
The consolidated statements of operations includes the Company and its
predecessors WEI and MCTV from inception of WEI. The operations of Santa
Fe are included from the acquisition date (October 8, 1998) to December 31,
1998.
NOTE 4. WIRELESS CABLE ASSETS
Property and equipment includes wireless cable station equipment, which is
operational but has not been put into use. The equipment is recorded at
cost of approximately $201,000 and is not being depreciated. In addition,
the Company owns licenses in the wireless cable markets, which operate on
the same frequencies and will be used in the wireless internet market.
Management's strategy is to pursue the wireless internet service market.
Management plans on using the existing wireless cable equipment to provide
interactive wireless internet service and to use its license agreements to
develop wireless internet markets. The Company's ability to provide
two-way interactive internet service on its current channel license
agreements depends on pending Federal Communication Commission (FCC)
approval of two-way communication on the related frequencies. Management
believes approval by the FCC is eminent; however, if such approval is not
obtained, future recoverability of the carrying value may become impaired.
NOTE 5. LICENSES AND RIGHTS TO LEASES OF LICENSES
The Company owns licenses or rights to leases of licenses in the following
wireless cable and community television markets:
Wireless Cable Market Expiration Date
Poplar Bluff, Missouri October 16, 2006
Lebanon, Missouri October 16, 2006
Port Angeles, Washington December 21, 2003
Astoria, Oregon December 21, 2003
Sand Point, Idaho August 09, 2006
The Dalles, Oregon August 09, 2006
Fallon, Nevada August 09, 2006
Community Television Market
Baton Rouge, Louisiana July 01, 2007
Monroe/Rayville, Louisiana July 01, 2007
Natchitoches, Louisiana July 01, 2007
Bainbridge, Georgia July 01, 2007
Application for renewal of licenses must be filed within a certain period
prior to expiration.
NOTE 6. NOTE PAYABLE MAJORITY STOCKHOLDER
1998 1997
Note payable to majority
stockholder, interest
accrues at 8%, due on
demand and unsecured $146,415 $116,282
NOTE 7. INCOME TAXES
Deferred income tax assets and liabilities are computed for differences
between financial statement and tax basis of assets and liabilities that
will result in taxable or deductible amounts in the future based on enacted
tax laws and rates applicable to the period in which the differences are
expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets
and liabilities. At December 31, 1998, 1997 and 1996, there was no current
or deferred tax expense.
Deferred tax asset and liability balances are as follows:
1998 1997
Deferred tax asset $573,467 $220,674
Deferred tax liability 0 0
Net deferred tax asset 573,467 220,674
Valuation allowance (573,467) (220,674)
$ 0 $ 0
The net change in the valuation allowance for the periods ended December
31, 1998 and 1997 were $352,793 and $212,433, respectively. The deferred
tax asset results from net operating loss carryovers.
The Company has a net operating loss carryover of approximately $1,686,000
available to offset future income for income tax reporting purposes, which
will ultimately expire between 2011 and 2018 if not previously utilized.
NOTE 8. INVESTMENT IN JOINT VENTURE
During the year ended December 31, 1997, the Company entered into an
agreement with Web One, Inc. forming Web One Wireless I.S.P. - Baton Rouge,
J.V. (the "Joint Venture"). The Joint Venture was created to operate as a
Wireless Internet Service Provider in Baton Rouge, Louisiana. The
agreement gave the Company the option to buy all the outstanding capital
stock of Web One, Inc. at any time on or before August 1, 1998. The option
price was to be based on an appraisal of Web One, Inc. During the year
ended December 31, 1998, the Joint Venture was abandoned, and as a result
the initial investment of $2,500 has been impaired and provided for in the
financial statements.
NOTE 9. STOCK OPTIONS
The Company entered into a stock options agreement effective October 14,
1997. Pursuant to the agreement, the Company issued 300,000 options to
purchase common stock in consideration for consulting services to be
performed for one year from the date of the agreement. Options may be
exercised from the date of the agreement through the expiration dates as
follows: 100,000 shares may be purchased at a price of $3.00 per share and
expire on January 31, 1998, 100,000 shares may be purchased at a price of
$4.00 per share and expire on June 30, 1998 and 100,000 shares may be
purchased at a price of $5.00 per share and expire on September 30, 1998.
Based on the market value of the underlying stock at the date the options
were granted, management has determined that the stock options have no fair
value. Therefore, no compensation expense has been recognized for options
granted for the year ended December 31, 1997. All options expired
unexercised during the year ended December 31, 1998.
NOTE 10. RELATED PARTY
The Company has issued stock pursuant to various consulting agreements.
Deferred consulting costs, which are valued on the stock price on the date
of the agreements, are recorded as a reduction of shareholder's equity and
will be amortized over the life of the agreements.
In March 1998, four directors of the Company were issued 20,000 shares each
of Company common stock as a bonus for their services as directors.
Compensation expense of approximately $45,000 was recorded based on the
fair value of the common stock on the date of issue.
NOTE 11. COMMON STOCK TRANSACTIONS
On April 24, 1998, the Company completed a private placement consisting of
300,000 units. Each unit consists of two shares of common stock and a
warrant to purchase one share of common stock. The per unit price was
$2.00 and was allocated $1.00 to each share of common stock and no value to
the warrant to purchase a share of common stock.
The warrants entitle the holder to purchase one share of common stock for
$2.00 and expire on May 18, 2000. The net proceeds to the Company from the
sale of 160,000 units amounted to $288,000 after deducting offering costs
of $32,000. The 160,000 warrants related to the units sold are still
outstanding at December 31, 1998.
In connection with that offering, the Company agreed to issue to the
placement agent warrants (the "Underwriter's Warrants") to purchase one
share each of common stock. The Warrants are exercisable for $1.25 per
share and expire four years from the date of the offering. At December 31,
1998, 32,000 warrants have been issued and are outstanding.
In addition, the Company agreed to issue Finder's Fee Warrants to purchase
one share each of common stock in connection with that offering. At
December 31, 1998, warrants issued and outstanding were as follows; 56,667
warrants exercisable at $1.25 per share and 56,667 warrants exercisable at
$1.50 per share.
NOTE 12. SUBSEQUENT EVENTS
On January 29, 1999, the Company acquired all of the tangible and
intangible assets and rights used in connection with the Internet services
business operated in the United States by CyberHighway, Inc.
(CyberHighway), a Idaho corporation.
The acquisition was effected pursuant to a Plan and Agreement of
Reorganization dated January 20, 1999 between Media and CyberHighway.
Media paid the shareholders of CyberHighway approximately $15,940,000
through the issuance of 2,000,000 shares of Media common stock. The
purchase price was based upon the weighted average closing price of Media
common stock for five days prior and subsequent to the acquisition date.
The transaction will be accounted for as a purchase. The purchase price
will be allocated to the underlying assets purchased and liabilities
assumed based on their fair market values at the acquisition date.
The following table summarizes the net assets purchased in connection with
the CyberHighway acquisition and the amount attributable to cost in excess
of net assets acquired:
Net assets acquired $ 372,472
Acquired customer base 15,566,787
Other assets 5,260,690
Deferred tax liability (5,260,690)
The preliminary estimate of net assets represents management's best
estimate based on currently available information; however, such estimate
may be revised up to one year from the acquisition date. Acquired customer
bases are amortized over 3 years.
The following shows the unaudited proforma condensed balance sheets of
Media and CyberHighway as if the acquisition occurred on December 31, 1998:
Historical
Internet Cyber- Proforma Proforma
Media Highway Adjustments Consolidated
Current
assets $ 8,265 $306,018 $ - $ 314,283
Property
and equip-
ment, net 247,267 408,558 (72,692) 583,133
Other
assets 43,920 13,480 - 57,400
Intang-
ibles 34,207 - 20,827,477 20,861,684
Total
assets $333,659 $728,056 $20,754,785 $21,816,500
Current
liabilities $249,071 $282,892 $ - $ 531,963
Deferred
tax
liability - - 5,260,690 5,260,690
Stockholders'
equity 84,588 445,164 15,494,095 16,023,847
Total
liabil-
ities
and
stock-
holders'
equity $333,659 $728,056 $20,754,785 $21,816,500
The following unaudited proforma condensed statements of operations assumes
the CyberHighway acquisition occurred on January 1, 1998. In the opinion
of management, all adjustments necessary to present fairly such unaudited
pro forma condensed statements of operations have been made.
Historical
Internet Cyber- Proforma Proforma
Media Highway Adjustments Consolidated
Revenues $ 5,440 $2,449,156 $ - $ 2,454,596
Expenses
Internet
access
cost - 510,036 - 510,036
Equipment
cost - 326,488 - 326,488
Deprecia-
tion and
amorti-
zation 4,394 138,674 6,918,262 7,061,330
General
and
admini-
strative 1,030,070 1,292,526 - 2,322,596
Selling - 110,397 - 110,397
Total
opera-
ting
expense 1,034,464 2,378,121 6,918,262 10,330,847
Operating
income
(loss) (1,029,024) 71,035 (6,918,262) (7,876,251)
Other
income
(expense) ( 8,602) 6,960 - ( 1,642)
Income
(loss)
before
taxes (1,037,626) 77,995 (6,918,262) (7,877,893)
Income
tax
benefit - - (1,753,563) (1,753,563)
Net income
(loss) ($1,037,626) $ 77,995 ($5,164,699) ($6,124,330)
Net income
(loss)
per share ($0.14) $31.51 ($0.65)
Weighted
average
number
of shares
out-
standing 7,361,275 2,475 9,361,275
Subsequent to year end, the Company authorized a private offering of units
to sell 225,000 units of its securities at an offering price of $4.50 per
unit. Each unit consists of one share of common stock and one warrant to
purchase one share of common stock at an exercise price of $7.00. As of
April 9, 1999, the Company has issued 50,444 shares of common stock for
approximately $227,000.
NOTE 13. YEAR 2000 ISSUES
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date-code field. These date-code
fields will need to accept four digit entries to distinguish 21st Century
dates from 20th Century dates. Confusion of dates by computer systems and
software products may bring about system failures or miscalculations,
causing disruptions of operations, including, among other things, a
temporary inability to process transactions, send invoices or engage in
similar business activities. As a result, many companies' software and
computer systems need to be upgraded or replaced in order to comply with
such "Year 2000" requirements. The Company, including CyberHighway, has
established procedures for evaluating and managing the risks and costs
associated with this problem. Currently, all components of CyberHighway's
Network Operations Center is Year 2000 compliant, except for a single
server, which is scheduled to be replaced during the third quarter of 1999.
CyberHighway expects that its computer systems will be Year 2000 compliant
by the end of the third quarter of 1999. However, many of CyberHighway's
customers maintain their Internet operations on commercially available
operating systems, which may be affected by Year 2000 complications.
Because of the unprecedented nature of the Year 2000 issue, its effects and
the success of related remediation efforts will not be fully determinable
until the year 2000 and thereafter. Management cannot assure that the
Company is or will be Year 2000 ready, that the Company's remediation
efforts will be successful in whole or in part, or that parties with whom
the Company does business will be Year 2000 ready.
INDEPENDENT AUDITOR'S REPORT
To the Shareholders
CyberHighway, Inc.
We have audited the accompanying balance sheets of CyberHighway, Inc. (the
Company) as of January 31, 1999 and 1998, and the related statements of
operations, changes in stockholders' equity and cash flows for each of the
three years in the period ended January 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CyberHighway, Inc. at
January 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended January 31, 1999, in
conformity with generally accepted accounting principles.
WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
March 23, 1999
CYBERHIGHWAY, INC.
BALANCE SHEETS
JANUARY 31, 1999 AND 1998
1999 1998
ASSETS
CURRENT ASSETS
Cash $177,270 $ 56,730
Trade receivables 58,023 17,165
Inventory 70,725 42,696
------- -------
Total current assets 306,018 116,591
PROPERTY AND
EQUIPMENT, net 408,558 367,648
OTHER ASSETS 13,480 16,489
TOTAL ASSETS $728,056 $500,728
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of
long-term debt $ 30,912 $ 29,577
Current maturities of
capital lease obligations 722 8,142
Accounts payable and
accrued expenses 184,050 102,221
Deferred revenue 64,342 49,204
Total current
liabilities 280,026 189,144
LONG-TERM LIABILITIES
Long-term debt 2,866 33,778
Capital lease
obligations - 722
2,866 34,500
STOCKHOLDERS' EQUITY
Common shares, no par
value, 10,000 shares
authorized, 2,475
issued and
outstanding 623,500 623,500
Retained earnings
(deficit) ( 178,336) ( 256,331)
Stock subscription
receivable - ( 90,085)
445,164 277,084
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $728,056 $500,728
CYBERHIGHWAY, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
1999 1998 1997
REVENUES
Access fees $1,175,051 $ 947,229 $ 405,111
Licensed affiliate
fees 875,025 627,992 406,753
Equipment sales 399,080 483,280 235,651
Total revenues 2,449,156 2,058,501 1,047,515
COSTS AND EXPENSES
Internet access cost 510,036 267,807 166,323
Equipment cost 326,488 360,083 180,800
General and
administrative 1,292,526 1,215,052 848,462
Selling 110,397 75,402 64,719
Depreciation and
amortization 138,674 115,784 65,167
Total operating
expenses 2,378,121 2,034,128 1,325,471
Income (loss) from
operations 71,035 24,373 ( 277,956)
OTHER INCOME AND
EXPENSES
Miscellaneous
income, net 12,147 8,519 20,532
Interest expense ( 5,187) ( 10,638) ( 3,642)
Income (loss) before
income taxes 77,995 22,254 ( 261,066)
INCOME TAXES - - -
NET INCOME (LOSS) $ 77,995 $ 22,254 $( 261,066)
Basic earnings
(loss) per common
share $31.51 $9.32 ($210.73)
Weighted average
number of shares
outstanding 2,475 2,387 1,239
CYBERHIGHWAY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
Stock
Retained Subscr-
Common Shares Earnings iption
Number Amount (Deficit) Receivable Total
BALANCE,
January 31,
1996 1,000 $2,000 ($17,519) $ - ($15,519)
Issuance
of common
stock,
net of
1,000
shares
cancelled 815 256,000 - - 256,000
Net loss - - ( 261,066) - (261,066)
BALANCE,
January 31,
1997 1,815 258,000 (278,585) - ( 20,585)
Issuance
of common
stock 660 365,500 - ( 90,085) 275,415
Net income - - 22,254 - 22,254
BALANCE,
January 31,
1998 2,475 623,500 (256,331) ( 90,085) 277,084
Collection
of stock
subscription
receivable - - - 90,085 90,085
Net income - - 77,995 - 77,995
BALANCE,
January 31,
1999 2,475 $623,500 $(178,336) $ - $445,164
CYBERHIGHWAY, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1999, 1998 AND 1997
1999 1998 1997
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income (loss) $ 77,995 $ 22,254 ($261,066)
Adjustments to
reconcile net
income (loss) to
net cash provided
by (used in)
operating activities:
Depreciation
and amortization 138,674 115,784 65,167
Impairment loss 18,488 - -
Changes in
operating assets
and liabilities
Trade
receivables ( 40,858) 10,599 ( 24,281)
Inventory ( 28,029) ( 28,782) ( 13,914)
Other assets 3,009 ( 13,135) ( 1,262)
Accounts payable
and accrued
expenses 81,829 ( 44,931) 89,886
Deferred
revenue 15,138 28,373 18,995
Other - ( 169) -
Net cash provided by
(used in) operating
activities 266,246 89,993 (126,475)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures (198,072) (125,069) (319,586)
Net cash used in
investing activities (198,072) (125,069) (319,586)
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from sale
of common stock - 70,000 236,000
Proceeds from
subscription
receivable 90,085 - -
Proceeds from
long-term debt - - 275,478
Proceeds from
capital lease
obligations - - 6,085
Payments on
long-term debt ( 29,577) ( 27,123) ( 61,185)
Payments on
capital lease
obligations ( 8,142) ( 24,273) ( 23,875)
Net cash provided
by investing
activities 52,366 18,604 432,503
Net increase
(decrease) in cash 120,540 ( 16,472) ( 13,558)
CASH, beginning
of period 56,730 73,202 86,760
CASH, end of period $177,270 $ 56,730 $ 73,202
SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
In 1997, the Company exchanged 550 shares of common stock for the balance
of a note payable to a shareholder of $20,000.
In 1998, the Company exchanged 660 shares of common stock for the balance
of notes payable to shareholders of $205,415. The difference between the
notes payable and the value of the shares exchanged of $90,085 was
transferred to a stock subscription agreement.
CYBERHIGHWAY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
CyberHighway, Inc. (the Company) is a regional Internet service provider
incorporated in the State of Idaho on February 27, 1995. The Company is a
full-service ISP, offering its services, directly and through licensees to
residential and business customers in eleven states throughout the
midwestern United States. On January 29, 1999, the Company became a
wholly-owned subsidiary of Internet Media Corporation.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid investments with original maturities of three months or less
to be cash equivalents.
Inventory
Inventory consists of internet access equipment held for sale and is valued
at the lower of cost or market. Cost is determined using the specific
identity method.
Property and Equipment
Property and equipment are stated as cost. Depreciation is calculated
using the straight-line method over the estimated useful lives ranging from
three to seven years.
Impairment of Long-Lived Assets
At each balance sheet date, management determines whether any property or
equipment or any other assets have been impaired based on the criteria
established in Statement of Financial Accounting Standards No. 121 (SFAS
121), Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of.
Revenue Recognition
The Company maintains license agreements with affiliate ISP's to provide
Internet access to affiliate's customers. License fees are typically
billed in the month the services are provided. The Company charges direct
customers (residential and business subscribers) monthly access fees to the
Internet and recognizes the revenue in the month the access is provided.
For certain subscribers billed in advance, the Company recognizes the
revenue over the period the billing covers. Revenue for other services
provided, including set-up fees charged to customers and affiliates, and
equipment sales are recognized as the service is performed or the equipment
is delivered.
Costs of Access Revenues
Costs of access revenues primarily consist of telecommunications expenses
inherent in the network infrastructure. Costs of access revenues also
include fees paid for lease of the Company's backbone, as well as license
fees for Web browser software based on a per-user charge, other license
fees paid to third-party software vendors, product costs, and contractor
fees for distribution of software to new subscribers.
Advertising Costs
The Company expenses advertising costs as incurred. During the years ended
January 31, 1999, 1998 and 1997, the Company incurred approximately
$110,500, $75,500 and $65,000, respectively, in advertising costs.
Income Taxes
Deferred tax liabilities and assets are recognized for the tax effects of
differences between the financial statement and tax bases of assets and
liabilities. For all periods presented, the Company's net deferred tax
asset has been fully reserved with a valuation allowance.
Financial Instruments and Concentration of Credit Risk
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash and trade
receivables. The Company maintains its cash in bank deposit accounts,
which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts and believes it is not exposed to
any significant credit risk on cash.
Concentrations of credit risk with respect to trade receivables are limited
due to the large number of customers and markets, which comprise the
Company's customer base. The Company generally does not require collateral
and receivables are generally due within 30 days.
The carrying amounts of financial instruments including cash, trade
receivables, accounts payable and accrued expenses approximate fair value
because of the immediate or short-term maturities of these instruments.
The difference between the carrying amount and fair value of the Company's
long-term debt is not significant.
Sources of Supplies
The Company relies on local telephone companies and other companies to
provide data communications. Although management believes alternative
telecommunications facilities could be found in a timely manner, any
disruption of these services could have an adverse effect on operating
results.
The Company maintains various vendors for required products, such as
modems, terminal services and high-performance routers, which are important
components of its network. Some of the Company's suppliers have limited
resources and production capacity. If the suppliers are unable to meet the
Company's needs as it is building out its network infrastructure, then
delays and increased costs in the expansion of the Company's network
infrastructure could result, having an adverse effect on operating results.
Earnings Per Share
Basic earnings (loss) per share are computed by dividing net income (loss)
by the weighted average number of common shares outstanding for the period.
The Company has no potential common shares.
NOTE 3. PROPERTY AND EQUIPMENT
Classifications of property and equipment and accumulated depreciation were
as follows for the years ended January 31, 1999 and 1998:
1999 1998
Equipment $367,100 $274,076
Furniture and fixtures 32,738 24,009
Office equipment 286,531 247,045
Leasehold improvements 19,680 16,915
706,049 562,045
Accumulated
depreciation 297,491 194,397
Property and
equipment, net $408,558 $367,848
NOTE 4. IMPAIRED EQUIPMENT
On January 31, 1999, management determined that various network operating
center computer equipment was impaired based on criteria established in
SFAS 121, including the fact that the computer equipment has been replaced
by other equipment due to changes in technology. The equipment is included
in inventory for resale on January 31, 1999. The impairment loss of
$18,488 recognized in the accompanying 1999 financial statements was
measured as the amount by which the carrying amount of the computer
equipment exceeded its fair value. Fair value was determined based upon
market value. No impairment loss occurred during 1998 or 1997.
NOTE 5. LONG-TERM DEBT
Long term debt on January 31, 1999 and 1998 consists of the following:
1999 1998
Note payable to bank with
interest at 9.25%, due in
monthly payments of $2,887,
with final payment due
February 25, 2000, secured
by accounts receivable,
inventory and equipment.
(Additional borrowing up to
$90,478, the original amount
of the note, is allowed under
the note agreement.) $ 33,778 $ 63,355
Less current maturities: 30,912 29,577
$ 2,866 $ 33,778
Aggregate maturities
of long-term debt are
as follows:
2000 $ 30,912 $ 29,577
2001 2,866 30,912
2002 - 2,866
$ 33,778 $ 63,355
NOTE 6. CAPITAL LEASES
The Company is the lessee of communication and data processing equipment
under capital leases expiring through 2000. The assets and liabilities
under capital lease are recorded at the lower of the present value of
minimum lease payments or the fair value of the assets. The equipment is
amortized over the related useful lives of the assets. Amortization of
assets under capital leases is included in depreciation expense.
Property held under capital leases is summarized as follows:
1999 1998
Communication and data
processing equipment $ 66,770 $ 66,770
Less accumulated amortization 46,729 33,375
$ 20,041 $ 33,395
Pursuant to the terms of the capital lease agreements, the Company will be
required to make future minimum payments as follows:
Year Ended
January 31
2000 $ 763
Less amount representing
interest 41
722
Less current maturities 722
$ -
NOTE 7. OPERATING LEASES
The Company has contracts with various telephone companies and other
companies to provide data communication services. The terms on these
agreements range from month-to-month to three years. Future obligations
under these agreements as of January 31, 1999 are approximately $240,000
for fiscal 2000 and 2001.
NOTE 8. INCOME TAXES
The Company provides for deferred income taxes resulting from temporary
differences between the tax basis of assets and liabilities, and their
reported amounts in the financial statements that will result in taxable or
deductible amounts in future years. The Company uses the cash basis of
accounting for preparation of U.S. Federal income tax returns. Under the
provisions of the Internal Revenue Code, the Company has net operating loss
carryforwards of approximately $160,000, which begin to expire in 2012.
The tax effect of this and other temporary differences are as follows:
1999 1998
Deferred tax assets
Net operating loss
carryforwards $ 54,326 $ 89,669
Cash to accrual
differences 66,003 45,124
120,329 134,793
Deferred tax liabilities
Property and equipment 5,260 21,552
Cash to accrual
differences 23,797 9,158
Accumulated depreciation 29,644 17,047
58,701 47,757
Net deferred tax asset
before valuation allowance 61,628 87,036
Valuation allowance ( 61,628) ( 87,036)
Net deferred tax asset $ - $ -
The Company's tax provision for 1999, 1998 and 1997 consists of the
following:
1999 1998 1997
Current taxes $ - $ - $ -
Deferred taxes 25,408 7,566 -
Re-evaluation of
valuation allowance
on beginning
temporary
differences ( 25,408) ( 7,566) -
$ - $ - $ -
The 1999, 1998 and 1997 tax provision differs from the amount calculated by
applying statutory tax rates to pre-tax income as follows:
1999 1998 1997
Tax at statutory
rates $ 26,518 $ 7,566 ($88,762)
Re-evaluation of
valuation
allowance on
beginning
temporary
differences ( 25,408) ( 7,566) -
Loss not providing
tax benefit - - 88,762
Other ( 1,110) - -
$ - $ - $ -
NOTE 9. LITIGATION
The Company is involved in a dispute with a vendor with potential exposure
of approximately $60,000. Management believes the vendor's claim is
without merit and is vigorously defending its position. Management does
not expect the ultimate outcome to materially affect the Company's
financial position.
NOTE 10. YEAR 2000
The Company is working to resolve the potential impact of the Year 2000 on
the ability of the Company's computerized information systems to accurately
process information that may be date sensitive. Any of the Company's
programs that recognize a date using "00" as the year 1900 rather than the
year 2000 could result in errors or system failures. The Company utilizes
a number of computer programs across its entire operation. The Company has
not completed its assessment, but currently believes that costs of
addressing this issue will not have a material adverse impact on the
Company's financial position. However, if the Company and third parties
upon which it relies are unable to address this issue in a timely manner,
it could result in a material financial risk to the Company. In order to
assure that this does not occur, the Company plans to devote all resources
required to resolve any significant Year 2000 issues in a timely manner.
Because of the unprecedented nature of the Year 2000 issue, its effects and
the success of related remediation efforts will not be fully determinable
until the year 2000 and thereafter. Management cannot assure that the
Company is or will be Year 2000 ready, that the Company's remediation
efforts will be successful in whole or in part, or that parties with whom
the Company does business will be Year 2000 ready.
On January 29, 1999, the Company acquired all of the tangible and
intangible assets and rights used in connection with the Internet services
business operated in the United States by CyberHighway, Inc.
(CyberHighway), a Idaho corporation.
The acquisition was effected pursuant to a Plan and Agreement of
Reorganization dated January 20, 1999 between Media and CyberHighway.
Media paid the shareholders of CyberHighway approximately $15,940,000
through the issuance of 2,000,000 shares of Media common stock. The
purchase price was based upon the weighted average closing price of Media
common stock for five days prior and subsequent to the acquisition date.
The transaction will be accounted for as a purchase. The purchase price
will be allocated to the underlying assets purchased and liabilities
assumed based on their fair market values at the acquisition date.
The following table summarizes the net assets purchased in connection with
the CyberHighway acquisition and the amount attributable to cost in excess
of net assets acquired:
Working capital $ 23,126
Property and equipment 335,866
Acquired customer base 15,566,787
Other assets 13,480
Goodwill 5,260,690
Deferred tax liability (5,260,690)
The preliminary estimate of net assets represents management's best
estimate based on currently available information; however, such estimate
may be revised up to one year from the acquisition date. Acquired customer
bases are amortized over 3 years.
The following shows the unaudited proforma condensed balance sheets of
Media and CyberHighway as if the acquisition occurred on December 31, 1998:
Historical
Internet Cyber- Proforma Proforma
Media Highway Adjustments Consolidated
Current
assets $ 8,265 $306,018 $ - $ 314,283
Property
and equi-
ment, net 247,267 408,558 (72,692)(1) 583,133
Other
assets 170 13,480 - 13,650
Intangibles 34,207 - 20,827,477(1) 20,861,684
Total
assets $289,909 $728,056 $20,754,785 $21,772,750
Current
liabil-
ities $191,552 $282,892 $ - $ 474,444
Deferred
tax
liability - - 5,260,690(1) 5,260,690
Stock-
holders'
equity 98,357 445,164 15,494,095(1) 16,037,616
Total
liabil-
ities
and
stock-
holders'
equity $289,909 $728,056 $20,754,785 $21,772,750
The following unaudited proforma condensed statements of operations assumes
the CyberHighway acquisition occurred on January 1, 1998. In the opinion
of management, all adjustments necessary to present fairly such unaudited
pro forma condensed statements of operations have been made.
Historical
Internet Cyber- Proforma Proforma
Media Highway Adjustments Consolidated
Revenues $ 5,440 $2,449,156 $ - $ 2,454,596
Expenses
Internet
access
cost - 510,036 - 510,036
Equipment
cost - 326,488 - 326,488
Deprecia-
tion and
amorti-
zation 4,394 138,674 6,918,262(2) 7,061,330
General
and admin-
istrative 1,030,070 1,292,526 - 2,322,596
Selling - 110,397 - 110,397
Total
operat-
ing ex-
pense 1,034,464 2,378,121 6,918,262 10,330,847
Operating
income
(loss) (1,029,024) 71,035 (6,918,262) (7,876,251)
Other
income
(expense) ( 8,602) 6,960 - ( 1,642)
Income
(loss)
before
taxes (1,037,626) 77,995 (6,918,262) (7,877,893)
Income
tax
benefit - - (1,753,563)(3)(1,753,563)
Net
income
(loss) ($1,037,626) $ 77,995 ($5,164,699) ($6,124,330)
Net
income
(loss)
per
share ($0.14) $31.51 ($0.84)
Weighted
average
number
of shares
outstand-
ing 7,360,506 2,475 9,360,506
(1) To record the net assets purchased in connection with the CyberHighway
acquisition and the amount attributable to cost in excess of net assets
acquired based upon total purchase price of $15,940,000.
(2) Depreciation and amortization expense on acquired customer base,
goodwill and property and equipment have been computed by amortizing them
over their useful lives of 3 years.
(3) To record the income tax benefit based on temporary differences
related to acquired customer base and property and equipment.
<BACK PAGE OF PROSPECTUS>
TABLE OF CONTENTS
Page
FORWARD-LOOKING STATEMENTS
ADDITIONAL INFORMATION
GLOSSARY OF TERMS
PROSPECTUS SUMMARY
RECENT DEVELOPMENTS
THE COMPANY
RISK FACTORS
DILUTION
USE OF PROCEEDS
TRADING AND MARKET PRICES
DIVIDENDS
CAPITALIZATION
SELECTED FINANCIAL DATA
RECENT CHANGE OF INDEPENDENT AUDITOR
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
REGULATION
BUSINESS
MANAGEMENT
CERTAIN TRANSACTIONS
PRINCIPAL SHAREHOLDERS
LITIGATION
PLAN OF DISTRIBUTION
SELLING SHAREHOLDERS
DESCRIPTION OF SECURITIES
LEGAL MATTERS
EXPERTS
INDEX TO FINANCIAL STATEMENTS
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Estimated expenses payable by the Company in connection with the
registration of Common Stock covered hereby are as follows:
Registration fee $ 6,003.31
Underwriter's unaccountable expense allowance 0.00
Printing and engraving expenses 3,000.00 *
Legal fees and expenses 25,000.00
Accounting fees and expenses 7,500.00 *
Blue Sky fees and expenses 0.00
Transfer agent and registrar fees and expenses 0.00
Miscellaneous 1,000.00 *
- --------------- ---------
(* estimate) Total $42,503.31 *
Item 14. Indemnification of Directors and Officers.
Registrant is a Nevada corporation. Section 78.751 of Nevada Revised
Statutes (the "Nevada Act") empowers a corporation to indemnify its
directors and officers and to purchase insurance with respect to liability
arising out of their capacity as directors and officers. The Nevada Act
further provides that the indemnification permitted thereunder shall not be
deemed exclusive of any other rights to which the directors and officers
may be entitled under the corporation's bylaws, any agreement, vote of the
shareholders or otherwise.
Section VIII of Registrant's Bylaws, included as Exhibit 3.2 filed
herewith, which provides for the indemnification of directors and officers,
is incorporated herein by reference.
Registrant has purchased no insurance for indemnification of its officers
and directors, agents, etc., nor has there been any specific agreement for
indemnification made between Registrant and any of its officers and
directors, or others, with respect to indemnification for them arising out
of their duties to Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, the Securities Exchange Act of 1934 or the Rules and
Regulations of the Securities and Exchange Commission thereunder may be
permitted under said indemnification provisions of the law, or otherwise,
Registrant has been advised that, in the opinion of the Securities and
Exchange Commission, any such indemnification is against public policy and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Nevada Act and will be governed by the
final adjudication of such issue.
Item 15. Recent Sales of Unregistered Securities.
1. (a) Securities Sold. On February 1, 1997, 150,000 shares of Company
Common Stock were issued.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Newlan & Newlan, Attorneys at Law.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting and Legal Services Agreement, at a value of $.40 per share,
or $60,000, in the aggregate.
(d) Exemption from Registration Claimed. These securities are
exempt from registration under the Securities Act of 1933, as amended,
pursuant to the provisions of Section 4(2) thereof, as a transaction not
involving a public offering.
2. (a) Securities Sold. On March 7, 1997, 20,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Michael Cohn.
(c) Consideration. Such shares of Common Stock were sold for cash
pursuant to a Stock Purchase Agreement, at a price of $2.50 per share, or
$50,000, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
3. (a) Securities Sold. On September 30, 1997, 60,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to The Humbolt Corporation.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $2.50 per share, or $150,000, in
the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
4. (a) Securities Sold. On October 16, 1997, 10,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Clarion Financial Services, Inc.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $2.50 per share, or $25,000, in
the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
5. (a) Securities Sold. On October 29, 1997, 40,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Tre Vega.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $3.00 per share, or $120,000, in
the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
6. (a) Securities Sold. On November 12, 1997, 44,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Langley Downey Entertainment, Inc.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $1.25 per share, or $55,000, in
the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
7. (a) Securities Sold. On December 16, 1997, 100,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Nibar Group, Inc.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $.25 per share, or $25,000, in the
aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
8. (a) Securities Sold. On February 17, 1998, 400,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Newlan & Newlan, Attorneys at Law.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting and Legal Services Agreement, at a price of $.10 per share,
or $40,000, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
9. (a) Securities Sold. On February 17, 1998, 36,092 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Langley Downey Entertainment, Inc.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $1.25 per share, or $45,115, in
the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
10. (a) Securities Sold. On March 20, 1998, 22,667 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Geoff Newlan, d/b/a jara.com productions.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $.375 per share, or $8,500, in the
aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
11. (a) Securities Sold. On March 21, 1998, a total of 80,000 shares of
Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Waddell D. Loflin (20,000 shares), Ross S. Bravata (20,000
shares), Michael Cohn (20,000 shares) and Richard N. Gill (20,000 shares).
(c) Consideration. Such shares of Common Stock were issued as a
bonus for services rendered, at a price of $.80 per share, or $64,000, in
the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
12. (a) Securities Sold. On June 22, 1998, a total of 300,000 shares of
Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Dennis A. Faker (100,000 shares), Barbara V. Schiller
(60,000 shares), Jeanne M. Rowzee (20,000 shares), Alvin Gottlieb (20,000
shares), Rogers Family Trust (60,000 shares), Delaware Charter Guarantee &
Trust Company f/b/o Clarence Yim (20,000 shares) and Delaware Charter
Guarantee & Trust Company f/b/o R. Logan Kock (20,000 shares).
(c) Consideration. Such shares of Common Stock were sold for cash
pursuant to a private offering, at a price of $1.00 per share, or $300,000,
in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
13. (a) Securities Sold. On June 22, 1998, a total of 150,000 common
stock purchase warrants of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to
Dennis A. Faker (50,000 warrants), Barbara V. Schiller (30,000 warrants),
Jeanne M. Rowzee (10,000 warrants), Alvin Gottlieb (10,000 warrants),
Rogers Family Trust (30,000 warrants), Delaware Charter Guarantee & Trust
Company f/b/o Clarence Yim (10,000 warrants) and Delaware Charter
Guarantee & Trust Company f/b/o R. Logan Kock (10,000 warrants).
(c) Consideration. Such warrants were issued for no additional
consideration as part of units of securities in a private offering.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Exercise price of the warrants
is $2.00 per share and exercisable for a period of two years from issuance.
The warrants are redeemable by the Company at any time the bid price of
the Company's Common Stock has been at or above $4.00 per share for five
consecutive trading days.
14. (a) Securities Sold. On May 18, 1999, 56,667 common stock purchase
warrants of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to
H+N Partners.
(c) Consideration. Such warrants were issued pursuant to an
Investment Banking Agreement.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Exercise price of the warrants
is $1.25 per share and exercisable for a period of four years from issuance.
15. (a) Securities Sold. On May 18, 1999, 56,667 common stock purchase
warrants of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to
H+N Partners.
(c) Consideration. Such warrants were issued pursuant to an
Investment Banking Agreement.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Exercise price of the warrants
is $1.50 per share and exercisable for a period of four years from issuance.
16. (a) Securities Sold. On May 18, 1999, 34,000 common stock purchase
warrants of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to
Centex Securities, Inc.
(c) Consideration. Such warrants were issued pursuant to a Selling
Agreement.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Exercise price of the warrants
is $1.25 per share and exercisable for a period of five years from issuance.
17. (a) Securities Sold. On June 15, 1998, 37,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to H+N Partners.
(c) Consideration. Such shares of Common Stock were issued pursuant
a Consulting Agreement, at a price of $2.00 per share, or $74,000, in the
aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
18. (a) Securities Sold. On July 31, 1998, 10,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Craig Boothe.
(c) Consideration. Such shares of Common Stock were issued as a
signing bonus pursuant a Business Acquisition Agreement, at a price of
$1.00 per share, or $10,000, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
19. (a) Securities Sold. On August 26, 1998, a total of 40,000 shares
of Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Delaware Charter Guarantee & Trust Company f/b/o Clarence
Yim (20,000 shares) and Delaware Charter Guarantee & Trust Company f/b/o R.
Logan Kock (20,000 shares).
(c) Consideration. Such shares of Common Stock were issued in a
private offering, at a price of $1.00 per share, or $40,000, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
20. (a) Securities Sold. On August 26, 1998, a total of 20,000 common
stock purchase warrants of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to
Delaware Charter Guarantee & Trust Company f/b/o Clarence Yim (10,000
warrants) and Delaware Charter Guarantee & Trust Company f/b/o R. Logan
Kock (10,000 warrants).
(c) Consideration. Such warrants were issued for no additional
consideration as part of units of securities in a private offering.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Exercise price of the warrants
is $2.00 per share and exercisable for a period of two years from issuance.
The warrants are redeemable by the Company at any time the bid price of
the Company's Common Stock has been at or above $4.00 per share for five
consecutive trading days.
21. (a) Securities Sold. On September 9, 1998, 300,000 shares of
Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Capital Financial Consultants, Inc.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $1.10 per share, or $330,000, in
the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
22. (a) Securities Sold. On September 1, 1998, 400,000 shares of
Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Newlan & Newlan, Attorneys at Law.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting and Legal Services Consulting Agreement, at a price of
$1.00 per share, or $400,000, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
23. (a) Securities Sold. On October 14, 1998, 100,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Peter Rochow.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $.70 per share, or $70,000, in the
aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
24. (a) Securities Sold. On August 14, 1998, 5,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Darrell Davis.
(c) Consideration. Such shares of Common Stock were issued as a
signing bonus pursuant to an Agreement and Plan of Reorganization, at a
price of $1.00 per share, or $5,000, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
25. (a) Securities Sold. On November 3, 1998, 150,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Fair Market Value, LLC.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $.50 per share, or $75,000, in the
aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
26. (a) Securities Sold. On December 30, 1998, 150,000 shares of
Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to H+N Partners.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $2.50 per share, or $375,000, in
the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
27. (a) Securities Sold. On December 30, 1998, 60,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to The Humbolt Corporation.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $2.50 per share, or $150,000, in
the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
28. (a) Securities Sold. On January 29, 1999, a total of 2,000,000
shares of Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Julius W. Basham, II (1,394,000 shares), Wm. Kim Stimpson
(303,000 shares) and David W. Brown (303,000 shares).
(c) Consideration. Such shares of Common Stock were issued pursuant
to an Agreement and Plan of Reorganization, at a price of $7.97 per share,
or $15,940,000, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
29. (a) Securities Sold. On January 20, 1999, a total of 60,000 shares
of Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Michael Cohn (30,000 shares), Walter C. Schiller (10,000
shares), Michael R. Van Geons (10,000 shares), Harry P. Kunecki Trust
(5,000 shares) and Frank L. Leyba (5,000 shares).
(c) Consideration. Such shares of Common Stock were sold for cash
pursuant to a private offering, at a price of $4.50 per share, or $270,000,
in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
30. (a) Securities Sold. On January 20, 1999, a total of 60,000 common
stock purchase warrants of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to
Michael Cohn (30,000 warrants), Walter C. Schiller (10,000 warrants),
Michael R. Van Geons (10,000 warrants), Harry P. Kunecki Trust (5,000
warrants) and Frank L. Leyba (5,000 warrants).
(c) Consideration. Such warrants were issued for no additional
consideration as part of units of securities in a private offering.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Exercise price of the warrants
is $7.00 per share and exercisable for a period of two years from issuance.
The warrants are redeemable by the Company at any time the bid price of
the Company's Common Stock has been at or above $8.50 per share for five
consecutive trading days.
31. (a) Securities Sold. On February 5, 1999, 325,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to James Kaufman.
(c) Consideration. Such shares of Common Stock were issued as a
finder's fee, at a price of $7.97 per share, or $2,590,250, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
32. (a) Securities Sold. On June 2, 1999, a total of 100,000 shares of
Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Darrell Davis and Deanna Davis (74,000 shares) and Roger
Davis and Gloria C. Davis (26,000).
(c) Consideration. Such shares of Common Stock were issued pursuant
to an Agreement and Plan of Reorganization, at a price of $4.00 per share,
or $400,000, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
33. (a) Securities Sold. On June 4, 1999, a total of 35,000 shares of
Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Walter Engler (10,000 shares) and Shelter Capital Ltd.
(25,000 shares).
(c) Consideration. Such shares of Common Stock were sold for cash
pursuant to a private offering, at a price of $3.00 per share, or $105,000,
in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
34. (a) Securities Sold. On June 4, 1999, a total of 35,000 common
stock purchase warrants of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to
Walter Engler (10,000 warrants) and Shelter Capital Ltd. (35000 warrants).
(c) Consideration. Such warrants were issued for no additional
consideration as part of units of securities in a private offering.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Exercise price of the warrants
is $7.00 per share and exercisable for a period of one year from issuance.
Warrants are redeemable by the Company at any time the bid price of the
Company's Common Stock has been at or above $10.00 per share for five
consecutive trading days.
35. (a) Securities Sold. On June 4, 1999, 500,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Interactive Business Channel.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $4.00 per share, or $2,000,000, in
the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
36. (a) Securities Sold. In July, 1999, a total of 155,000 shares of
Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Dennis A. Faker (50,000 shares), Barbara V. Schiller (30,000
shares), Jeanne M. Rowzee (10,000 shares), Alvin Gottlieb (10,000 shares),
Rogers Family Trust (15,000 shares), Delaware Charter Guarantee & Trust
Company f/b/o Clarence Yim (20,000 shares) and Delaware Charter Guarantee &
Trust Company f/b/o R. Logan Kock (20,000 shares).
(c) Consideration. Such shares of Common Stock were issued upon the
exercise of warrants, at a price of $2.00 per share, or $310,000, in the
aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
37. (a) Securities Sold. On February 5, 1999, 21,857 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Terry Lewis.
(c) Consideration. Such shares of Common Stock were issued upon the
exercise of warrants, at a price of $1.25 per share, or $27,321, in the
aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
38. (a) Securities Sold. On August 11, 1999, 150,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Mark Bove.
(c) Consideration. Such shares of Common Stock were issued pursuant
to an Business Acquisition Agreement, at a price of $4.00 per share, or
$600,000, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
39. (a) Securities Sold. On August 23, 1999, 250,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Knud Nielsen, III (127,500 shares) and Gary Stanley (122,500
shares).
(c) Consideration. Such shares of Common Stock were issued pursuant
to an Agreement and Plan of Reorganization, at a price of $4.00 per share,
or $1,000,000, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
40. (a) Securities Sold. On August 30, 1999, 127,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Alan L. Taylor (122,405 shares), Brent Bates (518 shares),
Kim Jorgensen (475 shares), Chris Allison (472 shares), Robert Carlson
(1,423 shares) and Lane Virgin (1,707 shares).
(c) Consideration. Such shares of Common Stock were issued pursuant
to an Agreement and Plan of Reorganization, at a price of $4.00 per share,
or $508,000, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
41. (a) Securities Sold. On September 24, 1999, 11,000 shares of
Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Alonzo B. See, III.
(c) Consideration. Such shares of Common Stock were issued pursuant
to an Employment Agreement, at a price of $5.00 per share, or $40,000, in
the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
42. (a) Securities Sold. On November 12, 1999, 25,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Cyber Mountain, Inc.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Letter Agreement, at a price of $4.00 per share, or $100,000, in the
aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
43. (a) Securities Sold. On December 9, 1999, a total of 340,000 shares
of Company Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Julius W. Basham, II (215,000 shares), Wm. Kim Stimpson
(34,000 shares) and David W. Brown (91,000 shares).
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Settlement Agreement and Mutual Release, at a price of $2.6875 per
share, or $913,750, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
44. (a) Securities Sold. On December 9, 1999, 30,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Peter Rochow.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $3.00 per share, or $90,000, in
the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
45. (a) Securities Sold. On December 13, 1999, 25,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to Nostas/Faeseel Group.
(c) Consideration. Such shares of Common Stock were issued pursuant
to a Consulting Agreement, at a price of $3.00 per share, or $75,000, in
the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
46. (a) Securities Sold. On December 13, 1999, 53,000 shares of Company
Common Stock were sold.
(b) Underwriter or Other Purchasers. Such shares of Common Stock
were issued to CyberHighway of North Georgia, Inc.
(c) Consideration. Such shares of Common Stock were issued pursuant
to an Asset Acquisition Agreement, at a price of $4.00 per share, or
$212,000, in the aggregate.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
47. (a) Securities Sold. On December 1, 1999, 60,000 common stock
purchase warrants of the Company were issued.
(b) Underwriter or Other Purchasers. Such warrants were issued to
The Research Works, Inc.
(c) Consideration. Such warrants were issued pursuant to a
Consulting Agreement.
(d) Exemption from Registration Claimed. These securities are exempt
from registration under the Securities Act of 1933, as amended, pursuant to
the provisions of Section 4(2) thereof, as a transaction not involving a
public offering.
(e) Terms of Conversion or Exercise. Exercise price of the warrants
is $3.50 per share and the warrants are exercisable for a period of two
years from issuance.
Item 16. Exhibits and Financial Statements Schedules.
1. Exhibits.
Exhibit No. Description
# 3.1 Articles of Incorporation of Registrant.
+ 3.2 Bylaws of Registrant, as amended.
+ 3.3 Bylaws of Executive Committee of the Board of
Directors of Registrant.
+ 3.4 Bylaws of Audit Committee of the Board of Directors
of Registrant.
* 3.5 Articles of Amendment to Articles of Incorporation
of Registrant.
** 3.6 Articles of Amendment to Articles of Incorporation
of Registrant.
+ 4.1 Specimen Common Stock Certificate.
+ 5.1 Opinion of Newlan & Newlan, Attorneys at Law, re:
Legality.
+ 10.1 Registration Rights Letter Agreement between
Registrant and Centex Securities, Inc., dated May
20, 1998.
+ 10.2 Finder's Fee Letter between Registrant and H+N
Partners, dated March 27, 1998.
+ 10.3 Registration Rights Letter Agreement between
Registrant and Dennis A. Faker, dated June 19, 1998.
+ 10.4 Registration Rights Letter Agreement between
Registrant and Delaware Charter Guaranty and Trust
Company, f/b/o R. Logan Kock IRA, dated June 19,
1998.
+ 10.5 Registration Rights Letter Agreement between
Registrant and Alvin Gottlieb, dated June 19, 1998.
+ 10.6 Registration Rights Letter Agreement between
Registrant and Rogers Family Trust, dated June 19,
1998.
+ 10.7 Registration Rights Letter Agreement between
Registrant and Jeanne Rowzee, dated June 19, 1998.
+ 10.8 Registration Rights Letter Agreement between
Registrant and Barbara V. Schiller, dated June 19,
1998.
+ 10.9 Registration Rights Letter Agreement between
Registrant and Delaware Charter Guarantee and Trust
Company f/b/o Clarence Yim IRA, dated June 19, 1998.
+ 10.9.1 Warrant Agreement between Registrant and Securities
Transfer Corporation, dated May 18, 1998.
+ 10.10 Warrant Agreement between Registrant and Securities
Transfer Corporation, dated May 20, 1998.
+ 10.11 Warrant Agreement between Registrant and Securities
Transfer Corporation, dated May 20, 1998.
+ 10.12 Warrant Agreement between Registrant and Securities
Transfer Corporation dated January 19, 1999.
+ 10.13 Registration Rights Letter Agreement between
Registrant and Michael Cohn, dated January 19, 1999.
+ 10.14 Registration Rights Letter Agreement between
Registrant and Walter C. Schiller, dated January 19,
1999.
+ 10.15 Registration Rights Letter Agreement between
Registrant and Michael R. Van Geons, dated January
19, 1999.
+ 10.16 Registration Rights Letter Agreement between
Registrant and Harry P. Kunecki Trust, dated January
19, 1999.
+ 10.17 Registration Rights Letter Agreement between
Registrant and Frank L. Leyba, dated January 19,
1999.
+ 10.18 Warrant Agreement between Registrant and Securities
Transfer Corporation, dated May 3, 1999.
+ 10.19 Registration Rights Letter Agreement between
Registrant and Shelter Capital, Ltd., dated May 28,
1999.
+ 10.20 Registration Rights Letter Agreement between
Registrant and Walter Engler, dated May 28, 1999.
+ 10.21 Agreement and Plan of Reorganization, dated April
28, 1999, among Registrant, Santa Fe Wireless
Internet, Inc., Santa Fe Trail Internet Plus, Inc.,
and Darrell Davis.
+ 10.21.1 Agreement of Merger, dated June 2, 1999, among
Registrant, Santa Fe Wireless Internet, Inc. and
Santa Fe Trail Internet Plus, Inc.
+ 10.22 Registration Rights Letter Agreement between
Registrant and Darrell Davis and Deanna Davis, dated
June 2, 1999.
+ 10.23 Registration Rights Letter Agreement between
Registrant and Roger Davis and Gloria C. Davis,
dated June 2, 1999.
+ 10.24 Business Acquisition Agreement between Registrant
and Mark Bove, dated July 14, 1999.
+ 10.25 Registration Rights Letter Agreement between
Registrant and Mark Bove, dated August 11, 1999.
+ 10.26 Agreement and Plan of Reorganization, dated August
24, 1999, among Registrant, CyberHighway, Inc.,
Premier Internet Services, Inc. and Alan Taylor.
+ 10.27 Agreement of Merger among Registrant, CyberHighway,
Inc. and Premier Internet Services, Inc., dated
August 30, 1999.
+ 10.28 Confidentiality Agreement between Registrant and
Alan Taylor, dated August 30, 1999.
+ 10.29 Agreement Not to Compete between Registrant and Alan
Taylor, dated August 30, 1999.
+ 10.30 Registration Rights Letter Agreement between
Registrant and Alan Taylor, dated August 30, 1999.
+ 10.31 Asset Purchase Agreement between Registrant and
CyberHighway of North Georgia, Inc., dated October
29, 1999.
+ 10.32 Confidentiality Agreement among Registrant,
CyberHighway of North Georgia, Inc., Grady E.
Brooks, Jr. and Anthony Woodall, dated December 20,
1999.
+ 10.33 Agreement Not to Compete among Registrant,
CyberHighway of North Georgia, Inc., Grady E.
Brooks, Jr., and Anthony Woodall, dated December 20,
1999.
+ 10.34 Registration Rights Letter Agreement between
Registrant and CyberHighway of North Georgia, Inc.,
dated December 20, 1999.
+ 10.35 Employment Agreement between Registrant and James
Kaufman, dated March 22, 1999.
+ 10.36 Confidentiality Agreement between Registrant and
James Kaufman, dated March 22, 1999.
+ 10.37 Agreement Not to Compete between Registrant and
James Kaufman, dated March 22, 1999.
+ 10.38 Employment Agreement between Registrant and Darrell
Davis, dated October 4, 1999.
+ 10.39 Confidentiality Agreement between Registrant and
Darrell Davis, dated October 4, 1999.
+ 10.40 Agreement Not to Compete between Registrant and
Darrell Davis, dated October 4, 1999.
+ 10.41 Employment Agreement between Registrant and David M.
Loflin, dated August 1, 1999.
+ 10.42 Confidentiality Agreement between Registrant and
David M. Loflin, dated August 1, 1999.
+ 10.43 Agreement Not to Compete between Registrant and
David M. Loflin, dated August 1, 1999.
+ 10.44 Employment Agreement between Registrant and Waddell
D. Loflin, dated August 1, 1999.
+ 10.45 Confidentiality Agreement between Registrant and
Waddell D. Loflin, dated August 1, 1999.
+ 10.46 Agreement Not to Compete between Registrant and
Waddell D. Loflin, dated August 1, 1999.
*** 10.47 Settlement Agreement and Mutual Release, dated
November 30, 1999, among Registrant, CyberHighway,
Inc., Julius W. Basham, II, Wm. Kim Stimpson and
David W. Brown.
+ 10.48 Wholesale Customer - Dial Access Agreement between
Registrant and ioNET, Inc. (a division of PSINet,
Inc.), dated July 21, 1999.
+ 10.49 ISP Agreement between Registrant and NaviNet, Inc.,
dated August 2, 1999.
+ 10.50 Warrant Agreement between Registrant and Securities
Transfer Corporation, dated November 1, 1999.
+ 10.50.1 Registration Rights Letter Agreement between
Registrant and Michael Cohn, dated November 1, 1999.
+ 10.51 Letter Agreement between Registrant and The Research
Works, Inc., dated December 1, 1999.
+ 10.51.1 Warrant Agreement between Registrant and Securities
Transfer Corporation, dated December 1, 1999.
+ 10.52 Financial Public Relations and Investor Relations
Services Agreement between Registrant and Peter
Rochow, dated October 27, 1999.
+ 10.53 Consultation Agreement - Investor Relations between
Registrant and Nostas/Faessel Group, dated October
23, 1999.
+ 10.54 Corporate Communications Services Agreement between
Registrant and JFMills/ Worldwide, dated November 1,
1999.
+ 10.55 Agreement and Plan of Reorganization, dated July 23,
1999, among Registrant, USURF America (Alabama),
Inc., Net 1, Inc. and Gary Stanley.
+ 10.56 Agreement of Merger, dated August 23, 1999, among
Registrant, USURF America (Alabama), Inc. and Net 1,
Inc.
+ 10.57 Registration Rights Letter Agreement between
Registrant and Kund Nielsen, III, dated August 23,
1999.
+ 10.58 Registration Rights Letter Agreement between
Registrant and Gary Stanley, dated August 23, 1999.
+ 10.59 Confidentiality Agreement between Registrant and
Kund Nielsen, III, dated August 23, 1999.
+ 10.60 Agreement Not to Compete between Registrant and Kund
Nielsen, III, dated August 23, 1999.
+ 11 Statement Regarding Computation of Per Share
Earnings.
+ 22.1 Subsidiaries of Registrant.
+ 23.1 Consent of Weaver and Tidwell, L.L.P., independent
auditor.
+ 23.2 Consent of Newlan & Newlan, Attorneys at Law.
- ------------
# Incorporated by reference from Registrant's Registration
Statement on Form S-1, Commission File No. 333-26385.
* Incorporated by reference from Registrant's Current Report on
Form 8-K, date of event: July 21 1998.
** Incorporated by reference from Registrant's Current Report on
Form 8-K, date of event: July 6, 1999.
*** Incorporated by reference from Registrant's Current Report on
Form 8-K, date of event: November 30, 1999.
+ Filed herewith.
2. Financial Statement Schedules.
All schedules are omitted since they are furnished elsewhere in the
Prospectus.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To included any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Act);
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Baton Rouge, State of Louisiana, on January 24, 2000.
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to this Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated:
Signatures Title Date
/s/ David M. Loflin President (Principal January 24, 2000
David M. Loflin Executive Officer
and Principal
Accounting Officer)
and Director
/s/ Waddell D. Loflin Vice President, January 24, 2000
Waddell D. Loflin Secretary and
Director
/s/ Julius W. Basham, II Director January 31, 2000
Julius W. Basham, II,
/s/ Ross S. Bravata Director January 24, 2000
Ross S. Bravata
/s/ Richard N. Gill Director January 24, 2000
Richard N. Gill
/s/ Michael Cohn Director January 24, 2000
Michael Cohn
- ------------------
EXHIBIT 3.2
- ------------------
BYLAWS
OF
USURF AMERICA, INC.
ARTICLE I - OFFICE AND REGISTERED AGENT
The principal office of the Corporation in the State of Nevada shall be
located at 502 East John, Carson City, Nevada 89706. The Corporation may
maintain such other offices, within or without the State of Nevada, as the
Board of Directors may from time to time designate. The location of the
principal office may be changed by the Board of Directors. The name of the
registered agent of the Corporation in the State of Nevada at its principal
office is CSC Services of Nevada, Inc.
ARTICLE II - SHAREHOLDERS' MEETINGS
Section 2.1. Annual Meetings. The annual meeting of the shareholders of
the Corporation shall be held at such place within or without the State of
Nevada as shall be set forth in compliance with these Bylaws. The meeting
shall be held on the first Tuesday of December of each year. If such day
is a legal holiday, the meeting shall be on the next business day. This
meeting shall be for the election of directors and for the transaction of
such other business as may properly come before it.
In the event that such annual meeting is omitted by oversight or otherwise
on the date herein provided for, the directors shall cause a meeting in
lieu thereof to be held as soon thereafter as conveniently may be, and any
business transacted or elections held at such meeting shall be as valid as
if transacted or held at the annual meeting. If the election of directors
shall not be held on the date designated herein for any annual meeting of
shareholders, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of shareholders as soon
thereafter as may conveniently be called. Such subsequent meeting shall be
called in the same manner as is provided for the annual meeting of
shareholders.
Section 2.2. Special Meetings. Special meetings of shareholders, other
than those regulated by statute, may be called at any time by the
President, or by a majority of the directors, and must be called by the
President upon written request of the holders of not less than 10% of the
issued and outstanding shares entitled to vote at such special meeting.
Section 2.3. Notice of Shareholders' Meetings. The President, Vice
President or Secretary shall give written notice stating the place, day and
hour of the meeting, and in the case of a special meeting the purpose or
purposes for which the meeting is called, which shall be delivered not less
than ten nor more than fifty days before the day of the meeting, either
personally or by mail to each shareholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail addressed to the shareholder at his
address as it appears on the books of the Corporation, with postage thereon
prepaid.
Any meeting of which all shareholders shall at any time waive or have
waived notice in writing shall be a legal meeting for the transaction of
business notwithstanding that notice has not been given as hereinbefore
provided.
Section 2.4. Waiver of Notice. Whenever any notice whatever is required
to be given by these Bylaws, or the Articles of Incorporation, or by any of
the Corporation Laws of the State of Nevada, a shareholder may waive the
notice of meeting by attendance, either in person or by proxy, at the
meeting, or by so stating in writing, either before or after such meeting.
Attendance at a meeting for the express purpose of objecting that the
meeting was not lawfully called or convened shall not, however, constitute
a waiver of notice.
Section 2.5. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of Nevada, as the place of
meeting for any annual meeting or for any special meeting called by the
Board of Directors. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the registered office of
the Corporation.
Section 2.6. Closing of Transfer Books or Fixing Record Date. For the
purpose of determining shareholders entitled to notice or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders
entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors of the Corporation may provide that the stock transfer books
shall be closed for a period not to exceed in any case 50 days. If the
stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders,
such books shall be closed for at least 10 days immediately preceding the
date determined to be the date of record. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date as the
record date for any such determination of shareholders, such date in any
case to be not more than 50 days and in case of a meeting of shareholders
not less than 10 days prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If the stock
transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice or to vote at a meeting of
shareholders or shareholders to receive payment of a dividend, the date on
which notice of the meeting is mailed or the date on which the resolution
of the Board of Directors declaring such dividend is adopted, as the case
may be, shall be deemed the date of record for such determination of
shareholders. When a determination of persons entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
Section 2.7. Quorum of Shareholders. Except as herein provided and as
otherwise provided by law, at any meeting of shareholders a majority in
interest of all the shares issued and outstanding represented by
shareholders of record in person or by proxy shall constitute a quorum, but
a less interest may adjourn any meeting and the meeting may be held as
adjourned without further notice; provided; however, that directors shall
not be elected at the meeting so adjourned. When a quorum is present at
any meeting, a majority in interest of the shares represented is one upon
which the express provision of law or of the Articles of Incorporation or
of these Bylaws a larger or different vote is required, in which case such
express provision shall govern and control the decision of such question.
Section 2.8. Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make a complete
list of the shareholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the address of
and the number of shares held by each, which list shall be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder, for any purpose germane to the meeting,
during the whole time of the meeting. The original stock transfer books
shall be prima facie evidence as to who are the shareholders entitled to
examine such list or transfer books or to vote at any meeting of shareholders.
Section 2.9. Voting. A holder of an outstanding share entitled to vote
at a meeting may vote at such meeting in person or by proxy. Except as may
otherwise be provided in the Articles of Incorporation, every shareholder
shall be entitled to one vote for each share standing in his name on the
record of shareholders. Except as herein or in the Articles of
Incorporation otherwise provided, all corporate action shall be determined
by a majority of the votes cast at a meeting of shareholders by the holders
of shares entitled to vote thereon.
Section 2.10. Proxies. At all meetings of shareholders, a shareholder
may vote in person or by proxy executed in writing by the shareholder or by
his duly authorized attorney in fact. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the meeting. No
proxy shall be valid after eleven months from the date of its execution,
unless otherwise provided in the proxy.
Section 2.11. Informal Action by Shareholders. Any action required to
be taken at a meeting of the shareholders, or any action which may be taken
at a meeting of the shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by a
majority of the shareholders entitled to vote with respect to the subject
matter thereof, provided that if any greater proportion and voting power is
required for such action, then such greater proportion of written consents
shall be required.
ARTICLE III - BOARD OF DIRECTORS
Section 3.1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors. The Board of Directors may
adopt such rules and regulations for the conduct of their meetings and the
management of the Corporation as they deem proper.
Section 3.2. Number, Tenure and Qualifications. The number of directors
for the Board of Directors of the Corporation shall be not less than two
nor more than ten. Each director shall hold office until the next annual
meeting of shareholders and until his successor shall have been elected and
qualified. Directors need not be residents of the State of Nevada or
shareholders of the Corporation.
Section 3.3. Election of Board of Directors. The Board of Directors
shall be chosen by ballot at the annual meeting of shareholders or at any
meeting held in place thereof as provided by law.
Section 3.4. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than by this Bylaw,
immediately following and at the same place as the annual meeting of the
shareholders. The Board of Directors may provide by resolution the time
and place for the holding of additional regular meetings without other
notice than this resolution.
Members of the Board of Directors may participate in a meeting of the
Board by means of conference telephone or similar communications equipment
by which all persons participating in the meeting can hear each other and
participation in a meeting under this subsection shall constitute presence
in person at the meeting, pursuant to Nevada Revised Statute, Section 78.315.
Section 3.5. Special Meetings. Special meetings of the Board of
Directors may be called by order of the Chairman of the Board, the
President or by one-third of the directors. The Secretary shall give
notice of the time, place and purpose or purposes of each special meeting
by mailing the same at least two days before the meeting or by telephoning
or telecopying or wiring the same at least one day before the meeting to
each director.
Section 3.6. Waiver of Notice. Whenever any notice whatever is required
to be given by these Bylaws, or the Articles of Incorporation of the
Corporation, or by any of the Corporation Laws of the State of Nevada, a
director may waive the notice of meeting by attendance in person at the
meeting, or by so stating in writing, either before or after such meeting.
Attendance at a meeting for the express purpose of objecting that the
meeting was not lawfully called or convened shall not, however, constitute
a waiver of notice.
Section 3.7. Quorum. A majority of the members of the Board of Directors
shall constitute a quorum for the transaction of business, but less than a
quorum may adjourn any meeting from time to time until a quorum shall be
present, whereupon the meeting may be held, as adjourned, without further
notice. At any meeting at which every director shall be present, even
though without any notice, any business may be transacted.
Section 3.8. Manner of Acting. At all meetings of the Board of
Directors, each director shall have one vote. The act of a majority
present at a meeting shall be the act of the board of Directors, provided a
quorum is present. Any action required to be taken or which may be taken
at a meeting of the directors may be taken without a meeting if a consent
in writing setting forth the action so taken shall be signed by all the
directors. The directors may conduct a meeting by means of a conference
telephone or any similar communication equipment by which all persons
participating in the meeting can hear each other.
Section 3.9. Powers of Directors. The Board of Directors shall have the
responsibility for the entire management of the business of the
Corporation. In the management and control of the property, business and
affairs of the Corporation the Board of Directors is hereby vested with all
of the powers possessed by the Corporation itself so far as this delegation
of authority is not inconsistent with the laws of the State of Nevada and
with the Articles of Incorporation or with these Bylaws. The Board of
Directors shall have the power to determine what constitutes net earnings,
profits and surplus, respectively, and what amounts shall be reserved for
working capital and for any other purpose and what amounts shall be
declared as dividends, and such determination by the Board of Directors
shall be final and conclusive.
Section 3.10. Vacancies. A vacancy in the Board of Directors shall be
deemed to exist in case of death, resignation or removal of any director,
or if the authorized number of directors be increased, or if the
shareholders fail at any meeting of shareholders at which any director is
to be elected, to elect the full authorized number to be elected at that
meeting.
Any vacancy occurring in the Board of Directors, whether arising from
death, resignation, removal (with or without cause), any increase in the
number of directors or any other reason, may be filled by an affirmative
vote of the majority of the remaining directors, though less than a quorum
of the Board of Directors, or by the shareholders at the next annual
meeting thereof or at a special meeting thereof, and each director so
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office.
Section 3.11. Removals. Directors may be removed at any time at a
meeting called expressly for that purpose by a vote of the shareholders
holding a majority of the shares issued and outstanding and entitled to
vote. Such vacancy shall be filled by the directors then in office, though
less than a quorum, to hold office until the next annual meeting or until
his successor is duly elected and qualified, except that any directorship
to be filled by reason of removal by the shareholders may be filled by
election, by the shareholders, at the meeting at which the director is
removed. No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Section 3.12. Resignations. A director may resign at any time by
delivering written notification thereof to the President or Secretary of
the Corporation. Such resignation shall become effective upon its
acceptance by the Board of Directors; provided, however, that if the Board
of Directors has not acted thereon within ten days from the date of its
delivery, the resignation shall upon the tenth day be deemed accepted.
Section 3.13. Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person
acting as the Secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the Secretary of the
Corporation immediately after the adjournment of the meeting. Such right
to dissent shall not apply to a director who voted in favor of such action.
Section 3.14. Compensation. By resolution of the Board of Directors, the
directors shall be paid their expenses, if any, of attendance at each
meeting of the Board of Directors, and may be paid a fixed sum for
attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 3.15. Emergency Power. When, due to a national disaster or
death, a majority of the directors are incapacitated or otherwise unable to
attend the meetings and function as directors, the remaining members of the
Board of Directors shall have all powers necessary to function as a
complete Board and, for the purpose of doing business and filling
vacancies, shall constitute a quorum until such time as all directors can
attend or vacancies can be filled pursuant to these Bylaws.
Section 3.16. Chairman. The Board of Directors may elect from its own
number a Chairman of the Board, who shall preside at all meetings of the
Board of Directors, and shall perform such other duties as may be
prescribed from time to time by the Board of Directors.
ARTICLE IV - OFFICERS
Section 4.1. Number. The officers of the Corporation shall be a
President, one or more Vice Presidents, a Secretary and a Treasurer, each
of whom shall be elected by a majority of the Board of Directors. Such
other officers and assistant officers as may be deemed necessary may be
elected or appointed by the Board of Directors. In its discretion, the
Board of Directors may leave unfilled for any such period as it may
determine any office except those of President and Secretary. Any two or
more offices may be held by the same person. Officers may or may not be
directors or shareholders of the Corporation.
Section 4.2. Election and Term of Office. The officers of the
Corporation are to be elected by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of the
shareholders. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as convenient.
Each officer shall hold office until his successor shall have been duly
elected and shall have qualified or until his death or until he shall
resign or shall have been removed in the manner hereinafter provided.
Section 4.3. Resignation. Any officer may resign at any time by
delivering a written resignation either to the President or to the
Secretary. Unless otherwise specified therein, such resignation shall take
effect upon delivery.
Section 4.4. Removal. Any officer or agent may be removed by the Board
of Directors whenever in its judgment the best interests of the Corporation
will be served thereby but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment
of an officer or agent shall not of itself create contract rights. Any
such removal shall require a majority vote of the Board of Directors,
exclusive of the officer in question if he is also a director.
Section 4.5. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, or if a new office
shall be created, may be filled by the Board of Directors for the unexpired
portion of the term.
Section 4.6. President. The President shall be the chief executive and
administrative officer of the Corporation. He shall preside at all
meetings of the shareholders and, in the absence of the Chairman of the
Board, at meetings of the Board of Directors. He shall exercise such
duties as customarily pertain to the office of President and shall have
general and active supervision over the property, business and affairs of
the Corporation and over its several officers. He may appoint officers,
agents or employees other than those appointed by the Board of Directors.
He may sign, execute and deliver in the name of the Corporation, powers of
attorney, certificates of stock, contracts, bonds, deeds, mortgages and
other obligations and shall perform such other duties as may be prescribed
from time to time by the Board of Directors or by the Bylaws.
Section 4.7. Vice President. The Vice President shall have such powers
and perform such duties as may be assigned to him by the Board of Directors
or the President. In the absence or disability of the President, the Vice
President designated by the board or the President shall perform the Duties
and exercise the powers of the President. In the event there is more than
one Vice President and the Board of Directors has not designated which Vice
President is to act as President, then the Vice President who was elected
first shall act as President. A Vice President may sign and execute
contracts and other obligations pertaining to the regular course of his
duties.
Section 4.8. Secretary. The Secretary shall keep the minutes of all
meetings of the shareholders and of the Board of Directors and to the
extent ordered by the Board of Directors or the President, the minutes of
meetings of all committees. He shall cause notice to be given of the
meetings of shareholders, of the Board of Directors and of any committee
appointed by the board. He shall have custody of the corporate seal and
general charge of the records, documents and papers of the Corporation not
pertaining to the performance of the duties vested in other officers, which
shall at all reasonable times be open to the examination of any director.
He may sign or execute contracts with the President or Vice President
thereunto authorized in the name of the Corporation and affix the seal of
the Corporation thereto. He shall perform such other duties as may be
prescribed from time to time by the board of Directors or by the Bylaws.
He shall be sworn to the faithful discharge of his duties. Assistant
Secretaries shall assist the Secretary and shall keep and record such
minutes of meetings as shall be directed by the Board of Directors.
Section 4.9. Treasurer. The Treasurer shall have general custody of the
collection and disbursement of funds of the Corporation for collection of
checks, notes, and other obligations, and shall deposit the same to the
credit of the Corporation in such bank or banks or depositories as the
Board of Directors may designate. He may sign, with the President, or such
other persons as may be designated for the purpose by the Board of
Directors, all bills of exchange or promissory notes of the Corporation.
He shall enter or cause to be entered regularly in the books of the
Corporation full and accurate accounts of all monies received and paid by
him on account of the Corporation; shall at all reasonable times exhibit
his books and accounts to any director of the Corporation upon application
at the office of the Corporation during business hours; and, whenever
required by the Board of Directors or the President, shall render a
statement of his accounts. He shall perform such other duties as may be
prescribed from time to time by the Board of Directors or by the Bylaws.
Section 4.10. General Manager. The Board of Directors may employ and
appoint a General Manager who may, or may not, be one of the officers or
directors of the Corporation. If employed by the Board of Directors he
shall be the chief operating officer of the Corporation and, subject to the
directions of the Board of Directors, shall have general charge of the
business operations of the Corporation and general supervision over its
employees and agents. He shall have the exclusive management of the
business of the Corporation and of all of its dealings, but at all times
subject to the control of the Board of Directors. Subject to the approval
of the Board of Directors or the executive committee, he shall employ all
employees of the Corporation, or delegate such employment to subordinate
officers, or such division officers, or such division chiefs, and shall
have authority to discharge any person so employed. He shall make a
quarterly report to the President and directors, or more often if required
to do so, setting forth the result of the operations under his charge,
together with suggestions looking to the improvement and betterment of the
condition of the Corporation, and to perform such other duties as the Board
of Directors shall require.
Section 4.11. Officers. Other officers shall perform such duties and
have such powers as may be assigned to them by the Board of Directors.
Section 4.12. Salaries. The salaries or other compensation of the
officers of the Corporation shall be fixed from time to time by the Board
of Directors except that the Board of Directors may delegate to any person
or group of persons the power to fix the salaries or other compensation of
any subordinate officers or agents. No officer shall be prevented from
receiving any such salary or compensation by reason of the fact that he is
also a director of the corporation.
Section 4.13. Surety Bonds. In case the Board of Directors shall so
require, any officer or agent of the corporation shall execute to the
Corporation a bond in such sums and with sureties as the Board of Directors
may direct, conditioned upon the faithful performance of his duties to the
Corporation, including responsibility for negligence and for the accounting
for all property, monies or securities of the Corporation which may come
into his hands.
ARTICLE V - COMMITTEES
Section 5.1. Executive Committee. The Board of Directors may appoint from
among its members an Executive Committee of not less than two nor more than
seven members, one of whom shall be the President, and shall designate one
or more of its members as alternates to serve as a member or members of the
Executive Committee in the absence of a regular member or members. The
Board of Directors reserves to itself alone the power to declare dividends,
issue stock, except that the Executive Committee shall have the power to
issue (A) an unlimited number of shares of stock in business and/or asset
acquisition transactions and (B) up to 25,000 shares of stock to an
employee of the corporation, or a subsidiary, in connection with any such
employee's employment, recommend to shareholders any action requiring their
approval, change the membership of any committee at any time, fill
vacancies therein, and discharge any committee either with or without cause
at any time. Subject to the foregoing limitations, the Executive Committee
shall possess and exercise all other powers of the Board of Directors
during the intervals between meetings.
Section 5.2. Other Committees. The Board of Directors may also appoint
from among its own members such other committees as the Board may
determine, which shall in each case consist of not less than two directors,
and which shall have such powers and duties as shall from time to time be
prescribed by the Board. The President shall be a member ex officio of
each committee appointed by the Board of Directors. A majority of the
members of any committee may fix its rules of procedure.
ARTICLE VI - CONTRACTS, LOANS, DEPOSITS AND CHECKS
Section 6.1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances.
Section 6.2. Loans. No loan or advances shall be contracted on behalf of
the Corporation, no negotiable paper or other evidence of its obligation
under any loan or advance shall be issued in its name, and no property of
the Corporation shall be mortgaged, pledged, hypothecated or transferred as
security for the payment of any loan, advance, indebtedness or liability of
the corporation unless and except as authorized by the Board of Directors.
Any such authorization may be general or confined to specific instances.
Section 6.3. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the
Board of Directors may select, or as may be selected by any officer or
agent authorized to do so by the Board of Directors.
Section 6.4. Checks and Drafts. All notes, drafts, acceptances, checks,
endorsements and evidences of indebtedness of the Corporation shall be
signed by such officer or officers or such agent or agents of the
Corporation and in such manner as the Board of Directors from time to time
may determine. Endorsements for deposit to the credit of the Corporation
in any of its duly authorized depositories shall be made in such manner as
the Board of Directors from time to time may determine.
Section 6.5. Bonds and Debentures. Every bond or debenture issued by the
Corporation shall be evidenced by an appropriate instrument which shall be
signed by the President or a Vice President and by the Treasurer or by the
Secretary, and sealed with the seal of the Corporation. The seal may be
facsimile, engraved or printed. Where such bond or debenture is
authenticated with the manual signature of an authorized officer of the
Corporation or other trustee designated by the indenture of trust or other
agreement under which such security is issued, the signature of any of the
Corporation's officers named thereon may be facsimile. In case any officer
who signed, or whose facsimile signature has been used on any such bond or
debenture, shall cease to be an officer of the Corporation for any reason
before the same has been delivered by the Corporation, such bond or
debenture may nevertheless be adopted by the Corporation and issued and
delivered as though the person who signed it or whose facsimile signature
has been used thereon had not ceased to be such officer.
ARTICLE VII - CAPITAL STOCK
Section 7.1. Certificates of Shares. The shares of the Corporation shall
be represented by certificates prepared by the Board of Directors and
signed by the President or aVice President, and by the Secretary, or an
Assistant Secretary, and sealed with the seal of the Corporation or a
facsimile. The signatures of such officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or
registered by a registrar other than the Corporation itself or one of its
employees. All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the
shares represented thereby are issued, with the number of shares and date
of issue, shall be entered on the stock transfer books of the Corporation.
All certificates surrendered to the Corporation for transfer shall be
cancelled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
cancelled, except that in case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms and indemnity
to the Corporation as the Board may prescribe.
Section 7.2. Transfer of Shares. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the
holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary
of the Corporation, and on surrender for cancellation of the certificate
for such shares. The person in whose name shares stand on the books of the
Corporation shall be deemed by the Corporation to be the owner thereof for
all purposes.
Section 7.3. Transfer Agent and Registrar. The Board of Directors shall
have power to appoint one or more transfer agents and registrars for the
transfer and registration of certificates of stock of any class, and may
require that stock certificates shall be countersigned and registered by
one or more of such transfer agents and registrars.
Section 7.4. Lost or Destroyed Certificates. The Corporation may issue a
new certificate to replace any certificate theretofore issued by it alleged
to have been lost or destroyed. The Board of Directors may require the
owner of such a certificate or his legal representatives to give the
Corporation a bond in such sum and with such sureties as the Board of
Directors may direct to indemnify the Corporation and its transfer agents
and registrars, if any, against claims that may be made on account of the
issuance of such new certificates. A new certificate may be issued without
requiring any bond.
Section 7.5. Consideration for Shares. The capital stock of the
Corporation shall be issued for such consideration, but not less than the
par value thereof, as shall be fixed from time to time by the Board of
Directors. In the absence of fraud, the determination of the Board of
Directors as to the value of any property or services received in full or
partial payment of shares shall be conclusive.
Section 7.6. Registered Shareholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder
thereof in fact, and shall not be bound to recognize any equitable or other
claim to or on behalf of the Corporation, any and all of the rights and
powers incident to the ownership of such stock at any such meeting, and
shall have power and authority to execute and deliver proxies and consents
on behalf of the Corporation in connection with the exercise by the
Corporation of the rights and powers incident to the ownership of such
stock. The Board of Directors, from time to time may confer like powers
upon any other person or persons.
ARTICLE VIII - INDEMNIFICATION
Section 8.1. Indemnification. No officer or director shall be personally
liable for any obligations arising out of any acts or conduct of said
officer or director performed for or on behalf of the Corporation. The
Corporation shall and does hereby indemnify and hold harmless each person
and his heirs and administrators who shall serve at any time hereafter as a
director or officer of the Corporation from and against any and all claims,
judgments and liabilities to which such persons shall become subject by
reason of any action alleged to have been heretofore or hereafter taken or
omitted to have been taken by him as such director or officer, and shall
reimburse each such person for all legal and other expenses reasonably
incurred by him in connection with any such claim of liability; including
power to defend such person from all suits as provided for under the
provisions of the Nevada Corporation Laws; provided, however that no such
person shall be indemnified against, or be reimbursed for, any expense
incurred in connection with any claim or liability arising out of his own
gross negligence or willful misconduct. The rights accruing to any person
under the foregoing provisions of this section shall not exclude any other
right to which he may lawfully be entitled, nor shall anything herein
contained restrict the right of the Corporation to indemnify or reimburse
such person in any proper case, even though not specifically herein
provided for. The Corporation, its directors, officers, employees and
agents shall be fully protected in taking any action or making any payment
or in refusing so to do in reliance upon the advice of counsel.
Section 8.2. Other Indemnification. The indemnification herein provided
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
director, officer or employee and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 8.3. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer or
employee of the Corporation, or is or was serving at the request of the
Corporation in such capacity for another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against
him and incurred by him in any capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against liability under the provisions of this Article VIII or the laws of
the State of Nevada.
Section 8.4. Settlement by Corporation. The right of any person to be
indemnified shall be subject always to the right of the Corporation by its
Board of Directors, in lieu of such indemnity, to settle any such claim,
action, suit or proceeding at the expense of the Corporation by the payment
of the amount of such settlement and the costs and expenses incurred in
connection therewith.
ARTICLE IX - AMENDMENTS
These Bylaws may be altered, amended, repealed, or added to by the
affirmative vote of the holders of a majority of the shares entitled to
vote in the election of any director at an annual meeting or at a special
meeting called for that purpose, provided that a written notice shall have
been sent to each shareholder of record entitled to vote at such meetings
at least ten days before the date of such annual or special meetings, which
notice shall state the alterations, amendments, additions, or changes which
are proposed to be made in such Bylaws. Only such changes shall be made as
have been specified in the notice. The Bylaws may also be altered,
amended, repealed, or new Bylaws adopted by a majority of the entire Board
of Directors at any regular or special meeting. Any Bylaws adopted by the
Board may be altered, amended, or repealed by a majority of the
shareholders entitled to vote.
ARTICLE X - FISCAL YEAR
The fiscal year of the Corporation shall be December 31, and may be varied
by resolution of the Board of Directors.
ARTICLE XI - DIVIDENDS
The Board of Directors may at any regular or special meeting, as they deem
advisable, declare dividends payable out of the unreserved and unrestricted
earned surplus of the Corporation except the directors may declare
dividends in accordance with the laws of the State of Nevada.
ARTICLE XII - CORPORATE SEAL
The seal of the Corporation shall be in the form of a circle and shall
bear the name of the Corporation and the year of incorporation.
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EXHIBIT 3.3
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USURF America, Inc.
EXECUTIVE COMMITTEE BYLAWS
I. NUMBER AND TERM OF OFFICE
The number of directors who shall constitute the whole Executive Committee
of the Board of Directors (the "Executive Committee") shall be three, with
one alternate member to be named by the Board of Directors; each member,
including the alternate member, shall be a director of the Corporation.
Each Executive Committee Member shall be elected for a term of one year and
until his successor is elected and qualified, except as otherwise provided
herein or required by law.
II. VACANCIES
If the office of any Executive Committee Member becomes vacant by reason
of death, resignation, disqualification, removal or other cause, a majority
of the Executive Committee Members remaining in office, although less than
a quorum, may elect a successor for the unexpired term and until his
successor is elected an qualified.
III. REGULAR MEETINGS
Regular meetings of the Executive Committee shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Executive Committee and publicized among all Executive
Committee Members. A notice of each regular meeting shall not be required.
IV. SPECIAL MEETINGS
Special meetings of the Executive Committee may be called by one or more
of the Executive Committee Members then in office and shall be held at such
place, on such date, and at such time as they or he or she shall fix.
Notice of the place, date and time of each such special meeting shall be
given each Committee Member by whom it is not waived by mailing written
notice not less than three days before the meeting or by telegraphing the
same not less than eighteen hours before the meeting or by communicating
via telephone or telecopier with the same not less than eight (8) hours
before the meeting. Unless otherwise indicated in the notice thereof, any
and all lawful business may be transacted at a special meeting.
V. QUORUM
At any meeting of the Executive Committee, a majority of the members shall
constitute a quorum for all purposes.
VI. PARTICIPATION IN MEETING BY CONFERENCE TELEPHONE
Members of the Executive Committee may participate in a meeting of such
committee by means of conference telephone or similar communications
equipment that enables all persons participating in the meeting to hear
each other. Such participation shall constitute presence in person at
such meeting.
VII. CONDUCT OF BUSINESS
At any meeting of the Executive Committee, business shall be transacted in
such order and manner as the Committee may from time to time determine, and
all matters shall be determined by the vote of a majority of the members
present, except as otherwise provided herein or required by law. Action
may be taken by the Executive Committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Executive Committee.
VIII. POWERS
The Executive Committee may, except as otherwise required by law, exercise
all such powers and do all such acts and things as may be exercised or done
by the Board of Directors, except the following:
A. Declare dividends;
B. Issue stock, except that the Executive Committee shall have the power
to issue (1) an unlimited number of shares of stock in business and/or
asset acquisition transactions and (2) up to 25,000 shares of stock to an
employee of the corporation, or a subsidiary, in connection with any such
employee's employment,
C. Recommend to shareholders any action requiring their approval; and
D. Change the membership of any committee, fill the vacancies thereon or
discharge any committee.
- ------------------
EXHIBIT 3.4
- ------------------
USURF America, Inc.
AUDIT COMMITTEE BYLAWS
I. NUMBER AND TERM OF OFFICE
The number of directors who shall constitute the whole Audit Committee of
the Board of Directors (the "Audit Committee") shall be three, with one
alternate member to be named by the Board of Directors; each member,
including the alternate member, shall be a director of the Corporation.
Each Audit Committee Member shall be elected for a term of one year and
until his successor is elected and qualified, except as otherwise provided
herein or required by law.
II. VACANCIES
If the office of any Executive Committee Member becomes vacant by reason
of death, resignation, disqualification, removal or other cause, a majority
of the Audit Committee Members remaining in office, although less than a
quorum, may elect a successor for the unexpired term and until his
successor is elected an qualified.
III. REGULAR MEETINGS
Regular meetings of the Audit Committee shall be held at such place or
places, on such date or dates, and at such time or times as shall have been
established by the Audit Committee and publicized among all Audit Committee
Members. A notice of each regular meeting shall not be required.
IV. SPECIAL MEETINGS
Special meetings of the Audit Committee may be called by one or more of
the Audit Committee Members then in office and shall be held at such place,
on such date, and at such time as they or he or she shall fix. Notice of
the place, date and time of each such special meeting shall be given each
Committee Member by whom it is not waived by mailing written notice not
less than three days before the meeting or by telegraphing the same not
less than eighteen hours before the meeting or by communicating via
telephone or telecopier with the same not less than eight (8) hours before
the meeting. Unless otherwise indicated in the notice thereof, any and all
lawful business may be transacted at a special meeting.
V. QUORUM
At any meeting of the Audit Committee, a majority of the members shall
constitute a quorum for all purposes.
VI. PARTICIPATION IN MEETING BY CONFERENCE TELEPHONE
Members of the Audit Committee may participate in a meeting of such
committee by means of conference telephone or similar communications
equipment that enables all persons participating in the meeting to hear
each other. Such participation shall constitute presence in person at
such meeting.
VII. CONDUCT OF BUSINESS
At any meeting of the Audit Committee, business shall be transacted in
such order and manner as the Committee may from time to time determine, and
all matters shall be determined by the vote of a majority of the members
present, except as otherwise provided herein or required by law. Action
may be taken by the Audit Committee without a meeting if all members
thereof consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Audit Committee.
VIII. POWERS
The Audit Committee shall be empowered, except as otherwise required by
law, to:
A. Nominate the independent auditors of the Corporation to the
shareholders of the Corporation;
B. Discuss the independent auditor's work with them, facilitate
cooperation by corporate employees, solve any problems encountered and
implement internal financial controls.
- -----------------
EXHIBIT 4.1
- -----------------
<FACE OF SPECIMEN COMMON STOCK CERTIFICATE>
USURF AMERICA, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEVADA
COMMON STOCK
CUSIP No. 91732M 10 5
Number
See Reverse for
Certain Definitions
This certificate is transferable in
Dallas, Texas or New York, New York
This certifies that
is the owner of
fully paid and non-assessable shares of the common stock, $.0001 par value of
USURF AMERICA, INC.
(hereinafter called the "Corporation"), transferable on the books of the
Corporation for the holder hereof in person or by duly authorized attorney
upon surrender of this certificate properly endorsed. This certificate and
the shares represented hereby are issued and shall be held subject to all
the provisions of the Certificate of Incorporation, as amended, and the
Bylaws of the Corporation, as amended (copies of which are on file at the
office of the Transfer Agent), to all of which the holder of this
Certificate by acceptance hereof assents. This Certificate is not valid
unless countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Date:
<Corporate Seal>
USURF America, Inc.
NEVADA
/s/ David M. Loflin
President
/s/ Waddell D. Lofli
Secretary
Countersigned:
Securities Transfer Corporation
P.O. Box 701629
Dallas, Tx. 75370
By:
Transfer Agent - Authorized Signature
<REVERSE SIDE OF SPECIMEN STOCK CERTIFICATE>
USURF AMERICA, INC.
Transfer Fee $15.00 per new certificate issued
A full statement of the relative rights, interests, preferences and
restrictions of each class of stock will be furnished by the Corporation to
any shareholder upon written request, without charge.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT - Custodian
(Cust) (Minor)
under Uniform Gifts to Minors Act
(State)
For value received, hereby sell, assign and
transfer unto
(please insert social
security or other
identifying number of
assignee)
Shares of the Common Stock represented by the within
Certificate, and do hereby irrevocably constitute and
appoint Attorney to transfer
the said stock on the books of the within-named corporation
with full power of substitution in the premises.
Dated:
Signature:
X
X
Signature Guarantee:
THE SIGNATURE(S) MUST BE MEDALLION BANK GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION PURSUANT TO SEC RULE 17AD-15.
Signature(s) guaranteed by:
- ---------------------
EXHIBIT 5.1
- ---------------------
January 24, 2000
The Board of Directors
USURF America, Inc.
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Gentlemen:
We have acted as counsel to USURF America, Inc., a Nevada corporation (the
"Company"), in connection with the preparation and filing of a Registration
Statement on Form S-1 (the "Registration Statement") with the Securities
and Exchange Commission under the Securities Act of 1933, as amended. The
Registration Statement covers the following securities of the Company:
A. Up to 2,000,000 shares of Company Common Stock, $.0001 par value per
share (the "Common Stock"), to be offered to the public in connection with
business combination transactions, which may be in the form of mergers,
stock-for-stock exchanges or stock-for-assets acquisitions (such 2,000,000
shares being referred to herein as the "Acquisition Stock");
B. Up to 407,607 shares of Company Common Stock, all of which are issued
and outstanding, and all of which are held by shareholders of the Company
(such 407,607 shares being referred to herein as the "Selling Shareholder
Stock"); and
C. Up to 330,477 shares of Company Common Stock underlying issued and
outstanding common stock purchase warrants of the Company (such 330,477
shares being referred to herein as the "Warrant Stock").
As counsel for the Company, we have examined the originals or copies
certified, or otherwise authenticated to our satisfaction, of the corporate
records of the Company and such other documents or certificates of public
officials as we have deemed necessary for the opinions expressed herein.
In rendering the opinions set forth herein, we have assumed (i) the legal
capacity of all natural persons, (ii) the authenticity of all documents
submitted to us as originals and (iii) the conformity to original documents
of all documents submitted to us as copies.
Based upon our examination of such documents, materials, certificates and
information as we have deemed appropriate or relevant for the purpose of
delivering this opinion, but subject to the qualifications set forth
herein, we are of the following opinion:
1. The Company is a corporation duly organized and lawfully existing and in
good standing under the laws of the State of Nevada.
2. The 2,000,000 shares of the Acquisition Stock, when issued and delivered
in accordance with the offering as set forth in the Prospectus filed as
part of the Registration Statement, the shares of Acquisition Stock will be
legally issued, fully paid and non-assessable shares of Common Stock of the
Company.
3. The 407,607 shares of the Selling Shareholder Stock owned by the various
shareholders named in the Prospectus filed as part of the Registration
Statement are validly issued and were duly authorized for issuance by the
Board of Directors of the Company at valid meetings thereof, after due
consideration by the Board of Directors of the facts and circumstances
surrounding such issuances, legally issued in accordance with the laws of
the State of Nevada, and appropriate stock certificates representing such
shares of Selling Shareholder Stock have been issued. Also, such 407,607
shares of Selling Shareholder Stock are fully paid and non-assessable.
4. The 330,477 shares of Warrant Stock issuable upon exercise of certain
outstanding common stock purchase warrants of the Company, when paid for
and issued in accordance with their respective terms, will be legally
issued, fully paid and non-assessable shares of Common Stock of the Company.
The foregoing is based solely on the facts stated herein. No opinion
contained herein shall be construed to infer an opinion relating to any
other situation, unless such opinion is stated expressly herein.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement and to the use of our name in the Prospectus forming
part of the Registration Statement.
Sincerely,
/s/
NEWLAN & NEWLAN
- ------------------
EXHIBIT 10.1
- ------------------
May 20, 1998
Centex Securities, Inc.
1020 Prospect Street
Suite 200
La Jolla, California 92037
Registration Rights Letter Agreement
Gentlemen:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 60,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Media Entertainment, Inc., a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you;
provided, however, that such registration right may not be exercised prior
to July 1, 1998. Upon receipt of your written demand for registration, the
Company will take steps to register your Subject Shares in a registration
statement (the "Registration Statement") under the Act. Your right to such
registration may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by the Company.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination", or the equivalent thereof, of
securities offerings (the Company shall not be required to register or
qualify the Subject Shares in any state invoking merit review authority),
to keep such registration or qualification in effect for a minimum of 120
days after its initial effective date, and do any and all other acts and
things which may be necessary or advisable to enable you to consummate the
disposition in such jurisdictions of your Subject Shares covered by such
Registration Statement, except that the Company shall not, for any such
purpose, be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not, but for the
requirements of this subdivision (d), be obligated to be so qualified, or
to subject itself to taxation in any such jurisdiction or to consent to
general service of process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin
President
AGREED AND ACCEPTED as of the
date and year first above written:
CENTEX SECURITIES, INC.
By: /s/
its authorized representative
- --------------------
EXHIBIT 10.2
- --------------------
March 27,1998
H+N Partners
B. Edward Haun
1444 Wazee Street
Denver, Colorado 802
Finder's Fee Letter
Gentlemen:
This letter will serve to memorialize our agreement with respect to
payment of finder's fees for your services in locating and referring a
securities broker to this company for the purpose of making a private sale
of securities. We intend to make a private offering of Common Stock of
Media Entertainment, Inc. (the "Company"). You have agreed to use your
best efforts to introduce the Company to a securities broker with the
ability to offer the Company's securites, on a private placement basis, to
persons qualifed as Accredited Investors, as that term is used in Rule 501
of Regulation D of the Rules of the Securities and Exchange Commission for
the purpose of their making an investment in the Company. The total
offering is to be $800,000, and shall consist of Units of securities, each
Unit consisting of one share of Common Stock and one Common Stock Purchase
Warrant (the "Warrants"). The offering price of the Units will equal the
opening bid price of the Company's common stock on the NASD's OTC
Electronic Bulletin Board (Symbol: MEME) on the day of execution of a
Selling Agreement between the Company and a securities broker introduced by
you. The exercise price of the Warrants is to be two times the offering
price of the Units. The exercise period of the Warrants is to be three
years from the date of their issue and they will contain standard
anti-dilution provisions.
We have agreed to pay to you (i) cash compensation equal to 5% of the
funds invested in the Units and (ii) issue to you 200,000 Common Stock
Purchase Warrants to purchase one share of Common Stock of the Company at
an exercise price equal to $1.25 per share as to 100,000 warrants and an
exercise price equal to $1.50 per share as to the remaining 100,000
warrants, with an exercise period equal to three years from the date of
their issuance and they will contain standard anti-dilution provisions.
In performing your duties as a finder, you are to do no more in the process
of selling the offered securities than refer one or more securities brokers
to us and make introductions of them. You agree not to perform any
services that would normally be performed by a licensed securities broker
or dealer, as you will not be acting in the capacity of a securities broker
or agent. When you have made an introduction or referred a securities
broker or brokers who are capable of undertaking the subject offering, you
will have performed all of the service required for you to have earned the
described finder's fee, should such referred securities broker or brokers
undertake and complete an offering along the lines set forth herein. You
will be paid both your cash compensation and have the Warrants issued to
you, at such time as the offering of securities is concluded, the
investment funds are accepted by the Company and the Units offered and sold
are issued to the purchasers thereof.
With respect to referrals and/or introductions to be made by you, you are
to advise the Company in writing of the identity of such Securities Broker
or Brokers. If such referred person is already known to the Company and is
a securites broker with whom the Company has an existing relationship
through its efforts, we will advise you on the day we receive your letter
of introduction or reference, and you will not be considered a finder as to
that securites broker. If we do not so advise you on the day of receipt of
your advice, you will be considered a finder of such securities broker.
If this letter properly reflects your understanding, please indicate such
in the space below. We thank you for your assistance and look forward to
working with you.
Sincerely,
/s/ David M. Loflin
David M. Loflin
President
ACCEPTED AND AGREED:
/s/ Bruce E. Haun
Bruce E. Haun
on behalf of H + N Partners
- ---------------------
EXHIBIT 10.3
- ---------------------
June 19, 1998
Mr. Dennis A. Faker
129 N. Meadow Street
Watertown, New York 13601
Registration Rights Letter Agreement
Dear Mr. Faker:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 50,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Media Entertainment, Inc., a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you;
provided, however, that such registration right may not be exercised prior
to July 1, 1998. Upon receipt of your written demand for registration, the
Company will take steps to register your Subject Shares in a registration
statement (the "Registration Statement") under the Act. Your right to such
registration may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by the Company.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
Yours very truly,
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin, President
- --------------------
EXHIBIT 10.4
- --------------------
June 19, 1998
Delaware Charter Guarantee & Trust Company
IRA FBO R. LOGAN KOCK A/C #44448867
1700 Pacific Avenue, Suite 500
Dallas, Texas 75201
Registration Rights Letter Agreement
Gentlemen:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 10,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Media Entertainment, Inc., a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you;
provided, however, that such registration right may not be exercised prior
to July 1, 1998. Upon receipt of your written demand for registration, the
Company will take steps to register your Subject Shares in a registration
statement (the "Registration Statement") under the Act. Your right to such
registration may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by the Company.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
Yours very truly,
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin, President
- -----------------------
EXHIBIT 10.5
- -----------------------
June 19, 1998
Mr. Alvin Gottlieb
Registration Rights Letter Agreement
Dear Mr. Miofsky:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 10,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Media Entertainment, Inc., a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you;
provided, however, that such registration right may not be exercised prior
to July 1, 1998. Upon receipt of your written demand for registration, the
Company will take steps to register your Subject Shares in a registration
statement (the "Registration Statement") under the Act. Your right to such
registration may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by the Company.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
Yours very truly,
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin, President
- --------------------
EXHIBIT 10.6
- --------------------
June 19, 1998
Ronald G. Rogers and Leah A. Rogers, Trustees
Rogers Family Trust
1409 Paseo Dorado
Fullerton, California 92833
Registration Rights Letter Agreement
Dear Mr. and Mrs. Rogers:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 30,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Media Entertainment, Inc., a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you;
provided, however, that such registration right may not be exercised prior
to July 1, 1998. Upon receipt of your written demand for registration, the
Company will take steps to register your Subject Shares in a registration
statement (the "Registration Statement") under the Act. Your right to such
registration may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by the Company.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
Yours very truly,
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin, President
- --------------------
EXHIBIT 10.7
- --------------------
June 19, 1998
Ms. Jeanne Rowzee
7 Las Cruces
Irvine, California 92614
Registration Rights Letter Agreement
Dear Ms. Rowzee:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 10,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Media Entertainment, Inc., a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you;
provided, however, that such registration right may not be exercised prior
to July 1, 1998. Upon receipt of your written demand for registration, the
Company will take steps to register your Subject Shares in a registration
statement (the "Registration Statement") under the Act. Your right to such
registration may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by the Company.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
Yours very truly,
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin, President
- ---------------------
EXHIBIT 10.8
- ---------------------
June 19, 1998
Ms. Barbara V. Schiller
1121 Farmington Avenue
West Hartford, Connecticut 06107
Registration Rights Letter Agreement
Dear Ms. Schiller:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 30,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Media Entertainment, Inc., a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you;
provided, however, that such registration right may not be exercised prior
to July 1, 1998. Upon receipt of your written demand for registration, the
Company will take steps to register your Subject Shares in a registration
statement (the "Registration Statement") under the Act. Your right to such
registration may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by the Company.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
Yours very truly,
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin, President
- ---------------------
EXHIBIT 10.9
- ---------------------
June 19, 1998
Delaware Charter Guarantee & Trust Company
IRA FBO CLARENCE YIM A/C #44415447
1700 Pacific Avenue, Suite 500
Dallas, Texas 75201
Registration Rights Letter Agreement
Gentlemen:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 10,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Media Entertainment, Inc., a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you;
provided, however, that such registration right may not be exercised prior
to July 1, 1998. Upon receipt of your written demand for registration, the
Company will take steps to register your Subject Shares in a registration
statement (the "Registration Statement") under the Act. Your right to such
registration may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by the Company.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
Yours very truly,
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin, President
- -----------------------
EXHIBIT 10.09.1
- -----------------------
WARRANT AGREEMENT
THIS AGREEMENT dated as of May 18, 1998, between Media Entertainment, Inc.,
a Nevada corporation (the "Company"), and Securities Transfer Corporation,
a Texas corporation (the "Warrant Agent").
RECITALS:
A. Pursuant to a private offering of 300,000 units of securities (the
"Units") by the Company, the Company proposes to issue to the purchasers of
the Units 300,000 Warrants (individually, a "Warrant", and, collectively,
the "Warrants"), to purchase an aggregate of 300,000 shares of Common Stock
of the Company (the "Warrant Shares").
B. The Company desires to provide for the issuance of warrant certificates
(the "Warrant Certificates") representing the Warrants.
C. The Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer and exchange of Warrant Certificates and
exercise of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrant Certificates and the Warrants, and the respective
rights and obligations thereunder of the Company, the registered holders of
the Warrant Certificates and the Warrant Agent, the parties hereto agree as
follows:
1. Definitions. As used herein:
A. "Common Stock" shall mean shares of common stock of the Company,
$.0001 par value (the "Common Stock"), whether now or hereafter authorized,
which have the right to participate in the distribution of earnings and
assets of the Company without limit as to amount or percentage.
B. "Corporate Office" shall mean the place of business of the Warrant
Agent located in Dallas, Texas, or its successor (for the mailing address
of the Warrant Agent, see paragraph 12 hereof).
C. "Exercise Period" shall mean the period commencing on the date of the
issuance of the Warrants and ending on the Expiration Date.
D. "Exercise Price" shall mean a purchase price of $2.00 per share of
Common Stock (the "Warrant Exercise Price").
E. "Expiration Date" shall mean 5:00 p.m. Central Time, on the date which
is two (2) years from the date of execution hereof, or if such day shall be
a holiday or day on which banks are authorized to close, then 5:00 p.m.
Central Time, whichever is in effect, on the next following day that in the
State of Texas is not a holiday or a day on which banks are authorized to
close.
F. "Registered Holder" shall mean the person in whose name any Warrant
Certificate shall be registered on the books maintained by the Warrant
Agent pursuant to this Agreement.
G. "Subsidiary" shall mean any corporation of which shares having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (regardless of whether the shares of any other class or classes
of such corporation shall have or may have voting power by reason of the
happening of any contingency) are at the time directly or indirectly owned
by the Company or one or more subsidiaries of the Company.
H. "Transfer Agent" shall mean the Company's transfer agent, Securities
Transfer Corporation, or its successor.
I. "Warrant" or "Warrants" shall mean and include up to 300,000 Warrants
to be issued to the purchasers of the Units to purchase a like number of
shares of the authorized and unissued Common Stock of the Company.
J. "Warrant Shares" shall mean and include up to 300,000 shares of
authorized and unissued Common Stock initially reserved for issuance on
exercise of the Warrants and any additional shares of Common Stock or other
property which may hereafter be issuable or deliverable on exercise of the
Warrants pursuant to paragraph 5 of this Agreement.
2. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company in accordance with the instructions
set forth hereafter in this Agreement, and the Warrant Agent hereby accepts
such appointment and agrees to perform the duties and obligations required
of it, as such duties and obligations are set forth herein.
3. Warrants and Issuance of Warrant Certificates. Each Warrant shall
initially entitle the Registered Holder of the Warrant Certificate
representing such Warrant to purchase one shares of Common Stock on
exercise thereof, subject to modification and adjustment as hereinafter
provided in paragraph 9. The Warrant Certificates will be issued and
delivered by the Warrant Agent on written order of the Company signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement.
4. Form and Execution of Warrant Certificates. The Warrant Certificates
representing the Warrants to be issued to the purchasers of the Units shall
be substantially in the form attached as Exhibit "A" and may have such
letters, numbers or other marks of identification and such legends,
summaries or endorsements printed, lithographed or engraved thereon as the
Company may deem appropriate and as are not inconsistent with the
provisions hereof.
The Warrant Certificates shall be dated as of the date of issuance,
whether on initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Warrant Certificates.
Warrant Certificates representing the Warrants to be issued to the
purchasers of the Units shall be numbered serially with the letters "WPO"
preceding the number of each Warrant Certificate.
Warrant Certificates shall be executed on behalf of the Company by its
President and Secretary, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. In the event any officer of the Company who executed the
Warrant Certificates shall cease to be an officer of the Company before the
date of issuance of the Warrant Certificates or before countersignature and
delivery by the Warrant Agent, such Warrant Certificates may be
countersigned, issued and delivered by the Warrant Agent with the same
force and effect as though the person who signed such Warrant Certificates
had not ceased to be an officer of the Company.
5. Exercise of Warrants. The Warrants shall be exercisable during the
Exercise Period. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of the surrender for
exercise (the "Exercise Date") of the Warrant Certificate. The exercise
form shall be executed by the Registered Holder thereof or his attorney
duly authorized in writing and shall be delivered together with payment to
the Warrant Agent, in cash or by official bank or certified check, of an
amount in lawful money of the United States of America. Such payment shall
be in an amount equal to the Exercise Price per Warrant as hereinabove
defined.
The person entitled to receive the number of Warrant Shares deliverable
on such exercise shall be treated for all purposes as the holder of such
Warrant Shares as of the close of business on the Exercise Date. The
Company shall not be obligated to issue any fractional share interests in
Warrant Shares issuable on exercise of a Warrant. If more than one Warrant
shall be exercised at one time by the same Registered Holder, the number of
full shares which shall be issuable on exercise thereof shall be computed
on the basis of the aggregate number of full shares issuable on such exercise.
As soon as practicable on or after the Exercise Date and in any event
within 30 days after such date, the Warrant Agent shall cause to be issued
and delivered to the person or persons entitled to receive the same, a
certificate or certificates for the number of Warrant Shares deliverable on
such exercise. No adjustment shall be made in respect of cash dividends on
Warrant Shares deliverable on exercise of any Warrant. The Warrant Agent
shall promptly notify the Company in writing of any exercise of any Warrant
and of the number of Warrant Shares delivered and shall cause payment of an
amount in cash equal to the Exercise Price to be made promptly to the order
of the Company. The parties contemplate such payments will be made by the
Warrant Agent to the Company as collected funds are received by the Warrant
Agent. The Warrant Agent shall hold any proceeds collected and not yet
paid to the Company in a Federally-insured escrow account at a commercial
bank selected by the Warrant Agent, at all times relevant hereto.
Following a determination by the Warrant Agent that collected funds have
been received, the Warrant Agent shall cause share certificates to be
issued representing the number of Warrants exercised by the holder.
Expenses incurred by the Warrant Agent hereunder, including
administrative costs, costs of maintaining records and other expenses,
shall be paid by the Company according to the standard fees imposed by the
Warrant Agent for such services.
A detailed accounting statement setting forth the number of Warrants
exercised, the net amount of exercised funds and all expenses incurred by
the Warrant Agent shall be transmitted to the Company on payment of each
exercise amount. Such accounting statement shall serve as an interim
accounting for the Company during the Exercise Period. The Warrant Agent
shall render to the Company a complete accounting setting forth the number
of Warrants exercised, the identity of persons exercising such Warrants,
the number of shares issued, the amounts to be distributed to the Company
and all other expenses incurred by the Warrant Agent, at the completion of
the Exercise Period.
6. Reservation of Shares and Payment of Taxes. The Company covenants that
it will, at all times, reserve and have available from its authorized
shares of Common Stock such number of shares of Common Stock as shall then
be issuable on exercise of all outstanding Warrants. The Company covenants
that all Warrant Shares, when issued, shall be duly and validly issued,
fully paid and non-assessable, and free from all taxes, liens and charges
with respect to the issue thereof.
If any Warrant Shares require registration with, or approval of, any
government authority under any Federal or state law before such shares may
be validly issued or delivered, the Company covenants it will, in good
faith and as expeditiously as possible, endeavor to secure such
registration or approval, as the case may be.
Warrantholders shall pay all documentary stamp or similar taxes and other
government charges that may be imposed with respect to the issuance of the
Warrants, or the issuance, transfer or delivery of any Warrant Shares on
exercise of the Warrants. In the event the Warrant Shares are to be
delivered in a name other than the name of the Registered Holder of the
Warrant Certificate, no such delivery shall be made unless the person
requesting the same has paid to the Warrant Agent the amount of any such
taxes or charges incident thereto.
The Warrant Agent is hereby irrevocably authorized to requisition
certificates for Warrant Shares from the Transfer Agent as required from
time to time. The Company has, contemporaneously with the execution of
this Agreement, authorized the Transfer Agent to comply with all such
requisitions. The Company will file with the Warrant Agent a statement
setting forth the name and address of its Transfer Agent for the Company's
Common Stock issuable on exercise of the Warrants and of any successor
Transfer Agent.
7. Registration of Transfer of Warrant Certificates. The Warrant
Certificates may not be transferred in whole or in part except as
authorized in this Agreement. Warrant Certificates to be exchanged shall
be surrendered to the Warrant Agent at its Corporate Office. The Company
shall execute, and the Warrant Agent shall countersign, issue and deliver
in exchange therefor, the Warrant Certificate or Certificates which the
holder making the transfer shall be entitled to receive.
The Warrant Agent shall keep transfer books at its Corporate Office in
which it shall register Warrant Certificates and the transfer thereof. On
due presentment for transfer of any Warrant Certificates at such office,
the Company shall execute, and the Warrant Agent shall issue and deliver to
the transferee or transferees, a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants.
The Warrants will not be publicly traded.
8. Loss or Mutilation. On receipt by the Company and the Warrant Agent of
evidence satisfactory as to the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate, the Company shall
execute, and the Warrant Agent shall countersign and deliver in lieu
thereof, a new Warrant Certificate representing an equal aggregate number
of Warrants. In the case of loss, theft or destruction of any Warrant
Certificate, the individual requesting issuance of a new Warrant
Certificate shall be required to indemnify the Company and Warrant Agent in
an amount satisfactory to each of them. In the event a Warrant Certificate
is mutilated, such Certificate shall be surrendered and cancelled by the
Warrant Agent prior to delivery of a new Warrant Certificate. Applicants
for a substitute Warrant Certificate shall also comply with such other
regulations and pay such other reasonable charges as the Company may
prescribe.
9. Adjustment of Exercise Price and Shares.
A. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall issue any of its Common Stock as a stock
dividend or shall subdivide the number of outstanding shares of Common
Stock into a greater number of shares, then, in either of such events, the
Exercise Price in effect at the time of such action shall be reduced
proportionately and the number of shares of Common Stock purchasable
pursuant to the Warrants shall be increased proportionately. Conversely,
in the event the Company shall reduce the number of its outstanding shares
of Common Stock by combining such shares into a smaller number of shares,
then, in such event, the Exercise Price in effect at the time of such
action shall be increased proportionately and the number of shares of
Common Stock at that time purchasable pursuant to the Warrants shall be
decreased proportionately. Such stock dividend paid or distributed on the
Common Stock in shares of any other class of the Company or securities
convertible into shares of Common Stock shall be treated as a dividend paid
or distributed in shares of Common Stock to the extent shares of Common
Stock are issuable on the payment or conversion thereof.
B. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall be recapitalized by reclassifying its
outstanding shares of Common Stock into shares with a different par value,
or by changing its outstanding Common Stock to shares without par value or
in the event of any other material change of the capital structure of the
Company or of any successor corporation by reason of any reclassification,
recapitalization or conveyance, prompt, proportionate, equitable, lawful
and adequate provision shall be made whereby any holder of the Warrants
shall thereafter have the right to purchase, on the basis and the terms and
conditions specified in this Agreement, in lieu of the shares of Common
Stock of the Company theretofore purchasable on the exercise of any
Warrant, such securities or assets as may be issued or payable with respect
to, or in exchange for, the number of shares of Common Stock of the Company
theretofore purchasable on exercise of the Warrants had such
reclassification, recapitalization or conveyance not taken place; and, in
any such event, the rights of any holder of a Warrant to any adjustment in
the number of shares of Common Stock purchasable on exercise of such
Warrant, as set forth above, shall continue and be preserved in respect of
any stock, securities or assets which the holder becomes entitled to
purchase; provided, however, that a merger, acquisition of a going business
or a portion thereof (whether for cash, stock, notes, other securities, or
a combination of cash and securities), exchange of stock for stock,
exchange of stock for assets, or like transaction involving the Company
will not be considered a "material change" for purposes of this paragraph,
and no adjustment shall be made under this paragraph 9 by reason of any
such merger, acquisition, exchange of stock for stock, exchange of stock
for assets, or like transaction.
C. In the event the Company, at any time while the Warrants shall remain
unexpired and unexercised, shall sell all or substantially all of its
property, or dissolves, liquidates or winds up its affairs, prompt,
proportionate, equitable, lawful and adequate provision shall be made as
part of the terms of such sale, dissolution, liquidation or winding up such
that the holder of a Warrant may thereafter receive, on exercise of such
Warrant, in lieu of each share of Common Stock of the Company which such
holder would have been entitled to receive upon exercise of such Warrant,
the same kind and amount of any stock, securities or assets as may be
issuable, distributable or payable on any such sale, dissolution,
liquidation or winding up with respect to each share of Common Stock of the
Company; provided, however, that, in the event of any such sale,
dissolution, liquidation or winding up, the right to exercise the Warrants
shall terminate on a date fixed by the Company, such date to be not earlier
than 5:00 p.m., Central Time, on the 30th day next succeeding the date on
which notice of such termination of the right to exercise the Warrants has
been given by mail to the holders thereof at such addresses as may appear
on the books of the Company.
D. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to purchase shares of its
Common Stock at a price per share more than 10% below the then-current
market price per share (as defined below) of its Common Stock at the date
of taking such record, then (i) the number of shares of Common Stock
purchasable pursuant to the Warrants shall be redetermined as follows: the
number of shares of Common Stock purchasable pursuant to a Warrant
immediately prior to such adjustment (taking into account fractional
interests to the nearest 1,000th of a share) shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common
Stock of the Company then outstanding (excluding the Common Stock then
owned by the Company) immediately prior to the taking of such record, plus
the number of additional shares offered for purchase, and the denominator
of which shall be the number of shares of Common Stock of the Company
outstanding (excluding the Common Stock owned by the Company) immediately
prior to the taking of such record, plus the number of shares which the
aggregate offering price of the total number of additional shares so
offered would purchase at such current market price; and (ii) the Exercise
Price per share of Common Stock purchasable pursuant to a Warrant shall be
redetermined as follows: the Exercise Price in effect immediately prior to
the taking of such record shall be multiplied by a fraction, the numerator
of which is the number of shares of Common Stock purchasable immediately
prior to the taking of such record, and the denominator of which is the
number of shares of Common Stock purchasable immediately after the taking
of such record as determined pursuant to clause (i) above. For the purpose
hereof, the current market price per share of Common Stock of the Company
at any date shall be deemed to be the average of (A) the highest bid and
asked prices as reported by NASDAQ if the Common Stock of the Company is
admitted to listing for trading thereon, or (B) the highest bid and asked
prices reported on the OTC Electronic Bulletin Board of the NASD, for 30
consecutive business days commencing 15 business days prior to the record
date.
E. On exercise of the Warrants by the holders, the Company shall not be
required to deliver fractions of shares of Common Stock; provided, however,
that prompt, proportionate, equitable, lawful and adequate adjustment in
the Exercise Price payable shall be made in respect of any such fraction of
one share of Common Stock on the basis of the Exercise Price per share.
F. In the event, prior to expiration of the Warrants by exercise or by
their terms, the Company shall determine to take a record of the holders of
its Common Stock for the purpose of determining shareholders entitled to
receive any stock dividend, distribution or other right which will cause
any change or adjustment in the number, amount, price or nature of the
Common Stock or other stock, securities or assets deliverable on exercise
of the Warrants pursuant to the foregoing provisions, the Company shall
give to the Registered Holders of the Warrants at the addresses as may
appear on the books of the Company at least 15 days' prior written notice
to the effect that it intends to take such a record. Such notice shall
specify the date as of which such record is to be taken; the purpose for
which such record is to be taken; and the number, amount, price and nature
of the Common Stock or other stock, securities or assets which will be
deliverable on exercise of the Warrants after the action for which such
record will be taken has been completed. Without limiting the obligation
of the Company to provide notice to the Registered Holders of the Warrant
Certificates of any corporate action hereunder, the failure of the Company
to give notice shall not invalidate such corporate action of the Company.
G. The Warrant shall not entitle the holder thereof to any of the rights
of shareholders or to any dividend declared on the Common Stock, unless the
Warrant is exercised and the Warrant Shares purchased prior to the record
date fixed by the Board of Directors of the Company for the determination
of holders of Common Stock entitled to such dividend or other right.
H. No adjustment of the Exercise Price shall be made as a result of, or
in connection with, (i) the establishment of one or more employee stock
option plans for employees of the Company, or the modification, renewal or
extension of any such plan, or the issuance of Common Stock on exercise of
any options pursuant to any such plan, (ii) the issuance of individual
warrants or options to purchase Common Stock, the issuance of Common Stock
upon exercise of such warrants or options, or the issuance of Common Stock
in connection with compensation arrangements for directors, officers,
employees, consultants or agents of the Company or any Subsidiary, and the
like, or (iii) the issuance of Common Stock in connection with a merger,
acquisition of a going business or a portion thereof (whether for cash,
stock, notes, other securities, or a combination of cash and securities),
exchange of stock for stock, exchange of stock for assets, or like
transaction.
10. Duties, Compensation and Termination of Warrant Agent. The Warrant
Agent shall act hereunder as agent and in a ministerial capacity for the
Company, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not, by issuing and delivering Warrant
Certificates or by any other act hereunder, be deemed to make any
representations as to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of the Common Stock or
other property delivered on exercise of any Warrant. The Warrant Agent
shall not be under any duty or responsibility to any holder of the Warrant
Certificates to make or cause to be made any adjustment of the Exercise
Price or to determine whether any fact exists which may require any such
adjustments.
The Warrant Agent shall not (i) be liable for any recital or statement of
fact contained herein or for any action taken or omitted by it in reliance
on any Warrant Certificate or other document or instrument believed by it
in good faith to be genuine and to have been signed or presented by the
proper party or parties, (ii) be responsible for any failure on the part of
the Company to comply with any of its covenants and obligations contained
in this Agreement or in the Warrant Certificates, or (iii) be liable for
any act or omission in connection with this Agreement, except for its own
negligence or willful misconduct.
The Warrant Agent may, at any time, consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken or omitted by it in good faith in
accordance with such notice, statement, instruction, request, direction,
order or demand.
Any notice, statement, instruction, request, direction, order or demand
of the Company shall be sufficiently evidenced by an instrument signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall not be liable for any action taken or omitted by it in
accordance with such notice, statement, instruction, request, direction,
order or demand.
The Company agrees to pay the Warrant Agent compensation for its services
hereunder and to reimburse the Warrant Agent for its reasonable expenses in
accordance with the terms of Exhibit "B" attached hereto and incorporated
herein by this reference. The Company further agrees to indemnify the
Warrant Agent against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for any action taken or
omitted by the Warrant Agent in the execution of its duties and powers
hereunder, excepting losses, expenses and liabilities arising as a result
of the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties or the Company may terminate the
Warrant Agent and the Warrant Agent shall be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of
the Warrant Agent's own negligence or willful misconduct) on 30 days' prior
written notice to the other party. At least 15 days prior to the date such
resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each
Warrant Certificate. On such resignation or termination, the Company shall
appoint a new Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in
writing of the resignation by the Warrant Agent, then the Registered Holder
of any Warrant Certificate may apply to any court of competent jurisdiction
for the appointment of a new Warrant Agent. Any new Warrant Agent, whether
appointed by the Company or by such court, shall be a bank or trust company
having a capital and surplus, as shown by its last published report to its
shareholders, of not less than $1,000,000.
After acceptance in writing of an appointment of a new Warrant Agent is
received by the Company, such new Warrant Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; provided, however, if it shall be
necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed. The Company shall file a
notice of appointment of a new Warrant Agent with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new Warrant Agent may
be converted or merged, or any corporation resulting from any consolidation
to which the Warrant Agent or any new Warrant Agent shall be a party, or
any corporation succeeding to the corporate trust business of the Warrant
Agent shall be a successor Warrant Agent under this Agreement, provided
that such corporation is eligible for appointment as a successor to the
Warrant Agent. Any such successor Warrant Agent shall promptly cause
notice of its succession as Warrant Agent to be mailed to the Company and
to the Registered Holder of each Warrant Certificate. No further action
shall be required for establishment and authorization of such successor
Warrant Agent.
The Warrant Agent, its officers or directors and its subsidiaries or
affiliates may buy, hold or sell Warrants or other securities of the
Company and otherwise deal with the Company in the same manner and to the
same extent and with like effect as though it were not the Warrant Agent.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company.
11. Modification of Agreement. The Warrant Agent and the Company may, by
supplemental agreement, make any changes or corrections in this Agreement
they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or mistake or error herein contained.
Additionally, the parties may make any changes or corrections deemed
necessary which shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, this Agreement shall not otherwise
be modified, supplemented or altered in any respect, except with the
consent in writing of the Registered Holders of Warrant Certificates
representing not less than 66 2/3% of the Warrants outstanding; provided,
however, that no change in the number or nature of the Warrant Shares
purchasable on exercise of a Warrant, or the Exercise Price or the Exercise
Period thereof shall be made without the consent, in writing, of the
Registered Holder of the Warrant Certificate representing such Warrant,
other than such changes as are specifically prescribed by this Agreement.
12. Notices. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder shall
be deemed given sufficiently in writing and sent via a nationally
recognized overnight courier service, by registered or certified mail,
return receipt requested and postage prepaid, or by facsimile to:
in the case of the Company: Media Entertainment, Inc.
Attention: David M. Loflin
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Facsimile: (504) 922-9123
with a copy to: Newlan & Newlan
Attorneys at Law
2512 Program Drive
Suite 101
Dallas, Texas 75220
Facsimile: (214) 654-9520
and, in the case of the Warrant Agent: Securities Transfer Corporation
Attention: Kevin Halter, Jr.
16910 Dallas Parkway
Suite 100
Dallas, Texas 75248
Facsimile: (972) 248-4797
and, if to the Registered Holder of a Warrant Certificate, at the address
of such holder as set forth on the books maintained by the Warrant Agent.
13. Persons Benefitting. This Agreement shall be binding upon and inure
to the benefit of the Company, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of the Warrant
Certificates. Nothing in this Agreement is intended to or shall be
construed to confer on any other person any right, remedy or claim or to
impose on any other person any duty, liability or obligation.
14. Further Instruments. The parties shall execute and deliver any and
all such other instruments and shall take any and all such other actions as
may be reasonable or necessary to carry out the intention of this Agreement.
15. Severability. If any provision of this Agreement shall be held,
declared or pronounced void, voidable, invalid, unenforceable or
inoperative for any reason by any court of competent jurisdiction,
government authority or otherwise, such holding, declaration or
pronouncement shall not affect adversely any other provision of this
Agreement, which shall otherwise remain in full force and effect and be
enforced in accordance with its terms, and the effect of such holding,
declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
16. Waiver. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies
as provided by law. No delay or failure on the part of either party in the
exercise of any right or remedy arising from a breach of this Agreement
shall operate as a waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party where
required hereunder to any act or occurrence shall not be deemed to be a
consent to any other act or occurrence.
17. General Provisions. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Texas. Except
as otherwise expressly stated herein, time is of the essence in performing
hereunder. This Agreement embodies the entire agreement and understanding
between the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, and this Agreement may not be
modified or amended or any term or provision hereof waived or discharged
except in writing signed by the party against whom such amendment,
modification, waiver or discharge is sought to be enforced. The headings
of this Agreement are for convenience of reference only and shall not limit
or otherwise affect the meaning thereof. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above-mentioned.
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin, President
SECURITIES TRANSFER CORPORATION
By: /s/ Kevin Halter, Jr.
Kevin Halter, Jr., President
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EXHIBIT 10.10
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WARRANT AGREEMENT
THIS AGREEMENT dated as of May 18, 1998, between Media Entertainment, Inc.,
a Nevada corporation (the "Company"), and Securities Transfer Corporation,
a Texas corporation (the "Warrant Agent").
RECITALS:
A. In payment of a finder's fee arising from the introduction of the
Company by H+N Partners to a broker/dealer that has completed a private
offering of 300,000 units of securities by the Company, the Company
proposes to issue to H+N Partners 200,000 Warrants (individually, a
"Warrant", and, collectively, the "Warrants"), to purchase an aggregate of
200,000 shares of Common Stock of the Company (the "Warrant Shares").
B. The Company desires to provide for the issuance of warrant certificates
(the "Warrant Certificates") representing the Warrants.
C. The Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer and exchange of Warrant Certificates and
exercise of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrant Certificates and the Warrants, and the respective
rights and obligations thereunder of the Company, the registered holders of
the Warrant Certificates and the Warrant Agent, the parties hereto agree as
follows:
1. Definitions. As used herein:
A. "Common Stock" shall mean shares of common stock of the Company,
$.0001 par value (the "Common Stock"), whether now or hereafter authorized,
which have the right to participate in the distribution of earnings and
assets of the Company without limit as to amount or percentage.
B. "Corporate Office" shall mean the place of business of the Warrant
Agent located in Dallas, Texas, or its successor (for the mailing address
of the Warrant Agent, see paragraph 14 hereof).
C. "Exercise Period" shall mean the period commencing on the Completion
Date and ending on the Expiration Date.
D. "Exercise Price" shall mean, (1) with respect to 100,000 of the
Warrants to be issued to H+N Partners, a purchase price of $1.25 per share
of Common Stock, and, (2) with respect to the remaining 100,000 Warrants to
be issued to H+N Partners, a purchase price of $1.50 per share of Common
Stock (collectively, the "Warrant Exercise Price").
E. "Expiration Date" shall mean 5:00 p.m. Central Time, on the date which
is three (3) years from the date of execution hereof, or if such day shall
be a holiday or day on which banks are authorized to close, then 5:00 p.m.
Central Time, whichever is in effect, on the next following day that in the
State of Texas is not a holiday or a day on which banks are authorized to
close.
F. "Registered Holder" shall mean the person in whose name any Warrant
Certificate shall be registered on the books maintained by the Warrant
Agent pursuant to this Agreement.
G. "Subsidiary" shall mean any corporation of which shares having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (regardless of whether the shares of any other class or classes
of such corporation shall have or may have voting power by reason of the
happening of any contingency) are at the time directly or indirectly owned
by the Company or one or more subsidiaries of the Company.
H. "Transfer Agent" shall mean the Company's transfer agent, Securities
Transfer Corporation, or its successor.
I. "Warrant" or "Warrants" shall mean and include up to 200,000 Warrants
to be issued to H+N Partners to purchase a like number of shares of the
authorized and unissued Common Stock of the Company.
J. "Warrant Shares" shall mean and include up to 200,000 shares of
authorized and unissued Common Stock initially reserved for issuance on
exercise of the Warrants and any additional shares of Common Stock or other
property which may hereafter be issuable or deliverable on exercise of the
Warrants pursuant to paragraph 5 of this Agreement.
2. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company in accordance with the instructions
set forth hereafter in this Agreement, and the Warrant Agent hereby accepts
such appointment and agrees to perform the duties and obligations required
of it, as such duties and obligations are set forth herein.
3. Warrants and Issuance of Warrant Certificates. Each Warrant shall
initially entitle the Registered Holder of the Warrant Certificate
representing such Warrant to purchase one shares of Common Stock on
exercise thereof, subject to modification and adjustment as hereinafter
provided in paragraph 9. The Warrant Certificates will be issued and
delivered by the Warrant Agent on written order of the Company signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement.
4. Form and Execution of Warrant Certificates. The Warrant Certificates
representing the 100,000 Warrants to be issued to H+N Partners with an
exercise price of $1.25 per share shall be substantially in the form
attached as Exhibit "A" and may have such letters, numbers or other marks
of identification and such legends, summaries or endorsements printed,
lithographed or engraved thereon as the Company may deem appropriate and as
are not inconsistent with the provisions hereof.
The Warrant Certificates representing the 100,000 Warrants to be issued
to H+N Partners with an exercise price of $1.50 per share shall be
substantially in the form attached as Exhibit "B" and may have such
letters, numbers or other marks of identification and such legends,
summaries or endorsements printed, lithographed or engraved thereon as the
Company may deem appropriate and as are not inconsistent with the
provisions hereof.
The Warrant Certificates shall be dated as of the date of issuance,
whether on initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Warrant Certificates.
Warrant Certificates representing the 100,000 Warrants to be issued to
H+N Partners with an exercise price of $1.25 per share shall be numbered
serially with the letters "WHNA" preceding the number of each Warrant
Certificate.
Warrant Certificates representing the 100,000 Warrants to be issued to
H+N Partners with an exercise price of $1.50 per share shall be numbered
serially with the letters "WHNB" preceding the number of each Warrant
Certificate.
Warrant Certificates shall be executed on behalf of the Company by its
President and Secretary, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. In the event any officer of the Company who executed the
Warrant Certificates shall cease to be an officer of the Company before the
date of issuance of the Warrant Certificates or before countersignature and
delivery by the Warrant Agent, such Warrant Certificates may be
countersigned, issued and delivered by the Warrant Agent with the same
force and effect as though the person who signed such Warrant Certificates
had not ceased to be an officer of the Company.
5. Exercise of Warrants. The Warrants shall be exercisable during the
Exercise Period. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of the surrender for
exercise (the "Exercise Date") of the Warrant Certificate. The exercise
form shall be executed by the Registered Holder thereof or his attorney
duly authorized in writing and shall be delivered together with payment to
the Warrant Agent, in cash or by official bank or certified check, of an
amount in lawful money of the United States of America. Such payment shall
be in an amount equal to the Exercise Price per Warrant as hereinabove
defined.
The person entitled to receive the number of Warrant Shares deliverable
on such exercise shall be treated for all purposes as the holder of such
Warrant Shares as of the close of business on the Exercise Date. The
Company shall not be obligated to issue any fractional share interests in
Warrant Shares issuable on exercise of a Warrant. If more than one Warrant
shall be exercised at one time by the same Registered Holder, the number of
full shares which shall be issuable on exercise thereof shall be computed
on the basis of the aggregate number of full shares issuable on such exercise.
As soon as practicable on or after the Exercise Date and in any event
within 30 days after such date, the Warrant Agent shall cause to be issued
and delivered to the person or persons entitled to receive the same, a
certificate or certificates for the number of Warrant Shares deliverable on
such exercise. No adjustment shall be made in respect of cash dividends on
Warrant Shares deliverable on exercise of any Warrant. The Warrant Agent
shall promptly notify the Company in writing of any exercise of any Warrant
and of the number of Warrant Shares delivered and shall cause payment of an
amount in cash equal to the Exercise Price to be made promptly to the order
of the Company. The parties contemplate such payments will be made by the
Warrant Agent to the Company as collected funds are received by the Warrant
Agent. The Warrant Agent shall hold any proceeds collected and not yet
paid to the Company in a Federally-insured escrow account at a commercial
bank selected by the Warrant Agent, at all times relevant hereto.
Following a determination by the Warrant Agent that collected funds have
been received, the Warrant Agent shall cause share certificates to be
issued representing the number of Warrants exercised by the holder.
Expenses incurred by the Warrant Agent hereunder, including
administrative costs, costs of maintaining records and other expenses,
shall be paid by the Company according to the standard fees imposed by the
Warrant Agent for such services.
A detailed accounting statement setting forth the number of Warrants
exercised, the net amount of exercised funds and all expenses incurred by
the Warrant Agent shall be transmitted to the Company on payment of each
exercise amount. Such accounting statement shall serve as an interim
accounting for the Company during the Exercise Period. The Warrant Agent
shall render to the Company a complete accounting setting forth the number
of Warrants exercised, the identity of persons exercising such Warrants,
the number of shares issued, the amounts to be distributed to the Company
and all other expenses incurred by the Warrant Agent, at the completion of
the Exercise Period.
6. Reservation of Shares and Payment of Taxes. The Company covenants that
it will, at all times, reserve and have available from its authorized
shares of Common Stock such number of shares of Common Stock as shall then
be issuable on exercise of all outstanding Warrants. The Company covenants
that all Warrant Shares, when issued, shall be duly and validly issued,
fully paid and non-assessable, and free from all taxes, liens and charges
with respect to the issue thereof.
If any Warrant Shares require registration with, or approval of, any
government authority under any Federal or state law before such shares may
be validly issued or delivered, the Company covenants it will, in good
faith and as expeditiously as possible, endeavor to secure such
registration or approval, as the case may be.
Warrantholders shall pay all documentary stamp or similar taxes and other
government charges that may be imposed with respect to the issuance of the
Warrants, or the issuance, transfer or delivery of any Warrant Shares on
exercise of the Warrants. In the event the Warrant Shares are to be
delivered in a name other than the name of the Registered Holder of the
Warrant Certificate, no such delivery shall be made unless the person
requesting the same has paid to the Warrant Agent the amount of any such
taxes or charges incident thereto.
The Warrant Agent is hereby irrevocably authorized to requisition
certificates for Warrant Shares from the Company's Transfer Agent as
required from time to time. The Company has, contemporaneously with the
execution of this Agreement, authorized the Transfer Agent to comply with
all such requisitions. The Company will file with the Warrant Agent a
statement setting forth the name and address of its Transfer Agent for the
Company's Common Stock issuable on exercise of the Warrants and of each
successor Transfer Agent, if any.
7. Registration of Transfer of Warrant Certificates. The Warrant
Certificates may not be transferred in whole or in part except as
authorized in this Agreement. Warrant Certificates to be exchanged shall
be surrendered to the Warrant Agent at its Corporate Office. The Company
shall execute, and the Warrant Agent shall countersign, issue and deliver
in exchange therefor, the Warrant Certificate or Certificates which the
holder making the transfer shall be entitled to receive.
The Warrant Agent shall keep transfer books at its Corporate Office in
which it shall register Warrant Certificates and the transfer thereof. On
due presentment for transfer of any Warrant Certificates at such office,
the Company shall execute, and the Warrant Agent shall issue and deliver to
the transferee or transferees, a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants.
The Warrants will not be publicly traded.
8. Loss or Mutilation. On receipt by the Company and the Warrant Agent of
evidence satisfactory as to the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate, the Company shall
execute, and the Warrant Agent shall countersign and deliver in lieu
thereof, a new Warrant Certificate representing an equal aggregate number
of Warrants. In the case of loss, theft or destruction of any Warrant
Certificate, the individual requesting issuance of a new Warrant
Certificate shall be required to indemnify the Company and Warrant Agent in
an amount satisfactory to each of them. In the event a Warrant Certificate
is mutilated, such Certificate shall be surrendered and cancelled by the
Warrant Agent prior to delivery of a new Warrant Certificate. Applicants
for a substitute Warrant Certificate shall also comply with such other
regulations and pay such other reasonable charges as the Company may
prescribe.
9. Adjustment of Exercise Price and Shares.
A. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall issue any of its Common Stock as a stock
dividend or shall subdivide the number of outstanding shares of Common
Stock into a greater number of shares, then, in either of such events, the
Exercise Price in effect at the time of such action shall be reduced
proportionately and the number of shares of Common Stock purchasable
pursuant to the Warrants shall be increased proportionately. Conversely,
in the event the Company shall reduce the number of its outstanding shares
of Common Stock by combining such shares into a smaller number of shares,
then, in such event, the Exercise Price in effect at the time of such
action shall be increased proportionately and the number of shares of
Common Stock at that time purchasable pursuant to the Warrants shall be
decreased proportionately. Such stock dividend paid or distributed on the
Common Stock in shares of any other class of the Company or securities
convertible into shares of Common Stock shall be treated as a dividend paid
or distributed in shares of Common Stock to the extent shares of Common
Stock are issuable on the payment or conversion thereof.
B. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall be recapitalized by reclassifying its
outstanding shares of Common Stock into shares with a different par value,
or by changing its outstanding Common Stock to shares without par value or
in the event of any other material change of the capital structure of the
Company or of any successor corporation by reason of any reclassification,
recapitalization or conveyance, prompt, proportionate, equitable, lawful
and adequate provision shall be made whereby any holder of the Warrants
shall thereafter have the right to purchase, on the basis and the terms and
conditions specified in this Agreement, in lieu of the shares of Common
Stock of the Company theretofore purchasable on the exercise of any
Warrant, such securities or assets as may be issued or payable with respect
to, or in exchange for, the number of shares of Common Stock of the Company
theretofore purchasable on exercise of the Warrants had such
reclassification, recapitalization or conveyance not taken place; and, in
any such event, the rights of any holder of a Warrant to any adjustment in
the number of shares of Common Stock purchasable on exercise of such
Warrant, as set forth above, shall continue and be preserved in respect of
any stock, securities or assets which the holder becomes entitled to
purchase; provided, however, that a merger, acquisition of a going business
or a portion thereof (whether for cash, stock, notes, other securities, or
a combination of cash and securities), exchange of stock for stock,
exchange of stock for assets, or like transaction involving the Company
will not be considered a "material change" for purposes of this paragraph,
and no adjustment shall be made under this paragraph 9 by reason of any
such merger, acquisition, exchange of stock for stock, exchange of stock
for assets, or like transaction.
C. In the event the Company, at any time while the Warrants shall remain
unexpired and unexercised, shall sell all or substantially all of its
property, or dissolves, liquidates or winds up its affairs, prompt,
proportionate, equitable, lawful and adequate provision shall be made as
part of the terms of such sale, dissolution, liquidation or winding up such
that the holder of a Warrant may thereafter receive, on exercise of such
Warrant, in lieu of each share of Common Stock of the Company which such
holder would have been entitled to receive upon exercise of such Warrant,
the same kind and amount of any stock, securities or assets as may be
issuable, distributable or payable on any such sale, dissolution,
liquidation or winding up with respect to each share of Common Stock of the
Company; provided, however, that, in the event of any such sale,
dissolution, liquidation or winding up, the right to exercise the Warrants
shall terminate on a date fixed by the Company, such date to be not earlier
than 5:00 p.m., Central Time, on the 30th day next succeeding the date on
which notice of such termination of the right to exercise the Warrants has
been given by mail to the holders thereof at such addresses as may appear
on the books of the Company.
D. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to purchase shares of its
Common Stock at a price per share more than 10% below the then-current
market price per share (as defined below) of its Common Stock at the date
of taking such record, then (i) the number of shares of Common Stock
purchasable pursuant to the Warrants shall be redetermined as follows: the
number of shares of Common Stock purchasable pursuant to a Warrant
immediately prior to such adjustment (taking into account fractional
interests to the nearest 1,000th of a share) shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common
Stock of the Company then outstanding (excluding the Common Stock then
owned by the Company) immediately prior to the taking of such record, plus
the number of additional shares offered for purchase, and the denominator
of which shall be the number of shares of Common Stock of the Company
outstanding (excluding the Common Stock owned by the Company) immediately
prior to the taking of such record, plus the number of shares which the
aggregate offering price of the total number of additional shares so
offered would purchase at such current market price; and (ii) the Exercise
Price per share of Common Stock purchasable pursuant to a Warrant shall be
redetermined as follows: the Exercise Price in effect immediately prior to
the taking of such record shall be multiplied by a fraction, the numerator
of which is the number of shares of Common Stock purchasable immediately
prior to the taking of such record, and the denominator of which is the
number of shares of Common Stock purchasable immediately after the taking
of such record as determined pursuant to clause (i) above. For the purpose
hereof, the current market price per share of Common Stock of the Company
at any date shall be deemed to be the average of (A) the highest bid and
asked prices as reported by NASDAQ if the Common Stock of the Company is
admitted to listing for trading thereon, or (B) the highest bid and asked
prices reported on the OTC Electronic Bulletin Board of the NASD, for 30
consecutive business days commencing 15 business days prior to the record
date.
E. On exercise of the Warrants by the holders, the Company shall not be
required to deliver fractions of shares of Common Stock; provided, however,
that prompt, proportionate, equitable, lawful and adequate adjustment in
the Exercise Price payable shall be made in respect of any such fraction of
one share of Common Stock on the basis of the Exercise Price per share.
F. In the event, prior to expiration of the Warrants by exercise or by
their terms, the Company shall determine to take a record of the holders of
its Common Stock for the purpose of determining shareholders entitled to
receive any stock dividend, distribution or other right which will cause
any change or adjustment in the number, amount, price or nature of the
Common Stock or other stock, securities or assets deliverable on exercise
of the Warrants pursuant to the foregoing provisions, the Company shall
give to the Registered Holders of the Warrants at the addresses as may
appear on the books of the Company at least 15 days' prior written notice
to the effect that it intends to take such a record. Such notice shall
specify the date as of which such record is to be taken; the purpose for
which such record is to be taken; and the number, amount, price and nature
of the Common Stock or other stock, securities or assets which will be
deliverable on exercise of the Warrants after the action for which such
record will be taken has been completed. Without limiting the obligation
of the Company to provide notice to the Registered Holders of the Warrant
Certificates of any corporate action hereunder, the failure of the Company
to give notice shall not invalidate such corporate action of the Company.
G. The Warrant shall not entitle the holder thereof to any of the rights
of shareholders or to any dividend declared on the Common Stock, unless the
Warrant is exercised and the Warrant Shares purchased prior to the record
date fixed by the Board of Directors of the Company for the determination
of holders of Common Stock entitled to such dividend or other right.
H. No adjustment of the Exercise Price shall be made as a result of, or
in connection with, (i) the establishment of one or more employee stock
option plans for employees of the Company, or the modification, renewal or
extension of any such plan, or the issuance of Common Stock on exercise of
any options pursuant to any such plan, (ii) the issuance of individual
warrants or options to purchase Common Stock, the issuance of Common Stock
upon exercise of such warrants or options, or the issuance of Common Stock
in connection with compensation arrangements for directors, officers,
employees, consultants or agents of the Company or any Subsidiary, and the
like, or (iii) the issuance of Common Stock in connection with a merger,
acquisition of a going business or a portion thereof (whether for cash,
stock, notes, other securities, or a combination of cash and securities),
exchange of stock for stock, exchange of stock for assets, or like
transaction.
10. Duties, Compensation and Termination of Warrant Agent. The Warrant
Agent shall act hereunder as agent and in a ministerial capacity for the
Company, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not, by issuing and delivering Warrant
Certificates or by any other act hereunder, be deemed to make any
representations as to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of the Common Stock or
other property delivered on exercise of any Warrant. The Warrant Agent
shall not be under any duty or responsibility to any holder of the Warrant
Certificates to make or cause to be made any adjustment of the Exercise
Price or to determine whether any fact exists which may require any such
adjustments.
The Warrant Agent shall not (i) be liable for any recital or statement of
fact contained herein or for any action taken or omitted by it in reliance
on any Warrant Certificate or other document or instrument believed by it
in good faith to be genuine and to have been signed or presented by the
proper party or parties, (ii) be responsible for any failure on the part of
the Company to comply with any of its covenants and obligations contained
in this Agreement or in the Warrant Certificates, or (iii) be liable for
any act or omission in connection with this Agreement, except for its own
negligence or willful misconduct.
The Warrant Agent may, at any time, consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken or omitted by it in good faith in
accordance with such notice, statement, instruction, request, direction,
order or demand.
Any notice, statement, instruction, request, direction, order or demand
of the Company shall be sufficiently evidenced by an instrument signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall not be liable for any action taken or omitted by it in
accordance with such notice, statement, instruction, request, direction,
order or demand.
The Company agrees to pay the Warrant Agent compensation for its services
hereunder and to reimburse the Warrant Agent for its reasonable expenses in
accordance with the terms of Exhibit "C" attached hereto and incorporated
herein by this reference. The Company further agrees to indemnify the
Warrant Agent against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for any action taken or
omitted by the Warrant Agent in the execution of its duties and powers
hereunder, excepting losses, expenses and liabilities arising as a result
of the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties or the Company may terminate the
Warrant Agent and the Warrant Agent shall be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of
the Warrant Agent's own negligence or willful misconduct) on 30 days' prior
written notice to the other party. At least 15 days prior to the date such
resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each
Warrant Certificate. On such resignation or termination, the Company shall
appoint a new Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in
writing of the resignation by the Warrant Agent, then the Registered Holder
of any Warrant Certificate may apply to any court of competent jurisdiction
for the appointment of a new Warrant Agent. Any new Warrant Agent, whether
appointed by the Company or by such court, shall be a bank or trust company
having a capital and surplus, as shown by its last published report to its
shareholders, of not less than $1,000,000.
After acceptance in writing of an appointment of a new Warrant Agent is
received by the Company, such new Warrant Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; provided, however, if it shall be
necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed. The Company shall file a
notice of appointment of a new Warrant Agent with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new Warrant Agent may
be converted or merged, or any corporation resulting from any consolidation
to which the Warrant Agent or any new Warrant Agent shall be a party, or
any corporation succeeding to the corporate trust business of the Warrant
Agent shall be a successor Warrant Agent under this Agreement, provided
that such corporation is eligible for appointment as a successor to the
Warrant Agent. Any such successor Warrant Agent shall promptly cause
notice of its succession as Warrant Agent to be mailed to the Company and
to the Registered Holder of each Warrant Certificate. No further action
shall be required for establishment and authorization of such successor
Warrant Agent.
The Warrant Agent, its officers or directors and its subsidiaries or
affiliates may buy, hold or sell Warrants or other securities of the
Company and otherwise deal with the Company in the same manner and to the
same extent and with like effect as though it were not the Warrant Agent.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company.
11. Modification of Agreement. The Warrant Agent and the Company may, by
supplemental agreement, make any changes or corrections in this Agreement
they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or mistake or error herein contained.
Additionally, the parties may make any changes or corrections deemed
necessary which shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, this Agreement shall not otherwise
be modified, supplemented or altered in any respect, except with the
consent in writing of the Registered Holders of Warrant Certificates
representing not less than 66 2/3% of the Warrants outstanding; provided,
however, that no change in the number or nature of the Warrant Shares
purchasable on exercise of a Warrant, or the Exercise Price or the Exercise
Period thereof shall be made without the consent, in writing, of the
Registered Holder of the Warrant Certificate representing such Warrant,
other than such changes as are specifically prescribed by this Agreement.
12. Notices. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder shall
be deemed given sufficiently in writing and sent via a nationally
recognized overnight courier service, by registered or certified mail,
return receipt requested and postage prepaid, or by facsimile to:
in the case of the Company: Media Entertainment, Inc.
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Facsimile: (504) 922-9123
with a copy to: Newlan & Newlan
Attorneys at Law
2512 Program Drive, Suite 101
Dallas, Texas 75220
Facsimile: (214) 654-9520
and, in the case of the Warrant Agent: Securities Transfer Corporation
16910 Dallas Parkway
Suite 100
Dallas, Texas 75248
Facsimile: (972) 248-4797
and, if to the Registered Holder of a Warrant Certificate, at the address
of such holder as set forth on the books maintained by the Warrant Agent.
13. Persons Benefiting. This Agreement shall be binding upon and inure to
the benefit of the Company, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of the Warrant
Certificates. Nothing in this Agreement is intended to or shall be
construed to confer on any other person any right, remedy or claim or to
impose on any other person any duty, liability or obligation.
14. Further Instruments. The parties shall execute and deliver any and
all such other instruments and shall take any and all such other actions as
may be reasonable or necessary to carry out the intention of this Agreement.
15. Severability. If any provision of this Agreement shall be held,
declared or pronounced void, voidable, invalid, unenforceable or
inoperative for any reason by any court of competent jurisdiction,
government authority or otherwise, such holding, declaration or
pronouncement shall not affect adversely any other provision of this
Agreement, which shall otherwise remain in full force and effect and be
enforced in accordance with its terms, and the effect of such holding,
declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
16. Waiver. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies
as provided by law. No delay or failure on the part of either party in the
exercise of any right or remedy arising from a breach of this Agreement
shall operate as a waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party where
required hereunder to any act or occurrence shall not be deemed to be a
consent to any other act or occurrence.
17. General Provisions. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Texas. Except
as otherwise expressly stated herein, time is of the essence in performing
hereunder. This Agreement embodies the entire agreement and understanding
between the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, and this Agreement may not be
modified or amended or any term or provision hereof waived or discharged
except in writing signed by the party against whom such amendment,
modification, waiver or discharge is sought to be enforced. The headings
of this Agreement are for convenience of reference only and shall not limit
or otherwise affect the meaning thereof. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above-mentioned.
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin, President
SECURITIES TRANSFER CORPORATION
By: /s/ Kevin Halter, Jr.
Kevin Halter, Jr., President
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EXHIBIT 10.11
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WARRANT AGREEMENT
THIS AGREEMENT dated as of May 18, 1998, between Media Entertainment, Inc.,
a Nevada corporation (the "Company"), and Securities Transfer Corporation,
a Texas corporation (the "Warrant Agent").
RECITALS:
A. Pursuant to a Selling Agreement with Centex Securities, Inc. relating
to a private offering of 300,000 units of securities by the Company, the
Company proposes to issue to Centex Securities, Inc. 60,000 Warrants
(individually, a "Warrant", and, collectively, the "Warrants"), to purchase
an aggregate of 60,000 shares of Common Stock of the Company (the "Warrant
Shares").
B. The Company desires to provide for the issuance of warrant certificates
(the "Warrant Certificates") representing the Warrants.
C. The Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer and exchange of Warrant Certificates and
exercise of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrant Certificates and the Warrants, and the respective
rights and obligations thereunder of the Company, the registered holders of
the Warrant Certificates and the Warrant Agent, the parties hereto agree as
follows:
1. Definitions. As used herein:
A. "Common Stock" shall mean shares of common stock of the Company,
$.0001 par value (the "Common Stock"), whether now or hereafter authorized,
which have the right to participate in the distribution of earnings and
assets of the Company without limit as to amount or percentage.
B. "Corporate Office" shall mean the place of business of the Warrant
Agent located in Dallas, Texas, or its successor (for the mailing address
of the Warrant Agent, see paragraph 12 hereof).
C. "Exercise Period" shall mean the period commencing on the date of the
issuance of the Warrants and ending on the Expiration Date.
D. "Exercise Price" shall mean a purchase price of $1.25 per share of
Common Stock (the "Warrant Exercise Price").
E. "Expiration Date" shall mean 5:00 p.m. Central Time, on the date which
is four (4) years from the date of execution hereof, or if such day shall
be a holiday or day on which banks are authorized to close, then 5:00 p.m.
Central Time, whichever is in effect, on the next following day that in the
State of Texas is not a holiday or a day on which banks are authorized to
close.
F. "Registered Holder" shall mean the person in whose name any Warrant
Certificate shall be registered on the books maintained by the Warrant
Agent pursuant to this Agreement.
G. "Subsidiary" shall mean any corporation of which shares having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (regardless of whether the shares of any other class or classes
of such corporation shall have or may have voting power by reason of the
happening of any contingency) are at the time directly or indirectly owned
by the Company or one or more subsidiaries of the Company.
H. "Transfer Agent" shall mean the Company's transfer agent, Securities
Transfer Corporation, or its successor.
I. "Warrant" or "Warrants" shall mean and include up to 60,000 Warrants
to be issued to Centex Securities, Inc. to purchase a like number of shares
of the authorized and unissued Common Stock of the Company.
J. "Warrant Shares" shall mean and include up to 60,000 shares of
authorized and unissued Common Stock initially reserved for issuance on
exercise of the Warrants and any additional shares of Common Stock or other
property which may hereafter be issuable or deliverable on exercise of the
Warrants pursuant to paragraph 5 of this Agreement.
2. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company in accordance with the instructions
set forth hereafter in this Agreement, and the Warrant Agent hereby accepts
such appointment and agrees to perform the duties and obligations required
of it, as such duties and obligations are set forth herein.
3. Warrants and Issuance of Warrant Certificates. Each Warrant shall
initially entitle the Registered Holder of the Warrant Certificate
representing such Warrant to purchase one shares of Common Stock on
exercise thereof, subject to modification and adjustment as hereinafter
provided in paragraph 9. The Warrant Certificates will be issued and
delivered by the Warrant Agent on written order of the Company signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement.
4. Form and Execution of Warrant Certificates. The Warrant Certificates
representing the Warrants to be issued to Centex Securities, Inc. shall be
substantially in the form attached as Exhibit "A" and may have such
letters, numbers or other marks of identification and such legends,
summaries or endorsements printed, lithographed or engraved thereon as the
Company may deem appropriate and as are not inconsistent with the
provisions hereof.
The Warrant Certificates shall be dated as of the date of issuance,
whether on initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Warrant Certificates.
Warrant Certificates representing the Warrants to be issued to Centex
Securities, Inc. shall be numbered serially with the letters "WCSI"
preceding the number of each Warrant Certificate.
Warrant Certificates shall be executed on behalf of the Company by its
President and Secretary, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. In the event any officer of the Company who executed the
Warrant Certificates shall cease to be an officer of the Company before the
date of issuance of the Warrant Certificates or before countersignature and
delivery by the Warrant Agent, such Warrant Certificates may be
countersigned, issued and delivered by the Warrant Agent with the same
force and effect as though the person who signed such Warrant Certificates
had not ceased to be an officer of the Company.
5. Exercise of Warrants. The Warrants shall be exercisable during the
Exercise Period. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of the surrender for
exercise (the "Exercise Date") of the Warrant Certificate. The exercise
form shall be executed by the Registered Holder thereof or his attorney
duly authorized in writing and shall be delivered together with payment to
the Warrant Agent, in cash or by official bank or certified check, of an
amount in lawful money of the United States of America. Such payment shall
be in an amount equal to the Exercise Price per Warrant as hereinabove
defined.
The person entitled to receive the number of Warrant Shares deliverable
on such exercise shall be treated for all purposes as the holder of such
Warrant Shares as of the close of business on the Exercise Date. The
Company shall not be obligated to issue any fractional share interests in
Warrant Shares issuable on exercise of a Warrant. If more than one Warrant
shall be exercised at one time by the same Registered Holder, the number of
full shares which shall be issuable on exercise thereof shall be computed
on the basis of the aggregate number of full shares issuable on such exercise.
As soon as practicable on or after the Exercise Date and in any event
within 30 days after such date, the Warrant Agent shall cause to be issued
and delivered to the person or persons entitled to receive the same, a
certificate or certificates for the number of Warrant Shares deliverable on
such exercise. No adjustment shall be made in respect of cash dividends on
Warrant Shares deliverable on exercise of any Warrant. The Warrant Agent
shall promptly notify the Company in writing of any exercise of any Warrant
and of the number of Warrant Shares delivered and shall cause payment of an
amount in cash equal to the Exercise Price to be made promptly to the order
of the Company. The parties contemplate such payments will be made by the
Warrant Agent to the Company as collected funds are received by the Warrant
Agent. The Warrant Agent shall hold any proceeds collected and not yet
paid to the Company in a Federally-insured escrow account at a commercial
bank selected by the Warrant Agent, at all times relevant hereto.
Following a determination by the Warrant Agent that collected funds have
been received, the Warrant Agent shall cause share certificates to be
issued representing the number of Warrants exercised by the holder.
Expenses incurred by the Warrant Agent hereunder, including
administrative costs, costs of maintaining records and other expenses,
shall be paid by the Company according to the standard fees imposed by the
Warrant Agent for such services.
A detailed accounting statement setting forth the number of Warrants
exercised, the net amount of exercised funds and all expenses incurred by
the Warrant Agent shall be transmitted to the Company on payment of each
exercise amount. Such accounting statement shall serve as an interim
accounting for the Company during the Exercise Period. The Warrant Agent
shall render to the Company a complete accounting setting forth the number
of Warrants exercised, the identity of persons exercising such Warrants,
the number of shares issued, the amounts to be distributed to the Company
and all other expenses incurred by the Warrant Agent, at the completion of
the Exercise Period.
6. Reservation of Shares and Payment of Taxes. The Company covenants that
it will, at all times, reserve and have available from its authorized
shares of Common Stock such number of shares of Common Stock as shall then
be issuable on exercise of all outstanding Warrants. The Company covenants
that all Warrant Shares, when issued, shall be duly and validly issued,
fully paid and non-assessable, and free from all taxes, liens and charges
with respect to the issue thereof.
If any Warrant Shares require registration with, or approval of, any
government authority under any Federal or state law before such shares may
be validly issued or delivered, the Company covenants it will, in good
faith and as expeditiously as possible, endeavor to secure such
registration or approval, as the case may be.
Warrantholders shall pay all documentary stamp or similar taxes and other
government charges that may be imposed with respect to the issuance of the
Warrants, or the issuance, transfer or delivery of any Warrant Shares on
exercise of the Warrants. In the event the Warrant Shares are to be
delivered in a name other than the name of the Registered Holder of the
Warrant Certificate, no such delivery shall be made unless the person
requesting the same has paid to the Warrant Agent the amount of any such
taxes or charges incident thereto.
The Warrant Agent is hereby irrevocably authorized to requisition
certificates for Warrant Shares from the Transfer Agent as required from
time to time. The Company has, contemporaneously with the execution of
this Agreement, authorized the Transfer Agent to comply with all such
requisitions. The Company will file with the Warrant Agent a statement
setting forth the name and address of its Transfer Agent for the Company's
Common Stock issuable on exercise of the Warrants and of any successor
Transfer Agent.
7. Registration of Transfer of Warrant Certificates. The Warrant
Certificates may not be transferred in whole or in part except as
authorized in this Agreement. Warrant Certificates to be exchanged shall
be surrendered to the Warrant Agent at its Corporate Office. The Company
shall execute, and the Warrant Agent shall countersign, issue and deliver
in exchange therefor, the Warrant Certificate or Certificates which the
holder making the transfer shall be entitled to receive.
The Warrant Agent shall keep transfer books at its Corporate Office in
which it shall register Warrant Certificates and the transfer thereof. On
due presentment for transfer of any Warrant Certificates at such office,
the Company shall execute, and the Warrant Agent shall issue and deliver to
the transferee or transferees, a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants.
The Warrants will not be publicly traded.
8. Loss or Mutilation. On receipt by the Company and the Warrant Agent of
evidence satisfactory as to the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate, the Company shall
execute, and the Warrant Agent shall countersign and deliver in lieu
thereof, a new Warrant Certificate representing an equal aggregate number
of Warrants. In the case of loss, theft or destruction of any Warrant
Certificate, the individual requesting issuance of a new Warrant
Certificate shall be required to indemnify the Company and Warrant Agent in
an amount satisfactory to each of them. In the event a Warrant Certificate
is mutilated, such Certificate shall be surrendered and cancelled by the
Warrant Agent prior to delivery of a new Warrant Certificate. Applicants
for a substitute Warrant Certificate shall also comply with such other
regulations and pay such other reasonable charges as the Company may
prescribe.
9. Adjustment of Exercise Price and Shares.
A. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall issue any of its Common Stock as a stock
dividend or shall subdivide the number of outstanding shares of Common
Stock into a greater number of shares, then, in either of such events, the
Exercise Price in effect at the time of such action shall be reduced
proportionately and the number of shares of Common Stock purchasable
pursuant to the Warrants shall be increased proportionately. Conversely,
in the event the Company shall reduce the number of its outstanding shares
of Common Stock by combining such shares into a smaller number of shares,
then, in such event, the Exercise Price in effect at the time of such
action shall be increased proportionately and the number of shares of
Common Stock at that time purchasable pursuant to the Warrants shall be
decreased proportionately. Such stock dividend paid or distributed on the
Common Stock in shares of any other class of the Company or securities
convertible into shares of Common Stock shall be treated as a dividend paid
or distributed in shares of Common Stock to the extent shares of Common
Stock are issuable on the payment or conversion thereof.
B. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall be recapitalized by reclassifying its
outstanding shares of Common Stock into shares with a different par value,
or by changing its outstanding Common Stock to shares without par value or
in the event of any other material change of the capital structure of the
Company or of any successor corporation by reason of any reclassification,
recapitalization or conveyance, prompt, proportionate, equitable, lawful
and adequate provision shall be made whereby any holder of the Warrants
shall thereafter have the right to purchase, on the basis and the terms and
conditions specified in this Agreement, in lieu of the shares of Common
Stock of the Company theretofore purchasable on the exercise of any
Warrant, such securities or assets as may be issued or payable with respect
to, or in exchange for, the number of shares of Common Stock of the Company
theretofore purchasable on exercise of the Warrants had such
reclassification, recapitalization or conveyance not taken place; and, in
any such event, the rights of any holder of a Warrant to any adjustment in
the number of shares of Common Stock purchasable on exercise of such
Warrant, as set forth above, shall continue and be preserved in respect of
any stock, securities or assets which the holder becomes entitled to
purchase; provided, however, that a merger, acquisition of a going business
or a portion thereof (whether for cash, stock, notes, other securities, or
a combination of cash and securities), exchange of stock for stock,
exchange of stock for assets, or like transaction involving the Company
will not be considered a "material change" for purposes of this paragraph,
and no adjustment shall be made under this paragraph 9 by reason of any
such merger, acquisition, exchange of stock for stock, exchange of stock
for assets, or like transaction.
C. In the event the Company, at any time while the Warrants shall remain
unexpired and unexercised, shall sell all or substantially all of its
property, or dissolves, liquidates or winds up its affairs, prompt,
proportionate, equitable, lawful and adequate provision shall be made as
part of the terms of such sale, dissolution, liquidation or winding up such
that the holder of a Warrant may thereafter receive, on exercise of such
Warrant, in lieu of each share of Common Stock of the Company which such
holder would have been entitled to receive upon exercise of such Warrant,
the same kind and amount of any stock, securities or assets as may be
issuable, distributable or payable on any such sale, dissolution,
liquidation or winding up with respect to each share of Common Stock of the
Company; provided, however, that, in the event of any such sale,
dissolution, liquidation or winding up, the right to exercise the Warrants
shall terminate on a date fixed by the Company, such date to be not earlier
than 5:00 p.m., Central Time, on the 30th day next succeeding the date on
which notice of such termination of the right to exercise the Warrants has
been given by mail to the holders thereof at such addresses as may appear
on the books of the Company.
D. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to purchase shares of its
Common Stock at a price per share more than 10% below the then-current
market price per share (as defined below) of its Common Stock at the date
of taking such record, then (i) the number of shares of Common Stock
purchasable pursuant to the Warrants shall be redetermined as follows: the
number of shares of Common Stock purchasable pursuant to a Warrant
immediately prior to such adjustment (taking into account fractional
interests to the nearest 1,000th of a share) shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common
Stock of the Company then outstanding (excluding the Common Stock then
owned by the Company) immediately prior to the taking of such record, plus
the number of additional shares offered for purchase, and the denominator
of which shall be the number of shares of Common Stock of the Company
outstanding (excluding the Common Stock owned by the Company) immediately
prior to the taking of such record, plus the number of shares which the
aggregate offering price of the total number of additional shares so
offered would purchase at such current market price; and (ii) the Exercise
Price per share of Common Stock purchasable pursuant to a Warrant shall be
redetermined as follows: the Exercise Price in effect immediately prior to
the taking of such record shall be multiplied by a fraction, the numerator
of which is the number of shares of Common Stock purchasable immediately
prior to the taking of such record, and the denominator of which is the
number of shares of Common Stock purchasable immediately after the taking
of such record as determined pursuant to clause (i) above. For the purpose
hereof, the current market price per share of Common Stock of the Company
at any date shall be deemed to be the average of (A) the highest bid and
asked prices as reported by NASDAQ if the Common Stock of the Company is
admitted to listing for trading thereon, or (B) the highest bid and asked
prices reported on the OTC Electronic Bulletin Board of the NASD, for 30
consecutive business days commencing 15 business days prior to the record
date.
E. On exercise of the Warrants by the holders, the Company shall not be
required to deliver fractions of shares of Common Stock; provided, however,
that prompt, proportionate, equitable, lawful and adequate adjustment in
the Exercise Price payable shall be made in respect of any such fraction of
one share of Common Stock on the basis of the Exercise Price per share.
F. In the event, prior to expiration of the Warrants by exercise or by
their terms, the Company shall determine to take a record of the holders of
its Common Stock for the purpose of determining shareholders entitled to
receive any stock dividend, distribution or other right which will cause
any change or adjustment in the number, amount, price or nature of the
Common Stock or other stock, securities or assets deliverable on exercise
of the Warrants pursuant to the foregoing provisions, the Company shall
give to the Registered Holders of the Warrants at the addresses as may
appear on the books of the Company at least 15 days' prior written notice
to the effect that it intends to take such a record. Such notice shall
specify the date as of which such record is to be taken; the purpose for
which such record is to be taken; and the number, amount, price and nature
of the Common Stock or other stock, securities or assets which will be
deliverable on exercise of the Warrants after the action for which such
record will be taken has been completed. Without limiting the obligation
of the Company to provide notice to the Registered Holders of the Warrant
Certificates of any corporate action hereunder, the failure of the Company
to give notice shall not invalidate such corporate action of the Company.
G. The Warrant shall not entitle the holder thereof to any of the rights
of shareholders or to any dividend declared on the Common Stock, unless the
Warrant is exercised and the Warrant Shares purchased prior to the record
date fixed by the Board of Directors of the Company for the determination
of holders of Common Stock entitled to such dividend or other right.
H. No adjustment of the Exercise Price shall be made as a result of, or
in connection with, (i) the establishment of one or more employee stock
option plans for employees of the Company, or the modification, renewal or
extension of any such plan, or the issuance of Common Stock on exercise of
any options pursuant to any such plan, (ii) the issuance of individual
warrants or options to purchase Common Stock, the issuance of Common Stock
upon exercise of such warrants or options, or the issuance of Common Stock
in connection with compensation arrangements for directors, officers,
employees, consultants or agents of the Company or any Subsidiary, and the
like, or (iii) the issuance of Common Stock in connection with a merger,
acquisition of a going business or a portion thereof (whether for cash,
stock, notes, other securities, or a combination of cash and securities),
exchange of stock for stock, exchange of stock for assets, or like
transaction.
10. Duties, Compensation and Termination of Warrant Agent. The Warrant
Agent shall act hereunder as agent and in a ministerial capacity for the
Company, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not, by issuing and delivering Warrant
Certificates or by any other act hereunder, be deemed to make any
representations as to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of the Common Stock or
other property delivered on exercise of any Warrant. The Warrant Agent
shall not be under any duty or responsibility to any holder of the Warrant
Certificates to make or cause to be made any adjustment of the Exercise
Price or to determine whether any fact exists which may require any such
adjustments.
The Warrant Agent shall not (i) be liable for any recital or statement of
fact contained herein or for any action taken or omitted by it in reliance
on any Warrant Certificate or other document or instrument believed by it
in good faith to be genuine and to have been signed or presented by the
proper party or parties, (ii) be responsible for any failure on the part of
the Company to comply with any of its covenants and obligations contained
in this Agreement or in the Warrant Certificates, or (iii) be liable for
any act or omission in connection with this Agreement, except for its own
negligence or willful misconduct.
The Warrant Agent may, at any time, consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken or omitted by it in good faith in
accordance with such notice, statement, instruction, request, direction,
order or demand.
Any notice, statement, instruction, request, direction, order or demand
of the Company shall be sufficiently evidenced by an instrument signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall not be liable for any action taken or omitted by it in
accordance with such notice, statement, instruction, request, direction,
order or demand.
The Company agrees to pay the Warrant Agent compensation for its services
hereunder and to reimburse the Warrant Agent for its reasonable expenses in
accordance with the terms of Exhibit "B" attached hereto and incorporated
herein by this reference. The Company further agrees to indemnify the
Warrant Agent against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for any action taken or
omitted by the Warrant Agent in the execution of its duties and powers
hereunder, excepting losses, expenses and liabilities arising as a result
of the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties or the Company may terminate the
Warrant Agent and the Warrant Agent shall be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of
the Warrant Agent's own negligence or willful misconduct) on 30 days' prior
written notice to the other party. At least 15 days prior to the date such
resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each
Warrant Certificate. On such resignation or termination, the Company shall
appoint a new Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in
writing of the resignation by the Warrant Agent, then the Registered Holder
of any Warrant Certificate may apply to any court of competent jurisdiction
for the appointment of a new Warrant Agent. Any new Warrant Agent, whether
appointed by the Company or by such court, shall be a bank or trust company
having a capital and surplus, as shown by its last published report to its
shareholders, of not less than $1,000,000.
After acceptance in writing of an appointment of a new Warrant Agent is
received by the Company, such new Warrant Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; provided, however, if it shall be
necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed. The Company shall file a
notice of appointment of a new Warrant Agent with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new Warrant Agent may
be converted or merged, or any corporation resulting from any consolidation
to which the Warrant Agent or any new Warrant Agent shall be a party, or
any corporation succeeding to the corporate trust business of the Warrant
Agent shall be a successor Warrant Agent under this Agreement, provided
that such corporation is eligible for appointment as a successor to the
Warrant Agent. Any such successor Warrant Agent shall promptly cause
notice of its succession as Warrant Agent to be mailed to the Company and
to the Registered Holder of each Warrant Certificate. No further action
shall be required for establishment and authorization of such successor
Warrant Agent.
The Warrant Agent, its officers or directors and its subsidiaries or
affiliates may buy, hold or sell Warrants or other securities of the
Company and otherwise deal with the Company in the same manner and to the
same extent and with like effect as though it were not the Warrant Agent.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company.
11. Modification of Agreement. The Warrant Agent and the Company may, by
supplemental agreement, make any changes or corrections in this Agreement
they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or mistake or error herein contained.
Additionally, the parties may make any changes or corrections deemed
necessary which shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, this Agreement shall not otherwise
be modified, supplemented or altered in any respect, except with the
consent in writing of the Registered Holders of Warrant Certificates
representing not less than 66 2/3% of the Warrants outstanding; provided,
however, that no change in the number or nature of the Warrant Shares
purchasable on exercise of a Warrant, or the Exercise Price or the Exercise
Period thereof shall be made without the consent, in writing, of the
Registered Holder of the Warrant Certificate representing such Warrant,
other than such changes as are specifically prescribed by this Agreement.
12. Notices. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder shall
be deemed given sufficiently in writing and sent via a nationally
recognized overnight courier service, by registered or certified mail,
return receipt requested and postage prepaid, or by facsimile to:
in the case of the Company: Media Entertainment, Inc.
Attention: David M. Loflin
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Facsimile: (504) 922-9123
with a copy to: Newlan & Newlan
Attorneys at Law
2512 Program Drive
Suite 101
Dallas, Texas 75220
Facsimile: (214) 654-9520
and, in the case of the Warrant Agent: Securities Transfer Corporation
Attention: Kevin Halter, Jr.
16910 Dallas Parkway
Suite 100
Dallas, Texas 75248
Facsimile: (972) 248-4797
and, if to the Registered Holder of a Warrant Certificate, at the address
of such holder as set forth on the books maintained by the Warrant Agent.
13. Persons Benefitting. This Agreement shall be binding upon and inure
to the benefit of the Company, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of the Warrant
Certificates. Nothing in this Agreement is intended to or shall be
construed to confer on any other person any right, remedy or claim or to
impose on any other person any duty, liability or obligation.
14. Further Instruments. The parties shall execute and deliver any and
all such other instruments and shall take any and all such other actions as
may be reasonable or necessary to carry out the intention of this Agreement.
15. Severability. If any provision of this Agreement shall be held,
declared or pronounced void, voidable, invalid, unenforceable or
inoperative for any reason by any court of competent jurisdiction,
government authority or otherwise, such holding, declaration or
pronouncement shall not affect adversely any other provision of this
Agreement, which shall otherwise remain in full force and effect and be
enforced in accordance with its terms, and the effect of such holding,
declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
16. Waiver. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies
as provided by law. No delay or failure on the part of either party in the
exercise of any right or remedy arising from a breach of this Agreement
shall operate as a waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party where
required hereunder to any act or occurrence shall not be deemed to be a
consent to any other act or occurrence.
17. General Provisions. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Texas. Except
as otherwise expressly stated herein, time is of the essence in performing
hereunder. This Agreement embodies the entire agreement and understanding
between the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, and this Agreement may not be
modified or amended or any term or provision hereof waived or discharged
except in writing signed by the party against whom such amendment,
modification, waiver or discharge is sought to be enforced. The headings
of this Agreement are for convenience of reference only and shall not limit
or otherwise affect the meaning thereof. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above-mentioned.
MEDIA ENTERTAINMENT, INC.
By: /s/ David M. Loflin
David M. Loflin, President
SECURITIES TRANSFER CORPORATION
By: /s/ Kevin Halter, Jr.
Kevin Halter, Jr., President
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EXHIBIT 10.12
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WARRANT AGREEMENT
THIS AGREEMENT dated as of January 19, 1999, between Internet Media
Corporation, a Nevada corporation (the "Company"), and Securities Transfer
Corporation, a Texas corporation (the "Warrant Agent").
RECITALS:
A. Pursuant to a private offering of 225,000 units of securities (the
"Units") by the Company, the Company proposes to issue to the purchasers of
the Units 225,000 Warrants (individually, a "Warrant", and, collectively,
the "Warrants"), to purchase an aggregate of 225,000 shares of Common Stock
of the Company (the "Warrant Shares").
B. The Company desires to provide for the issuance of warrant certificates
(the "Warrant Certificates") representing the Warrants.
C. The Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer and exchange of Warrant Certificates and
exercise of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrant Certificates and the Warrants, and the respective
rights and obligations thereunder of the Company, the registered holders of
the Warrant Certificates and the Warrant Agent, the parties hereto agree as
follows:
1. Definitions. As used herein:
A. "Common Stock" shall mean shares of common stock of the Company,
$.0001 par value (the "Common Stock"), whether now or hereafter authorized,
which have the right to participate in the distribution of earnings and
assets of the Company without limit as to amount or percentage.
B. "Corporate Office" shall mean the place of business of the Warrant
Agent located in Dallas, Texas, or its successor (for the mailing address
of the Warrant Agent, see paragraph 13 hereof).
C. "Exercise Period" shall mean the period commencing on the date of the
issuance of the Warrants and ending on the Expiration Date.
D. "Exercise Price" shall mean a purchase price of $7.00 per share of
Common Stock (the "Warrant Exercise Price").
E. "Expiration Date" shall mean 5:00 p.m. Central Time, on the date which
is six (6) months from the date of execution hereof, or if such day shall
be a holiday or day on which banks are authorized to close, then 5:00 p.m.
Central Time, whichever is in effect, on the next following day that in the
State of Texas is not a holiday or a day on which banks are authorized to
close.
F. "Registered Holder" shall mean the person in whose name any Warrant
Certificate shall be registered on the books maintained by the Warrant
Agent pursuant to this Agreement.
G. "Subsidiary" shall mean any corporation of which shares having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (regardless of whether the shares of any other class or classes
of such corporation shall have or may have voting power by reason of the
happening of any contingency) are at the time directly or indirectly owned
by the Company or one or more subsidiaries of the Company.
H. "Transfer Agent" shall mean the Company's transfer agent, Securities
Transfer Corporation, or its successor.
I. "Warrant" or "Warrants" shall mean and include up to 225,000 Warrants
to be issued to the purchasers of the Units to purchase a like number of
shares of the authorized and unissued Common Stock of the Company.
J. "Warrant Shares" shall mean and include up to 225,000 shares of
authorized and unissued Common Stock initially reserved for issuance on
exercise of the Warrants and any additional shares of Common Stock or other
property which may hereafter be issuable or deliverable on exercise of the
Warrants pursuant to paragraph 5 of this Agreement.
2. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company in accordance with the instructions
set forth hereafter in this Agreement, and the Warrant Agent hereby accepts
such appointment and agrees to perform the duties and obligations required
of it, as such duties and obligations are set forth herein.
3. Warrants and Issuance of Warrant Certificates. Each Warrant shall
initially entitle the Registered Holder of the Warrant Certificate
representing such Warrant to purchase one shares of Common Stock on
exercise thereof, subject to modification and adjustment as hereinafter
provided in paragraph 10. The Warrant Certificates will be issued and
delivered by the Warrant Agent on written order of the Company signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement.
4. Form and Execution of Warrant Certificates. The Warrant Certificates
representing the Warrants to be issued to the purchasers of the Units shall
be substantially in the form attached as Exhibit "A" and may have such
letters, numbers or other marks of identification and such legends,
summaries or endorsements printed, lithographed or engraved thereon as the
Company may deem appropriate and as are not inconsistent with the
provisions hereof.
The Warrant Certificates shall be dated as of the date of issuance,
whether on initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Warrant Certificates.
Warrant Certificates representing the Warrants to be issued to the
purchasers of the Units shall be numbered serially with the letters "WPOB"
preceding the number of each Warrant Certificate.
Warrant Certificates shall be executed on behalf of the Company by its
President and Secretary, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. In the event any officer of the Company who executed the
Warrant Certificates shall cease to be an officer of the Company before the
date of issuance of the Warrant Certificates or before countersignature and
delivery by the Warrant Agent, such Warrant Certificates may be
countersigned, issued and delivered by the Warrant Agent with the same
force and effect as though the person who signed such Warrant Certificates
had not ceased to be an officer of the Company.
5. Exercise of Warrants. The Warrants shall be exercisable during the
Exercise Period. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of the surrender for
exercise (the "Exercise Date") of the Warrant Certificate. The exercise
form shall be executed by the Registered Holder thereof or his attorney
duly authorized in writing and shall be delivered together with payment to
the Warrant Agent, in cash or by official bank or certified check, of an
amount in lawful money of the United States of America. Such payment shall
be in an amount equal to the Exercise Price per Warrant as hereinabove
defined.
The person entitled to receive the number of Warrant Shares deliverable
on such exercise shall be treated for all purposes as the holder of such
Warrant Shares as of the close of business on the Exercise Date. The
Company shall not be obligated to issue any fractional share interests in
Warrant Shares issuable on exercise of a Warrant. If more than one Warrant
shall be exercised at one time by the same Registered Holder, the number of
full shares which shall be issuable on exercise thereof shall be computed
on the basis of the aggregate number of full shares issuable on such exercise.
As soon as practicable on or after the Exercise Date and in any event
within 30 days after such date, the Warrant Agent shall cause to be issued
and delivered to the person or persons entitled to receive the same, a
certificate or certificates for the number of Warrant Shares deliverable on
such exercise. No adjustment shall be made in respect of cash dividends on
Warrant Shares deliverable on exercise of any Warrant. The Warrant Agent
shall promptly notify the Company in writing of any exercise of any Warrant
and of the number of Warrant Shares delivered and shall cause payment of an
amount in cash equal to the Exercise Price to be made promptly to the order
of the Company. The parties contemplate such payments will be made by the
Warrant Agent to the Company as collected funds are received by the Warrant
Agent. The Warrant Agent shall hold any proceeds collected and not yet
paid to the Company in a Federally-insured escrow account at a commercial
bank selected by the Warrant Agent, at all times relevant hereto.
Following a determination by the Warrant Agent that collected funds have
been received, the Warrant Agent shall cause share certificates to be
issued representing the number of Warrants exercised by the holder.
Expenses incurred by the Warrant Agent hereunder, including
administrative costs, costs of maintaining records and other expenses,
shall be paid by the Company according to the standard fees imposed by the
Warrant Agent for such services.
A detailed accounting statement setting forth the number of Warrants
exercised, the net amount of exercised funds and all expenses incurred by
the Warrant Agent shall be transmitted to the Company on payment of each
exercise amount. Such accounting statement shall serve as an interim
accounting for the Company during the Exercise Period. The Warrant Agent
shall render to the Company a complete accounting setting forth the number
of Warrants exercised, the identity of persons exercising such Warrants,
the number of shares issued, the amounts to be distributed to the Company
and all other expenses incurred by the Warrant Agent, at the completion of
the Exercise Period.
6. Redemption of Warrants. The Warrants are redeemable upon 30-days'
written notice to their holders for $.01 per Warrant at any time that (1)
the bid price of the Company's Common Stock has equalled or exceeded $8.50
per share for a period of 5 consecutive trading days preceding the stated
redemption date and (2) the shares of Common Stock underlying the Warrants
shall have been duly registered under the Securities Act of 1933, as
amended. The Company shall provide Warrant Agent with a copy of any such
notice of redemption.
From and after the redemption date, all rights of the holders of Warrants
(except the right to receive the redemption price) shall terminate, but
only if (a) on or prior to the redemption date the Company shall have
irrevocably deposited with the Warrant Agent as paying agent a sufficient
amount to pay on the redemption the redemption price for all Warrants
called for redemption and (b) the notice of redemption shall have stated
the name and address of the Warrant Agent and the intention of the Company
to deposit such amount with the Warrant Agent on or before the redemption
date.
7. Reservation of Shares and Payment of Taxes. The Company covenants that
it will, at all times, reserve and have available from its authorized
shares of Common Stock such number of shares of Common Stock as shall then
be issuable on exercise of all outstanding Warrants. The Company covenants
that all Warrant Shares, when issued, shall be duly and validly issued,
fully paid and non-assessable, and free from all taxes, liens and charges
with respect to the issue thereof.
If any Warrant Shares require registration with, or approval of, any
government authority under any Federal or state law before such shares may
be validly issued or delivered, the Company covenants it will, in good
faith and as expeditiously as possible, endeavor to secure such
registration or approval, as the case may be.
Warrantholders shall pay all documentary stamp or similar taxes and other
government charges that may be imposed with respect to the issuance of the
Warrants, or the issuance, transfer or delivery of any Warrant Shares on
exercise of the Warrants. In the event the Warrant Shares are to be
delivered in a name other than the name of the Registered Holder of the
Warrant Certificate, no such delivery shall be made unless the person
requesting the same has paid to the Warrant Agent the amount of any such
taxes or charges incident thereto.
The Warrant Agent is hereby irrevocably authorized to requisition
certificates for Warrant Shares from the Transfer Agent as required from
time to time. The Company has, contemporaneously with the execution of
this Agreement, authorized the Transfer Agent to comply with all such
requisitions. The Company will file with the Warrant Agent a statement
setting forth the name and address of its Transfer Agent for the Company's
Common Stock issuable on exercise of the Warrants and of any successor
Transfer Agent.
8. Registration of Transfer of Warrant Certificates. The Warrant
Certificates may not be transferred in whole or in part except as
authorized in this Agreement. Warrant Certificates to be exchanged shall
be surrendered to the Warrant Agent at its Corporate Office. The Company
shall execute, and the Warrant Agent shall countersign, issue and deliver
in exchange therefor, the Warrant Certificate or Certificates which the
holder making the transfer shall be entitled to receive.
The Warrant Agent shall keep transfer books at its Corporate Office in
which it shall register Warrant Certificates and the transfer thereof. On
due presentment for transfer of any Warrant Certificates at such office,
the Company shall execute, and the Warrant Agent shall issue and deliver to
the transferee or transferees, a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants.
The Warrants will not be publicly traded.
9. Loss or Mutilation. On receipt by the Company and the Warrant Agent of
evidence satisfactory as to the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate, the Company shall
execute, and the Warrant Agent shall countersign and deliver in lieu
thereof, a new Warrant Certificate representing an equal aggregate number
of Warrants. In the case of loss, theft or destruction of any Warrant
Certificate, the individual requesting issuance of a new Warrant
Certificate shall be required to indemnify the Company and Warrant Agent in
an amount satisfactory to each of them. In the event a Warrant Certificate
is mutilated, such Certificate shall be surrendered and cancelled by the
Warrant Agent prior to delivery of a new Warrant Certificate. Applicants
for a substitute Warrant Certificate shall also comply with such other
regulations and pay such other reasonable charges as the Company may
prescribe.
10. Adjustment of Exercise Price and Shares.
A. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall issue any of its Common Stock as a stock
dividend or shall subdivide the number of outstanding shares of Common
Stock into a greater number of shares, then, in either of such events, the
Exercise Price in effect at the time of such action shall be reduced
proportionately and the number of shares of Common Stock purchasable
pursuant to the Warrants shall be increased proportionately. Conversely,
in the event the Company shall reduce the number of its outstanding shares
of Common Stock by combining such shares into a smaller number of shares,
then, in such event, the Exercise Price in effect at the time of such
action shall be increased proportionately and the number of shares of
Common Stock at that time purchasable pursuant to the Warrants shall be
decreased proportionately. Such stock dividend paid or distributed on the
Common Stock in shares of any other class of the Company or securities
convertible into shares of Common Stock shall be treated as a dividend paid
or distributed in shares of Common Stock to the extent shares of Common
Stock are issuable on the payment or conversion thereof.
B. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall be recapitalized by reclassifying its
outstanding shares of Common Stock into shares with a different par value,
or by changing its outstanding Common Stock to shares without par value or
in the event of any other material change of the capital structure of the
Company or of any successor corporation by reason of any reclassification,
recapitalization or conveyance, prompt, proportionate, equitable, lawful
and adequate provision shall be made whereby any holder of the Warrants
shall thereafter have the right to purchase, on the basis and the terms and
conditions specified in this Agreement, in lieu of the shares of Common
Stock of the Company theretofore purchasable on the exercise of any
Warrant, such securities or assets as may be issued or payable with respect
to, or in exchange for, the number of shares of Common Stock of the Company
theretofore purchasable on exercise of the Warrants had such
reclassification, recapitalization or conveyance not taken place; and, in
any such event, the rights of any holder of a Warrant to any adjustment in
the number of shares of Common Stock purchasable on exercise of such
Warrant, as set forth above, shall continue and be preserved in respect of
any stock, securities or assets which the holder becomes entitled to
purchase; provided, however, that a merger, acquisition of a going business
or a portion thereof (whether for cash, stock, notes, other securities, or
a combination of cash and securities), exchange of stock for stock,
exchange of stock for assets, or like transaction involving the Company
will not be considered a "material change" for purposes of this paragraph,
and no adjustment shall be made under this paragraph 10 by reason of any
such merger, acquisition, exchange of stock for stock, exchange of stock
for assets, or like transaction.
C. In the event the Company, at any time while the Warrants shall remain
unexpired and unexercised, shall sell all or substantially all of its
property, or dissolves, liquidates or winds up its affairs, prompt,
proportionate, equitable, lawful and adequate provision shall be made as
part of the terms of such sale, dissolution, liquidation or winding up such
that the holder of a Warrant may thereafter receive, on exercise of such
Warrant, in lieu of each share of Common Stock of the Company which such
holder would have been entitled to receive upon exercise of such Warrant,
the same kind and amount of any stock, securities or assets as may be
issuable, distributable or payable on any such sale, dissolution,
liquidation or winding up with respect to each share of Common Stock of the
Company; provided, however, that, in the event of any such sale,
dissolution, liquidation or winding up, the right to exercise the Warrants
shall terminate on a date fixed by the Company, such date to be not earlier
than 5:00 p.m., Central Time, on the 30th day next succeeding the date on
which notice of such termination of the right to exercise the Warrants has
been given by mail to the holders thereof at such addresses as may appear
on the books of the Company.
D. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to purchase shares of its
Common Stock at a price per share more than 10% below the then-current
market price per share (as defined below) of its Common Stock at the date
of taking such record, then (i) the number of shares of Common Stock
purchasable pursuant to the Warrants shall be redetermined as follows: the
number of shares of Common Stock purchasable pursuant to a Warrant
immediately prior to such adjustment (taking into account fractional
interests to the nearest 1,000th of a share) shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common
Stock of the Company then outstanding (excluding the Common Stock then
owned by the Company) immediately prior to the taking of such record, plus
the number of additional shares offered for purchase, and the denominator
of which shall be the number of shares of Common Stock of the Company
outstanding (excluding the Common Stock owned by the Company) immediately
prior to the taking of such record, plus the number of shares which the
aggregate offering price of the total number of additional shares so
offered would purchase at such current market price; and (ii) the Exercise
Price per share of Common Stock purchasable pursuant to a Warrant shall be
redetermined as follows: the Exercise Price in effect immediately prior to
the taking of such record shall be multiplied by a fraction, the numerator
of which is the number of shares of Common Stock purchasable immediately
prior to the taking of such record, and the denominator of which is the
number of shares of Common Stock purchasable immediately after the taking
of such record as determined pursuant to clause (i) above. For the purpose
hereof, the current market price per share of Common Stock of the Company
at any date shall be deemed to be the average of (A) the highest bid and
asked prices as reported by NASDAQ if the Common Stock of the Company is
admitted to listing for trading thereon, or (B) the highest bid and asked
prices reported on the OTC Electronic Bulletin Board of the NASD, for 30
consecutive business days commencing 15 business days prior to the record
date.
E. On exercise of the Warrants by the holders, the Company shall not be
required to deliver fractions of shares of Common Stock; provided, however,
that prompt, proportionate, equitable, lawful and adequate adjustment in
the Exercise Price payable shall be made in respect of any such fraction of
one share of Common Stock on the basis of the Exercise Price per share.
F. In the event, prior to expiration of the Warrants by exercise or by
their terms, the Company shall determine to take a record of the holders of
its Common Stock for the purpose of determining shareholders entitled to
receive any stock dividend, distribution or other right which will cause
any change or adjustment in the number, amount, price or nature of the
Common Stock or other stock, securities or assets deliverable on exercise
of the Warrants pursuant to the foregoing provisions, the Company shall
give to the Registered Holders of the Warrants at the addresses as may
appear on the books of the Company at least 15 days' prior written notice
to the effect that it intends to take such a record. Such notice shall
specify the date as of which such record is to be taken; the purpose for
which such record is to be taken; and the number, amount, price and nature
of the Common Stock or other stock, securities or assets which will be
deliverable on exercise of the Warrants after the action for which such
record will be taken has been completed. Without limiting the obligation
of the Company to provide notice to the Registered Holders of the Warrant
Certificates of any corporate action hereunder, the failure of the Company
to give notice shall not invalidate such corporate action of the Company.
G. The Warrant shall not entitle the holder thereof to any of the rights
of shareholders or to any dividend declared on the Common Stock, unless the
Warrant is exercised and the Warrant Shares purchased prior to the record
date fixed by the Board of Directors of the Company for the determination
of holders of Common Stock entitled to such dividend or other right.
H. No adjustment of the Exercise Price shall be made as a result of, or
in connection with, (i) the establishment of one or more employee stock
option plans for employees of the Company, or the modification, renewal or
extension of any such plan, or the issuance of Common Stock on exercise of
any options pursuant to any such plan, (ii) the issuance of individual
warrants or options to purchase Common Stock, the issuance of Common Stock
upon exercise of such warrants or options, or the issuance of Common Stock
in connection with compensation arrangements for directors, officers,
employees, consultants or agents of the Company or any Subsidiary, and the
like, or (iii) the issuance of Common Stock in connection with a merger,
acquisition of a going business or a portion thereof (whether for cash,
stock, notes, other securities, or a combination of cash and securities),
exchange of stock for stock, exchange of stock for assets, or like
transaction.
11. Duties, Compensation and Termination of Warrant Agent. The Warrant
Agent shall act hereunder as agent and in a ministerial capacity for the
Company, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not, by issuing and delivering Warrant
Certificates or by any other act hereunder, be deemed to make any
representations as to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of the Common Stock or
other property delivered on exercise of any Warrant. The Warrant Agent
shall not be under any duty or responsibility to any holder of the Warrant
Certificates to make or cause to be made any adjustment of the Exercise
Price or to determine whether any fact exists which may require any such
adjustments.
The Warrant Agent shall not (i) be liable for any recital or statement of
fact contained herein or for any action taken or omitted by it in reliance
on any Warrant Certificate or other document or instrument believed by it
in good faith to be genuine and to have been signed or presented by the
proper party or parties, (ii) be responsible for any failure on the part of
the Company to comply with any of its covenants and obligations contained
in this Agreement or in the Warrant Certificates, or (iii) be liable for
any act or omission in connection with this Agreement, except for its own
negligence or willful misconduct.
The Warrant Agent may, at any time, consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken or omitted by it in good faith in
accordance with such notice, statement, instruction, request, direction,
order or demand.
Any notice, statement, instruction, request, direction, order or demand
of the Company shall be sufficiently evidenced by an instrument signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall not be liable for any action taken or omitted by it in
accordance with such notice, statement, instruction, request, direction,
order or demand.
The Company agrees to pay the Warrant Agent compensation for its services
hereunder and to reimburse the Warrant Agent for its reasonable expenses in
accordance with the terms of Exhibit "B" attached hereto and incorporated
herein by this reference. The Company further agrees to indemnify the
Warrant Agent against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for any action taken or
omitted by the Warrant Agent in the execution of its duties and powers
hereunder, excepting losses, expenses and liabilities arising as a result
of the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties or the Company may terminate the
Warrant Agent and the Warrant Agent shall be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of
the Warrant Agent's own negligence or willful misconduct) on 30 days' prior
written notice to the other party. At least 15 days prior to the date such
resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each
Warrant Certificate. On such resignation or termination, the Company shall
appoint a new Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in
writing of the resignation by the Warrant Agent, then the Registered Holder
of any Warrant Certificate may apply to any court of competent jurisdiction
for the appointment of a new Warrant Agent. Any new Warrant Agent, whether
appointed by the Company or by such court, shall be a bank or trust company
having a capital and surplus, as shown by its last published report to its
shareholders, of not less than $1,000,000.
After acceptance in writing of an appointment of a new Warrant Agent is
received by the Company, such new Warrant Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; provided, however, if it shall be
necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed. The Company shall file a
notice of appointment of a new Warrant Agent with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new Warrant Agent may
be converted or merged, or any corporation resulting from any consolidation
to which the Warrant Agent or any new Warrant Agent shall be a party, or
any corporation succeeding to the corporate trust business of the Warrant
Agent shall be a successor Warrant Agent under this Agreement, provided
that such corporation is eligible for appointment as a successor to the
Warrant Agent. Any such successor Warrant Agent shall promptly cause
notice of its succession as Warrant Agent to be mailed to the Company and
to the Registered Holder of each Warrant Certificate. No further action
shall be required for establishment and authorization of such successor
Warrant Agent.
The Warrant Agent, its officers or directors and its subsidiaries or
affiliates may buy, hold or sell Warrants or other securities of the
Company and otherwise deal with the Company in the same manner and to the
same extent and with like effect as though it were not the Warrant Agent.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company.
12. Modification of Agreement. The Warrant Agent and the Company may, by
supplemental agreement, make any changes or corrections in this Agreement
they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or mistake or error herein contained.
Additionally, the parties may make any changes or corrections deemed
necessary which shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, this Agreement shall not otherwise
be modified, supplemented or altered in any respect, except with the
consent in writing of the Registered Holders of Warrant Certificates
representing not less than 66 2/3% of the Warrants outstanding; provided,
however, that no change in the number or nature of the Warrant Shares
purchasable on exercise of a Warrant, or the Exercise Price or the Exercise
Period thereof shall be made without the consent, in writing, of the
Registered Holder of the Warrant Certificate representing such Warrant,
other than such changes as are specifically prescribed by this Agreement.
13. Notices. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder shall
be deemed given sufficiently in writing and sent via a nationally
recognized overnight courier service, by registered or certified mail,
return receipt requested and postage prepaid, or by facsimile to:
in the case of the Company: Internet Media Corporation
Attention: David M. Loflin
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Facsimile: (504) 922-9123
with a copy to: Newlan & Newlan
Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
Facsimile: (972) 353-3880
and, in the case of the Warrant Agent: Securities Transfer Corporation
Attention: Kevin Halter, Jr.
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
Facsimile: (972) 447-9890
and, if to the Registered Holder of a Warrant Certificate, at the address
of such holder as set forth on the books maintained by the Warrant Agent.
14. Persons Benefitting. This Agreement shall be binding upon and inure
to the benefit of the Company, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of the Warrant
Certificates. Nothing in this Agreement is intended to or shall be
construed to confer on any other person any right, remedy or claim or to
impose on any other person any duty, liability or obligation.
15. Further Instruments. The parties shall execute and deliver any and
all such other instruments and shall take any and all such other actions as
may be reasonable or necessary to carry out the intention of this Agreement.
16. Severability. If any provision of this Agreement shall be held,
declared or pronounced void, voidable, invalid, unenforceable or
inoperative for any reason by any court of competent jurisdiction,
government authority or otherwise, such holding, declaration or
pronouncement shall not affect adversely any other provision of this
Agreement, which shall otherwise remain in full force and effect and be
enforced in accordance with its terms, and the effect of such holding,
declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
17. Waiver. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies
as provided by law. No delay or failure on the part of either party in the
exercise of any right or remedy arising from a breach of this Agreement
shall operate as a waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party where
required hereunder to any act or occurrence shall not be deemed to be a
consent to any other act or occurrence.
18. General Provisions. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Texas. Except
as otherwise expressly stated herein, time is of the essence in performing
hereunder. This Agreement embodies the entire agreement and understanding
between the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, and this Agreement may not be
modified or amended or any term or provision hereof waived or discharged
except in writing signed by the party against whom such amendment,
modification, waiver or discharge is sought to be enforced. The headings
of this Agreement are for convenience of reference only and shall not limit
or otherwise affect the meaning thereof. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above-mentioned.
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin, President
SECURITIES TRANSFER CORPORATION
By: /s/ Kevin Halter, Jr.
Kevin Halter, Jr., President
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EXHIBIT 10.13
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January 19, 1999
Mr. Michael Cohn
6328 Quinn Drive
Baton Rouge, Louisiana 70817
Registration Rights Letter Agreement
Dear Mr. Cohn:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 30,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Internet Media Corporation, a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you;
provided, however, that such registration right may not be exercised prior
to March 1, 1999. Upon receipt of your written demand for registration,
the Company will take steps to register your Subject Shares in a
registration statement (the "Registration Statement") under the Act. Your
right to such registration may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you and all other
selling shareholders, on a pro rata basis, based on the percentage that
your shares bear to all shares being registered for selling shareholders.
In this regard, the Company reserves the right to include additional
selling shareholders in any registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin, President
- ----------------------
EXHIBIT 10.14
- ----------------------
January 19, 1999
Mr. Walter C. Schiller
1121 Farmington Avenue
West Hartford, Connecticut 06107
Registration Rights Letter Agreement
Dear Mr. Schiller:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 10,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Internet Media Corporation, a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you;
provided, however, that such registration right may not be exercised prior
to March 1, 1999. Upon receipt of your written demand for registration,
the Company will take steps to register your Subject Shares in a
registration statement (the "Registration Statement") under the Act. Your
right to such registration may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you and all other
selling shareholders, on a pro rata basis, based on the percentage that
your shares bear to all shares being registered for selling shareholders.
In this regard, the Company reserves the right to include additional
selling shareholders in any registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin, President
- ----------------------------
EXHIBIT 10.15
- ----------------------------
January 19, 1999
Mr. Michael R. Van Geons
7 Oakville Avenue
Waterbury, Connecticut 06708
Registration Rights Letter Agreement
Dear Mr. Van Geons:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 10,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Internet Media Corporation, a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you;
provided, however, that such registration right may not be exercised prior
to March 1, 1999. Upon receipt of your written demand for registration,
the Company will take steps to register your Subject Shares in a
registration statement (the "Registration Statement") under the Act. Your
right to such registration may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you and all other
selling shareholders, on a pro rata basis, based on the percentage that
your shares bear to all shares being registered for selling shareholders.
In this regard, the Company reserves the right to include additional
selling shareholders in any registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin, President
- ----------------------
EXHIBIT 10.16
- ----------------------
January 19, 1999
Mr. Harry P. Kunecki, Trustee
Harry P. Kunecki Trust
1896 Leisure World
Mesa, Arizona 85206
Registration Rights Letter Agreement
Dear Mr. Kunecki
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 5,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Internet Media Corporation, a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you;
provided, however, that such registration right may not be exercised prior
to March 1, 1999. Upon receipt of your written demand for registration,
the Company will take steps to register your Subject Shares in a
registration statement (the "Registration Statement") under the Act. Your
right to such registration may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you and all other
selling shareholders, on a pro rata basis, based on the percentage that
your shares bear to all shares being registered for selling shareholders.
In this regard, the Company reserves the right to include additional
selling shareholders in any registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin, President
- ----------------------
EXHIBIT 10.17
- ----------------------
January 19, 1999
Mr. Frank L. Leyba
2132 Foothill
Santa Ana, California 92705
Registration Rights Letter Agreement
Dear Mr. Leyba:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 5,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Internet Media Corporation, a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you;
provided, however, that such registration right may not be exercised prior
to March 1, 1999. Upon receipt of your written demand for registration,
the Company will take steps to register your Subject Shares in a
registration statement (the "Registration Statement") under the Act. Your
right to such registration may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you and all other
selling shareholders, on a pro rata basis, based on the percentage that
your shares bear to all shares being registered for selling shareholders.
In this regard, the Company reserves the right to include additional
selling shareholders in any registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin, President
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EXHIBIT 10.18
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WARRANT AGREEMENT
THIS AGREEMENT dated as of May 3, 1999, between Internet Media Corporation,
a Nevada corporation (the "Company"), and Securities Transfer Corporation,
a Texas corporation (the "Warrant Agent").
RECITALS:
A. Pursuant to a private offering of 100,000 units of securities (the
"Units") by the Company, the Company proposes to issue to the purchasers of
the Units 100,000 Warrants (individually, a "Warrant", and, collectively,
the "Warrants"), to purchase an aggregate of 100,000 shares of Common Stock
of the Company (the "Warrant Shares").
B. The Company desires to provide for the issuance of warrant certificates
(the "Warrant Certificates") representing the Warrants.
C. The Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer and exchange of Warrant Certificates and
exercise of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrant Certificates and the Warrants, and the respective
rights and obligations thereunder of the Company, the registered holders of
the Warrant Certificates and the Warrant Agent, the parties hereto agree as
follows:
1. Definitions. As used herein:
A. "Common Stock" shall mean shares of common stock of the Company,
$.0001 par value (the "Common Stock"), whether now or hereafter authorized,
which have the right to participate in the distribution of earnings and
assets of the Company without limit as to amount or percentage.
B. "Corporate Office" shall mean the place of business of the Warrant
Agent located in Dallas, Texas, or its successor (for the mailing address
of the Warrant Agent, see paragraph 13 hereof).
C. "Exercise Period" shall mean the period commencing on the date of the
issuance of the Warrants and ending on the Expiration Date.
D. "Exercise Price" shall mean a purchase price of $7.00 per share of
Common Stock (the "Warrant Exercise Price").
E. "Expiration Date" shall mean 5:00 p.m. Central Time, on the date which
is six (6) months from the date of execution hereof, or if such day shall
be a holiday or day on which banks are authorized to close, then 5:00 p.m.
Central Time, whichever is in effect, on the next following day that in the
State of Texas is not a holiday or a day on which banks are authorized to
close.
F. "Registered Holder" shall mean the person in whose name any Warrant
Certificate shall be registered on the books maintained by the Warrant
Agent pursuant to this Agreement.
G. "Subsidiary" shall mean any corporation of which shares having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (regardless of whether the shares of any other class or classes
of such corporation shall have or may have voting power by reason of the
happening of any contingency) are at the time directly or indirectly owned
by the Company or one or more subsidiaries of the Company.
H. "Transfer Agent" shall mean the Company's transfer agent, Securities
Transfer Corporation, or its successor.
I. "Warrant" or "Warrants" shall mean and include up to 100,000 Warrants
to be issued to the purchasers of the Units to purchase a like number of
shares of the authorized and unissued Common Stock of the Company.
J. "Warrant Shares" shall mean and include up to 100,000 shares of
authorized and unissued Common Stock initially reserved for issuance on
exercise of the Warrants and any additional shares of Common Stock or other
property which may hereafter be issuable or deliverable on exercise of the
Warrants pursuant to paragraph 5 of this Agreement.
2. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company in accordance with the instructions
set forth hereafter in this Agreement, and the Warrant Agent hereby accepts
such appointment and agrees to perform the duties and obligations required
of it, as such duties and obligations are set forth herein.
3. Warrants and Issuance of Warrant Certificates. Each Warrant shall
initially entitle the Registered Holder of the Warrant Certificate
representing such Warrant to purchase one shares of Common Stock on
exercise thereof, subject to modification and adjustment as hereinafter
provided in paragraph 10. The Warrant Certificates will be issued and
delivered by the Warrant Agent on written order of the Company signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement.
4. Form and Execution of Warrant Certificates. The Warrant Certificates
representing the Warrants to be issued to the purchasers of the Units shall
be substantially in the form attached as Exhibit "A" and may have such
letters, numbers or other marks of identification and such legends,
summaries or endorsements printed, lithographed or engraved thereon as the
Company may deem appropriate and as are not inconsistent with the
provisions hereof.
The Warrant Certificates shall be dated as of the date of issuance,
whether on initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Warrant Certificates.
Warrant Certificates representing the Warrants to be issued to the
purchasers of the Units shall be numbered serially with the letters "WPOC"
preceding the number of each Warrant Certificate.
Warrant Certificates shall be executed on behalf of the Company by its
President and Secretary, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. In the event any officer of the Company who executed the
Warrant Certificates shall cease to be an officer of the Company before the
date of issuance of the Warrant Certificates or before countersignature and
delivery by the Warrant Agent, such Warrant Certificates may be
countersigned, issued and delivered by the Warrant Agent with the same
force and effect as though the person who signed such Warrant Certificates
had not ceased to be an officer of the Company.
5. Exercise of Warrants. The Warrants shall be exercisable during the
Exercise Period. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of the surrender for
exercise (the "Exercise Date") of the Warrant Certificate. The exercise
form shall be executed by the Registered Holder thereof or his attorney
duly authorized in writing and shall be delivered together with payment to
the Warrant Agent, in cash or by official bank or certified check, of an
amount in lawful money of the United States of America. Such payment shall
be in an amount equal to the Exercise Price per Warrant as hereinabove
defined.
The person entitled to receive the number of Warrant Shares deliverable
on such exercise shall be treated for all purposes as the holder of such
Warrant Shares as of the close of business on the Exercise Date. The
Company shall not be obligated to issue any fractional share interests in
Warrant Shares issuable on exercise of a Warrant. If more than one Warrant
shall be exercised at one time by the same Registered Holder, the number of
full shares which shall be issuable on exercise thereof shall be computed
on the basis of the aggregate number of full shares issuable on such exercise.
As soon as practicable on or after the Exercise Date and in any event
within 30 days after such date, the Warrant Agent shall cause to be issued
and delivered to the person or persons entitled to receive the same, a
certificate or certificates for the number of Warrant Shares deliverable on
such exercise. No adjustment shall be made in respect of cash dividends on
Warrant Shares deliverable on exercise of any Warrant. The Warrant Agent
shall promptly notify the Company in writing of any exercise of any Warrant
and of the number of Warrant Shares delivered and shall cause payment of an
amount in cash equal to the Exercise Price to be made promptly to the order
of the Company. The parties contemplate such payments will be made by the
Warrant Agent to the Company as collected funds are received by the Warrant
Agent. The Warrant Agent shall hold any proceeds collected and not yet
paid to the Company in a Federally-insured escrow account at a commercial
bank selected by the Warrant Agent, at all times relevant hereto.
Following a determination by the Warrant Agent that collected funds have
been received, the Warrant Agent shall cause share certificates to be
issued representing the number of Warrants exercised by the holder.
Expenses incurred by the Warrant Agent hereunder, including
administrative costs, costs of maintaining records and other expenses,
shall be paid by the Company according to the standard fees imposed by the
Warrant Agent for such services.
A detailed accounting statement setting forth the number of Warrants
exercised, the net amount of exercised funds and all expenses incurred by
the Warrant Agent shall be transmitted to the Company on payment of each
exercise amount. Such accounting statement shall serve as an interim
accounting for the Company during the Exercise Period. The Warrant Agent
shall render to the Company a complete accounting setting forth the number
of Warrants exercised, the identity of persons exercising such Warrants,
the number of shares issued, the amounts to be distributed to the Company
and all other expenses incurred by the Warrant Agent, at the completion of
the Exercise Period.
6. Redemption of Warrants. The Warrants are redeemable upon 30-days'
written notice to their holders for $.01 per Warrant at any time that (1)
the bid price of the Company's Common Stock has equalled or exceeded $10.00
per share for a period of 5 consecutive trading days preceding the stated
redemption date and (2) the shares of Common Stock underlying the Warrants
shall have been duly registered under the Securities Act of 1933, as
amended. The Company shall provide Warrant Agent with a copy of any such
notice of redemption.
From and after the redemption date, all rights of the holders of Warrants
(except the right to receive the redemption price) shall terminate, but
only if (a) on or prior to the redemption date the Company shall have
irrevocably deposited with the Warrant Agent as paying agent a sufficient
amount to pay on the redemption the redemption price for all Warrants
called for redemption and (b) the notice of redemption shall have stated
the name and address of the Warrant Agent and the intention of the Company
to deposit such amount with the Warrant Agent on or before the redemption
date.
7. Reservation of Shares and Payment of Taxes. The Company covenants that
it will, at all times, reserve and have available from its authorized
shares of Common Stock such number of shares of Common Stock as shall then
be issuable on exercise of all outstanding Warrants. The Company covenants
that all Warrant Shares, when issued, shall be duly and validly issued,
fully paid and non-assessable, and free from all taxes, liens and charges
with respect to the issue thereof.
If any Warrant Shares require registration with, or approval of, any
government authority under any Federal or state law before such shares may
be validly issued or delivered, the Company covenants it will, in good
faith and as expeditiously as possible, endeavor to secure such
registration or approval, as the case may be.
Warrantholders shall pay all documentary stamp or similar taxes and other
government charges that may be imposed with respect to the issuance of the
Warrants, or the issuance, transfer or delivery of any Warrant Shares on
exercise of the Warrants. In the event the Warrant Shares are to be
delivered in a name other than the name of the Registered Holder of the
Warrant Certificate, no such delivery shall be made unless the person
requesting the same has paid to the Warrant Agent the amount of any such
taxes or charges incident thereto.
The Warrant Agent is hereby irrevocably authorized to requisition
certificates for Warrant Shares from the Transfer Agent as required from
time to time. The Company has, contemporaneously with the execution of
this Agreement, authorized the Transfer Agent to comply with all such
requisitions. The Company will file with the Warrant Agent a statement
setting forth the name and address of its Transfer Agent for the Company's
Common Stock issuable on exercise of the Warrants and of any successor
Transfer Agent.
8. Registration of Transfer of Warrant Certificates. The Warrant
Certificates may not be transferred in whole or in part except as
authorized in this Agreement. Warrant Certificates to be exchanged shall
be surrendered to the Warrant Agent at its Corporate Office. The Company
shall execute, and the Warrant Agent shall countersign, issue and deliver
in exchange therefor, the Warrant Certificate or Certificates which the
holder making the transfer shall be entitled to receive.
The Warrant Agent shall keep transfer books at its Corporate Office in
which it shall register Warrant Certificates and the transfer thereof. On
due presentment for transfer of any Warrant Certificates at such office,
the Company shall execute, and the Warrant Agent shall issue and deliver to
the transferee or transferees, a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants.
The Warrants will not be publicly traded.
9. Loss or Mutilation. On receipt by the Company and the Warrant Agent of
evidence satisfactory as to the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate, the Company shall
execute, and the Warrant Agent shall countersign and deliver in lieu
thereof, a new Warrant Certificate representing an equal aggregate number
of Warrants. In the case of loss, theft or destruction of any Warrant
Certificate, the individual requesting issuance of a new Warrant
Certificate shall be required to indemnify the Company and Warrant Agent in
an amount satisfactory to each of them. In the event a Warrant Certificate
is mutilated, such Certificate shall be surrendered and cancelled by the
Warrant Agent prior to delivery of a new Warrant Certificate. Applicants
for a substitute Warrant Certificate shall also comply with such other
regulations and pay such other reasonable charges as the Company may
prescribe.
10. Adjustment of Exercise Price and Shares.
A. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall issue any of its Common Stock as a stock
dividend or shall subdivide the number of outstanding shares of Common
Stock into a greater number of shares, then, in either of such events, the
Exercise Price in effect at the time of such action shall be reduced
proportionately and the number of shares of Common Stock purchasable
pursuant to the Warrants shall be increased proportionately. Conversely,
in the event the Company shall reduce the number of its outstanding shares
of Common Stock by combining such shares into a smaller number of shares,
then, in such event, the Exercise Price in effect at the time of such
action shall be increased proportionately and the number of shares of
Common Stock at that time purchasable pursuant to the Warrants shall be
decreased proportionately. Such stock dividend paid or distributed on the
Common Stock in shares of any other class of the Company or securities
convertible into shares of Common Stock shall be treated as a dividend paid
or distributed in shares of Common Stock to the extent shares of Common
Stock are issuable on the payment or conversion thereof.
B. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall be recapitalized by reclassifying its
outstanding shares of Common Stock into shares with a different par value,
or by changing its outstanding Common Stock to shares without par value or
in the event of any other material change of the capital structure of the
Company or of any successor corporation by reason of any reclassification,
recapitalization or conveyance, prompt, proportionate, equitable, lawful
and adequate provision shall be made whereby any holder of the Warrants
shall thereafter have the right to purchase, on the basis and the terms and
conditions specified in this Agreement, in lieu of the shares of Common
Stock of the Company theretofore purchasable on the exercise of any
Warrant, such securities or assets as may be issued or payable with respect
to, or in exchange for, the number of shares of Common Stock of the Company
theretofore purchasable on exercise of the Warrants had such
reclassification, recapitalization or conveyance not taken place; and, in
any such event, the rights of any holder of a Warrant to any adjustment in
the number of shares of Common Stock purchasable on exercise of such
Warrant, as set forth above, shall continue and be preserved in respect of
any stock, securities or assets which the holder becomes entitled to
purchase; provided, however, that a merger, acquisition of a going business
or a portion thereof (whether for cash, stock, notes, other securities, or
a combination of cash and securities), exchange of stock for stock,
exchange of stock for assets, or like transaction involving the Company
will not be considered a "material change" for purposes of this paragraph,
and no adjustment shall be made under this paragraph 10 by reason of any
such merger, acquisition, exchange of stock for stock, exchange of stock
for assets, or like transaction.
C. In the event the Company, at any time while the Warrants shall remain
unexpired and unexercised, shall sell all or substantially all of its
property, or dissolves, liquidates or winds up its affairs, prompt,
proportionate, equitable, lawful and adequate provision shall be made as
part of the terms of such sale, dissolution, liquidation or winding up such
that the holder of a Warrant may thereafter receive, on exercise of such
Warrant, in lieu of each share of Common Stock of the Company which such
holder would have been entitled to receive upon exercise of such Warrant,
the same kind and amount of any stock, securities or assets as may be
issuable, distributable or payable on any such sale, dissolution,
liquidation or winding up with respect to each share of Common Stock of the
Company; provided, however, that, in the event of any such sale,
dissolution, liquidation or winding up, the right to exercise the Warrants
shall terminate on a date fixed by the Company, such date to be not earlier
than 5:00 p.m., Central Time, on the 30th day next succeeding the date on
which notice of such termination of the right to exercise the Warrants has
been given by mail to the holders thereof at such addresses as may appear
on the books of the Company.
D. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to purchase shares of its
Common Stock at a price per share more than 10% below the then-current
market price per share (as defined below) of its Common Stock at the date
of taking such record, then (i) the number of shares of Common Stock
purchasable pursuant to the Warrants shall be redetermined as follows: the
number of shares of Common Stock purchasable pursuant to a Warrant
immediately prior to such adjustment (taking into account fractional
interests to the nearest 1,000th of a share) shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common
Stock of the Company then outstanding (excluding the Common Stock then
owned by the Company) immediately prior to the taking of such record, plus
the number of additional shares offered for purchase, and the denominator
of which shall be the number of shares of Common Stock of the Company
outstanding (excluding the Common Stock owned by the Company) immediately
prior to the taking of such record, plus the number of shares which the
aggregate offering price of the total number of additional shares so
offered would purchase at such current market price; and (ii) the Exercise
Price per share of Common Stock purchasable pursuant to a Warrant shall be
redetermined as follows: the Exercise Price in effect immediately prior to
the taking of such record shall be multiplied by a fraction, the numerator
of which is the number of shares of Common Stock purchasable immediately
prior to the taking of such record, and the denominator of which is the
number of shares of Common Stock purchasable immediately after the taking
of such record as determined pursuant to clause (i) above. For the purpose
hereof, the current market price per share of Common Stock of the Company
at any date shall be deemed to be the average of (A) the highest bid and
asked prices as reported by NASDAQ if the Common Stock of the Company is
admitted to listing for trading thereon, or (B) the highest bid and asked
prices reported on the OTC Electronic Bulletin Board of the NASD, for 30
consecutive business days commencing 15 business days prior to the record
date.
E. On exercise of the Warrants by the holders, the Company shall not be
required to deliver fractions of shares of Common Stock; provided, however,
that prompt, proportionate, equitable, lawful and adequate adjustment in
the Exercise Price payable shall be made in respect of any such fraction of
one share of Common Stock on the basis of the Exercise Price per share.
F. In the event, prior to expiration of the Warrants by exercise or by
their terms, the Company shall determine to take a record of the holders of
its Common Stock for the purpose of determining shareholders entitled to
receive any stock dividend, distribution or other right which will cause
any change or adjustment in the number, amount, price or nature of the
Common Stock or other stock, securities or assets deliverable on exercise
of the Warrants pursuant to the foregoing provisions, the Company shall
give to the Registered Holders of the Warrants at the addresses as may
appear on the books of the Company at least 15 days' prior written notice
to the effect that it intends to take such a record. Such notice shall
specify the date as of which such record is to be taken; the purpose for
which such record is to be taken; and the number, amount, price and nature
of the Common Stock or other stock, securities or assets which will be
deliverable on exercise of the Warrants after the action for which such
record will be taken has been completed. Without limiting the obligation
of the Company to provide notice to the Registered Holders of the Warrant
Certificates of any corporate action hereunder, the failure of the Company
to give notice shall not invalidate such corporate action of the Company.
G. The Warrant shall not entitle the holder thereof to any of the rights
of shareholders or to any dividend declared on the Common Stock, unless the
Warrant is exercised and the Warrant Shares purchased prior to the record
date fixed by the Board of Directors of the Company for the determination
of holders of Common Stock entitled to such dividend or other right.
H. No adjustment of the Exercise Price shall be made as a result of, or
in connection with, (i) the establishment of one or more employee stock
option plans for employees of the Company, or the modification, renewal or
extension of any such plan, or the issuance of Common Stock on exercise of
any options pursuant to any such plan, (ii) the issuance of individual
warrants or options to purchase Common Stock, the issuance of Common Stock
upon exercise of such warrants or options, or the issuance of Common Stock
in connection with compensation arrangements for directors, officers,
employees, consultants or agents of the Company or any Subsidiary, and the
like, or (iii) the issuance of Common Stock in connection with a merger,
acquisition of a going business or a portion thereof (whether for cash,
stock, notes, other securities, or a combination of cash and securities),
exchange of stock for stock, exchange of stock for assets, or like
transaction.
11. Duties, Compensation and Termination of Warrant Agent. The Warrant
Agent shall act hereunder as agent and in a ministerial capacity for the
Company, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not, by issuing and delivering Warrant
Certificates or by any other act hereunder, be deemed to make any
representations as to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of the Common Stock or
other property delivered on exercise of any Warrant. The Warrant Agent
shall not be under any duty or responsibility to any holder of the Warrant
Certificates to make or cause to be made any adjustment of the Exercise
Price or to determine whether any fact exists which may require any such
adjustments.
The Warrant Agent shall not (i) be liable for any recital or statement of
fact contained herein or for any action taken or omitted by it in reliance
on any Warrant Certificate or other document or instrument believed by it
in good faith to be genuine and to have been signed or presented by the
proper party or parties, (ii) be responsible for any failure on the part of
the Company to comply with any of its covenants and obligations contained
in this Agreement or in the Warrant Certificates, or (iii) be liable for
any act or omission in connection with this Agreement, except for its own
negligence or willful misconduct.
The Warrant Agent may, at any time, consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken or omitted by it in good faith in
accordance with such notice, statement, instruction, request, direction,
order or demand.
Any notice, statement, instruction, request, direction, order or demand
of the Company shall be sufficiently evidenced by an instrument signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall not be liable for any action taken or omitted by it in
accordance with such notice, statement, instruction, request, direction,
order or demand.
The Company agrees to pay the Warrant Agent compensation for its services
hereunder and to reimburse the Warrant Agent for its reasonable expenses in
accordance with the terms of Exhibit "B" attached hereto and incorporated
herein by this reference. The Company further agrees to indemnify the
Warrant Agent against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for any action taken or
omitted by the Warrant Agent in the execution of its duties and powers
hereunder, excepting losses, expenses and liabilities arising as a result
of the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties or the Company may terminate the
Warrant Agent and the Warrant Agent shall be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of
the Warrant Agent's own negligence or willful misconduct) on 30 days' prior
written notice to the other party. At least 15 days prior to the date such
resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each
Warrant Certificate. On such resignation or termination, the Company shall
appoint a new Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in
writing of the resignation by the Warrant Agent, then the Registered Holder
of any Warrant Certificate may apply to any court of competent jurisdiction
for the appointment of a new Warrant Agent. Any new Warrant Agent, whether
appointed by the Company or by such court, shall be a bank or trust company
having a capital and surplus, as shown by its last published report to its
shareholders, of not less than $1,000,000.
After acceptance in writing of an appointment of a new Warrant Agent is
received by the Company, such new Warrant Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; provided, however, if it shall be
necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed. The Company shall file a
notice of appointment of a new Warrant Agent with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new Warrant Agent may
be converted or merged, or any corporation resulting from any consolidation
to which the Warrant Agent or any new Warrant Agent shall be a party, or
any corporation succeeding to the corporate trust business of the Warrant
Agent shall be a successor Warrant Agent under this Agreement, provided
that such corporation is eligible for appointment as a successor to the
Warrant Agent. Any such successor Warrant Agent shall promptly cause
notice of its succession as Warrant Agent to be mailed to the Company and
to the Registered Holder of each Warrant Certificate. No further action
shall be required for establishment and authorization of such successor
Warrant Agent.
The Warrant Agent, its officers or directors and its subsidiaries or
affiliates may buy, hold or sell Warrants or other securities of the
Company and otherwise deal with the Company in the same manner and to the
same extent and with like effect as though it were not the Warrant Agent.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company.
12. Modification of Agreement. The Warrant Agent and the Company may, by
supplemental agreement, make any changes or corrections in this Agreement
they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or mistake or error herein contained.
Additionally, the parties may make any changes or corrections deemed
necessary which shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, this Agreement shall not otherwise
be modified, supplemented or altered in any respect, except with the
consent in writing of the Registered Holders of Warrant Certificates
representing not less than 66 2/3% of the Warrants outstanding; provided,
however, that no change in the number or nature of the Warrant Shares
purchasable on exercise of a Warrant, or the Exercise Price or the Exercise
Period thereof shall be made without the consent, in writing, of the
Registered Holder of the Warrant Certificate representing such Warrant,
other than such changes as are specifically prescribed by this Agreement.
13. Notices. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder shall
be deemed given sufficiently in writing and sent via a nationally
recognized overnight courier service, by registered or certified mail,
return receipt requested and postage prepaid, or by facsimile to:
in the case of the Company: Internet Media Corporation
Attention: David M. Loflin
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Facsimile: (504) 922-9123
with a copy to: Newlan & Newlan
Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
Facsimile: (972) 353-3880
and, in the case of
the Warrant Agent: Securities Transfer Corporation
Attention: Kevin Halter, Jr.
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
Facsimile: (972) 447-9890
and, if to the Registered Holder of a Warrant Certificate, at the address
of such holder as set forth on the books maintained by the Warrant Agent.
14. Persons Benefitting. This Agreement shall be binding upon and inure
to the benefit of the Company, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of the Warrant
Certificates. Nothing in this Agreement is intended to or shall be
construed to confer on any other person any right, remedy or claim or to
impose on any other person any duty, liability or obligation.
15. Further Instruments. The parties shall execute and deliver any and
all such other instruments and shall take any and all such other actions as
may be reasonable or necessary to carry out the intention of this Agreement.
16. Severability. If any provision of this Agreement shall be held,
declared or pronounced void, voidable, invalid, unenforceable or
inoperative for any reason by any court of competent jurisdiction,
government authority or otherwise, such holding, declaration or
pronouncement shall not affect adversely any other provision of this
Agreement, which shall otherwise remain in full force and effect and be
enforced in accordance with its terms, and the effect of such holding,
declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
17. Waiver. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies
as provided by law. No delay or failure on the part of either party in the
exercise of any right or remedy arising from a breach of this Agreement
shall operate as a waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party where
required hereunder to any act or occurrence shall not be deemed to be a
consent to any other act or occurrence.
18. General Provisions. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Texas. Except
as otherwise expressly stated herein, time is of the essence in performing
hereunder. This Agreement embodies the entire agreement and understanding
between the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, and this Agreement may not be
modified or amended or any term or provision hereof waived or discharged
except in writing signed by the party against whom such amendment,
modification, waiver or discharge is sought to be enforced. The headings
of this Agreement are for convenience of reference only and shall not limit
or otherwise affect the meaning thereof. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above-mentioned.
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin, President
SECURITIES TRANSFER CORPORATION
By: /s/ Kevin Halter, Jr.
Kevin Halter, Jr., President
- ---------------------
EXHIBIT 10.19
- ---------------------
May 28, 1999
Shelter Capital Ltd.
P.O. Box 64
Providenciales
Turks and Caicos Islands
British West Indies
Registration Rights Letter Agreement
Sir/Madam:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 25,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Internet Media Corporation, a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you.
Upon receipt of your written demand for registration, the Company will take
steps to register your Subject Shares in a registration statement (the
"Registration Statement") under the Act. Your right to such registration
may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you and all other
selling shareholders, on a pro rata basis, based on the percentage that
your shares bear to all shares being registered for selling shareholders.
In this regard, the Company reserves the right to include additional
selling shareholders in any registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin, President
AGREED AND ACCEPTED as of the date and year first above written:
SHELTER CAPITAL LTD.
By: /s/ Peter Rochow
Managing Director
- -----------------------
EXHIBIT 10.20
- -----------------------
May 28, 1999
Mr. Walter Engler
4572 Benz Crescent
Langley, British Columbia
Canada V2Z 1B3
Registration Rights Letter Agreement
Sir/Madam:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 10,000 shares of the $.0001 par value common stock
(the "Subject Shares") of Internet Media Corporation, a Nevada corporation
(the "Company"), which shares of Common Stock underlie certain common stock
purchase warrants (the "Warrants") of the Company owned by you. It is our
understanding that:
1. Registration Rights. At any time during the exercise period of the
Warrants and after you have elected to exercise all of the Warrants owned
by you, you may demand on one occasion, in writing, the registration under
the Act for sale the Subject Shares underlying the Warrants owned by you.
Upon receipt of your written demand for registration, the Company will take
steps to register your Subject Shares in a registration statement (the
"Registration Statement") under the Act. Your right to such registration
may be exercised one time only.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you and all other
selling shareholders, on a pro rata basis, based on the percentage that
your shares bear to all shares being registered for selling shareholders.
In this regard, the Company reserves the right to include additional
selling shareholders in any registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin, President
AGREED AND ACCEPTED as of the date and year first above written:
/s/ Walter Engler
Walter Engler
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EXHIBIT 10.21
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of April 28, 1999 (the
"Agreement"), among Internet Media Corporation, a Nevada corporation
("Parent"), Santa Fe Wireless Internet, Inc., a New Mexico corporation
wholly owned by Parent ("Acquiror"), Santa Fe Trail Internet Plus, Inc., a
New Mexico corporation ("Target") (Acquiror and Target being hereinafter
collectively referred to as the "Constituent Corporations"), and Darrell
Davis, the majority shareholder of Santa Fe Trail Internet Plus, Inc.,
executing this Agreement (the "Shareholder).
WHEREAS, the Boards of Directors of Parent, Acquiror and Target have
approved the acquisition of Target by Parent;
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
Parent, Acquiror and Target have each approved the merger of Target into
Acquiror (the "Merger"), pursuant to an Agreement of Merger in the form
attached hereto as Exhibit "A" (the "Merger Agreement"), and the
transactions contemplated hereby, in accordance with the applicable
provisions of the statutes of the States of Nevada and New Mexico and upon
the terms and subject to the conditions set forth herein; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization with the meaning of Section 368(a)(1 )(A)
and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, each of the parties to this Agreement desires to make certain
representations, warranties and agreements in connection with the Merger
and also to prescribe various conditions thereto; and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Acquiror, Target and the Shareholder hereby agree as follows:
ARTICLE I. THE MERGER
Section 1.1. The Merger. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement and the
Merger Agreement, Target shall be merged with and into Acquiror, the
separate corporate existence of Target shall cease and Acquiror shall
continue as the surviving corporation, in accordance with the applicable
provisions of the Business Corporation Law of the State of New Mexico (the
"New Mexico Law"). Acquiror, as the surviving corporation after the Merger,
is hereinafter sometimes referred to as the "Surviving Corporation".
Section 1.2. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, and
provided that this Agreement has not been terminated or abandoned pursuant
to Article IX, the Constituent Corporations shall cause the Merger to be
consummated by filing a Certificate of Merger (the "Certificate of Merger")
with the office of the Secretary of State of the State of New Mexico, in
such form as required by, and executed in accordance with, the relevant
provisions of the New Mexico Law. Subject to, and in accordance with, the
New Mexico Law, the Merger will become effective at the date and time the
Certificate of Merger is filed with the office of the Secretary of State of
the State of New Mexico or such later time or date as may be specified in
the Certificate of Merger (the "Effective Time"). Each of the parties shall
use its best efforts to cause the Merger to be consummated as soon as
practicable following the fulfillment or waiver of the conditions specified
in Article VII hereof.
Section 1.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the New Mexico
Law. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, except as otherwise provided herein, all the
property, rights, privileges, powers and franchises of Target shall vest in
the Surviving Corporation, and all debts, liabilities and duties of Target
shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.4. Articles of Incorporation: Bylaws. (a) At the Effective Time,
the Articles of Incorporation of Acquiror, as in effect immediately prior
to the Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Articles of Incorporation.
(b) The Bylaws of Acquiror, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation until thereafter
amended as provided by law, the Articles of Incorporation of the Surviving
Corporation and such Bylaws.
Section 1.5. Directors and Officers. The directors of Acquiror immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
Acquiror immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
Section 1.6. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Acquiror, the following
shall occur:
(a) each share of common stock of Target (the "Target Common Stock") held
in the treasury of Target and each such share of Target Common Stock owned
by Acquiror, Parent or any direct or indirect wholly-owned subsidiary of
Parent or of Target immediately prior to the Effective Time shall be
cancelled and extinguished without any conversion thereof and no payment
shall be made with respect thereto;
(b) each share of Target Common Stock which is outstanding immediately
prior to the Effective Time,
other than those shares of Target Common Stock cancelled as set forth in
subsection (a) hereof, shall be converted into the right to receive 66.66
shares of the $.0001 par value per share common stock of Parent (the
"Parent Common Stock"), a total of 100,000 shares of Parent Common Stock.
(c) the common stock, par value $.0001 per share, of Acquiror issued and
outstanding immediately prior to the Effective Time shall remain validly
issued, fully paid and non-assessable common stock of the Surviving
Corporation.
Section 1.7. Surrender of and Exchange of Target Common Stock. (a) As soon
as practicable after the Effective Time, the stock certificates
representing Target Common Stock issued and outstanding at the Effective
Time shall be surrendered for exchange to the Surviving Corporation. Until
so surrendered for exchange, each such stock certificate nominally
representing Target Common Stock shall be deemed for all purposes (except
for payment of dividends thereon or redemption thereof) to evidence the
ownership of the number of shares of Parent Common Stock which the holder
would be entitled to receive upon its surrender to the Surviving Corporation.
(b) No redemption with respect to Parent Common Stock shall be made with
respect to any unsurrendered certificates representing shares of Target
Common Stock with respect to which the shares of Parent Common Stock shall
have been issued in the Merger, until such certificates shall be
surrendered as provided herein.
(c) All rights to receive the Merger Consideration into which shares of
Target Common Stock shall have been converted pursuant to this Article I
shall be deemed to have been paid or issued, as the case may be, in full
satisfaction of all rights pertaining to such shares of Target Common Stock.
1.8. Closing. The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place (a) at the offices of Acquiror at 10:00
a.m. , local time, on the earlier of (i) July 31' 1999, and (ii) the third
business day immediately following the date on which the last of the
conditions set forth in Article VI is fulfilled or waived, or (b) at such
other time and place and on such other date as Parent and Target shall
agree (the "Closing Date").
ARTICLE II. FURTHER AGREEMENTS
Section 2.1. Employment Agreement -Shareholder. Prior to or at the Closing,
Acquiror and the Shareholder shall execute an employment agreement (the
"Davis Employment Agreement"). The Davis Employment Agreement shall be
substantially in the form attached hereto as Exhibit "B".
Section 2.2. Non-Competition Agreement. Prior to or at the Closing,
Acquiror and the Shareholder shall execute a non-competition agreement (the
"Agreement Not to Compete") substantially in the form attached hereto as
Exhibit "C".
Section 2.3. Confidentiality Agreement. Prior to or at the Closing,
Acquiror and the Shareholder shall execute a confidentiality agreement (the
"Confidentiality Agreement") substantially in the form attached hereto as
Exhibit "D".
Section 2.4. Continuity of Interest Agreement. Prior to or at the Closing,
Parent, Acquiror and the Shareholder shall execute a continuity of interest
agreement (the "Continuity of Interest Agreement") substantially in the
form attached hereto as Exhibit "E".
Section 2.5. Escrow Agreement. Upon delivery by Target of the audited
financial statements required under Section 4.7, Parent shall execute an
escrow agreement (the "Escrow Agreement") substantially in the form
attached hereto as Exhibit "F" and deliver to the Escrow Agent named
therein such executed document, along with a check in the amount of
$37,500, payable to Los Alamos National Bank.
Section 2.6. Registration Rights. Prior to or at the Closing, Parent shall
deliver to the holders of shares of Parent Common Stock received hereunder
a registration rights letter agreement (the "Registration Agreement")
substantially in the form attached hereto as Exhibit "G".
Section 2.7. Access to Information: Confidentiality. (a) From the date
hereof to the Effective Time, each of Parent, Acquiror and Target shall,
and shall cause their respective subsidiaries, affiliates, officers,
directors, employees, auditors and agents to, afford the officers,
employees and agents of one another complete access at all reasonable times
to one another s officers, employees, agents, properties, offices, plants
and other facilities and to all books and records, and shall furnish one
another with all financial, operating and other data and information as
each, through its officers, employees or agents, may reasonably request;
provided, however, that no party shall be required to provide access or
furnish information which it is prohibited by law or contract to provide or
furnish.
(b) Each of Parent, Acquiror and Target shall, and shall cause their
respective affiliates and their respective officers, directors, employees
and agents, to hold in strict confidence all data and information obtained
by them from one another or their respective subsidiaries, affiliates,
directors, officers, employees and agents (unless such information is or
becomes readily ascertainable from public or published information or trade
sources or public disclosure or such information is required by law) and
shall insure that such officers, directors, employees and agents do not
disclose such information to others without the prior written consent of
Parent, Acquiror or Target, as the case may be.
(c) In the event of the termination of this Agreement, Parent, Acquiror and
Target shall, and shall cause their respective affiliates, officers,
directors, employees and agents to, (i) return promptly every document
furnished to them by one another or any of their respective subsidiaries,
affiliates, officers, directors, employees and agents in connection with
the transactions contemplated hereby and any copies thereof, and (ii) shall
cause others to whom such documents may have been furnished promptly to
return such documents and any copies thereof any of them may have made.
(d) No investigation pursuant to this Section II shall affect any
representations or warranties of the parties herein or the conditions to
the obligations of the parties hereto.
Section 2.8. Notification of Certain Matters. Target shall give prompt
notice to Parent, and Parent shall give prompt notice to Target, of (a) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence
of which would be likely to cause any representation or warranty contained
in this Agreement to be untrue or inaccurate, and (b) any failure of
Target, Parent or Acquiror, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to
this Article II shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 2.9. Further Action. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other
things necessary , proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.
Section 2.10. Public Announcements. Parent shall have the exclusive right
to issue a press release or otherwise make any public statements with
respect to the Merger.
Section 2.11. Registration Rights. The holders of Parent Common Stock
received hereunder shall have the registration rights with respect to their
respective shares of Parent Common Stock as are set forth in the
Registration Agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUIROR
Parent and Acquiror hereby, jointly and severally, represent and warrant to
Target that, except as set forth in the Disclosure Schedule delivered prior
to the date which is three days prior to the Closing Date by Parent and
Acquiror to Target (the "Parent Disclosure Schedule"):
Section 3.1. Organization and Qualification: Subsidiaries. Each of Parent
and Acquiror and each of Parent s other subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders
to own, operate or lease the properties that it purports to own, operate or
lease and to carry on its business as it is now being conducted, and is
duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except for such failures which, when taken together with all
other such failures, would not have a Material Adverse Effect. Neither
Parent nor any subsidiary has received any notice of proceedings relating
to revocation or modification of any such franchises, grants,
authorizations, licenses, permits, easements, consents, certificates,
approvals or orders. The term "Material Adverse Effect", as used herein,
means any change in or effect on the business of Parent or any of its
properties (including intangible properties), prospects, condition
(financial or otherwise), assets or subsidiaries, taken as a whole. Parent
has four wholly-owned subsidiaries: (a) Missouri Cable TV Corp., a
Louisiana corporation; (b) Winter Entertainment, Inc., a Delaware
corporation; (c) Santa Fe Wireless Internet, Inc., a New Mexico corporation
(Acquiror); and (d) CyberHighway, Inc., an Idaho corporation.
Section 3.2. Articles of Incorporation and Bylaws. Parent shall, as part of
the Parent Disclosure Schedule, furnish to Target a complete and correct
copy of the Articles of Incorporation and the Bylaws, each as amended to
date, of Parent and Acquiror. Such Articles of Incorporation and Bylaws are
in full force and effect.
Section 3.3. Capitalization. The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock, $0001 par value per
share. As of the date hereof, (a) 10,890, 120 shares of Parent Common Stock
are issued and outstanding, all of which are validly issued, fully paid and
non-assessable, and (b) no shares of Parent Common Stock are held in the
treasury of Parent or by subsidiaries of Parent. 2,550,000 shares of Parent
Common Stock are reserved for future issuance under certain contracts, all
as described in the Parent Disclosure Schedule. Each of the outstanding
shares of capital stock of each of Parent s subsidiaries is duly
authorized, validly issued, fully paid and non-assessable and such shares
owned by Parent are owned free and clear of all security interests, liens,
claims, pledges, agreements, limitations on Parent s voting rights, charges
or other encumbrances of any nature whatsoever.
Section 3.4. Authority Relative to this Agreement. Each of Parent and
Acquiror has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement by Parent and Acquiror and the consummation by
Parent and Acquiror of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and
Acquiror other than filing and recordation of appropriate merger documents
as required by the New Mexico Law. This Agreement has been duly executed
and delivered by Parent and Acquiror and, assuming the due authorization,
execution and delivery by Target, constitutes a legal, valid and binding
obligation of each such corporation.
Section 3.5. No Conflict: Required Filings and Consents. (a) The execution
and delivery of this Agreement by Parent and Acquiror do not, and the
performance of this Agreement by Parent and Acquiror shall not, (i)
conflict with or violate either the Articles of Incorporation or Bylaws of
Parent or the Articles of Incorporation or Bylaws of Acquiror, (ii)
conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent or Acquiror or by which either of them or their
respective properties is bound or affected, or (iii) result in any breach
of or constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of
Parent or Acquiror pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
or obligation to which Parent or Acquiror is a party or by which Parent or
Acquiror or any of their respective properties is bound or affected, except
for any such breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and Acquiror
does not, and the performance of this Agreement by Parent and Acquiror
shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except for applicable requirements of the Securities
Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act
of 1934 (the "Exchange Act") and State securities laws ("Blue Sky Laws").
Section 3.6. Compliance. Neither Parent nor any of its subsidiaries is in
conflict with, or in default or violation of, (a) its Articles of
Incorporation or Bylaws or equivalent organizational documents, (b) any
law, rule, regulation, order, judgment or decree applicable to Parent or
any of its subsidiaries or by which its or any of their respective
properties is bound or affected, including, without limitation, health and
safety, environmental, civil rights laws and regulations and zoning
ordinances and building codes, or (c) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, easement, consent,
order or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or
its or any of their respective properties is bound or affected, except for
any such conflicts, defaults or violations which would not, individually or
in the aggregate, have a Material Adverse Effect.
Section 3.7. SEC Filings: Financial Statements. (a) Parent has filed all
forms, reports and documents required to be filed with the SEC and has
heretofore delivered to Target, in the form filed with the SEC, (i) its
Annual Report on Form 1 O-KSB for the year ended December 31,1998; (ii) its
Quarterly Report on Form 1 O-QSB for the period ended September 30, 1998,
(iii) all other reports or registration statements filed by Parent with the
SEC since December 31, 1998, and (iv) all amendments and supplements to all
such reports and registration statements filed by Parent with the SEC since
September 30,1998 (collectively, the "Parent SEC Reports"). The Parent SEC
Reports (x) were, and will be, prepared in accordance with the requirements
of the Securities Act or the Exchange Act, as the case may be, and (y) did
not, and will not, at the time they were, or will be, filed, contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports has been,
and will be, prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto) and each fairly presents,
and will present, the consolidated financial position of Parent and its
subsidiaries as at the respective dates thereof and the consolidated
results of its operations and changes in financial position for the periods
indicated, except that the unaudited interim financial statements were or
are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount.
(c) Except as and to the extent set forth on the consolidated balance sheet
of Parent and its subsidiaries as at December31, 1998, including the notes
thereto (the "1998 Balance Sheet"), neither Parent nor any of its
subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which would be required to be
reflected on a balance sheet, or in the notes thereto, prepared in
accordance with generally accepted accounting principles, except for
liabilities or obligations incurred in the ordinary course of business
since December31 , 1998, which would not, individually or in the aggregate,
have a Material Adverse Effect.
(d) Parent has heretofore furnished to Target a complete and correct copy
of any amendments or modifications, which have not yet been filed with the
SEC, to agreements, documents or other instruments which previously had
been filed by Parent with the SEC pursuant to the Securities Act or the
Exchange Act. Section 3.8. Absence of Litigation. Except as disclosed in
the Parent Disclosure Schedule, there are no claims, actions, proceedings
or investigations pending or, to the best knowledge of Parent, threatened
against Parent or any of its subsidiaries, or any properties or rights of
Parent or any of its subsidiaries, before any court, arbitrator, or
administrative, governmental or regulatory authority or body, domestic or
foreign, that, individually or in the aggregate, would have a Material
Adverse Effect. As of the date hereof, neither Parent nor any of its
subsidiaries nor any of their properties is subject to any order, writ,
judgment, injunction, decree, determination or award having a Material
Adverse Effect.
Section 3.9. Absence of Certain Changes or Events. Since December 31, 1998,
except as contemplated or permitted by this Agreement or disclosed in
Parent SEC Reports filed since that date and through the date hereof,
Parent and its subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since
such date, there has not been (a) any change in the financial condition,
results of operations, business or prospects of Parent or any of its
subsidiaries having a Material Adverse Effect, (b) any damage, destruction
or loss (whether or not covered by insurance) with respect to any assets of
Parent or any of its subsidiaries having a Material Adverse Effect, (c) any
material change by Parent in its accounting methods, principles or
practices, (d) any revaluation by Parent of any of its assets, including,
without limitation, writing down the value of inventory or any notes,
accounts receivable or other investments which would individually or in the
aggregate, exceed five percent of the total assets of Parent and its
subsidiaries as reflected on the consolidated balance sheets in Parent s
Annual Report on Form 10-KSB for the period ended December 31,1998; ( e)
any declaration, setting aside or payment of any dividends or distributions
in respect of shares of Parent Common Stock or any redemption, purchase or
other acquisition of any of its securities; (f) any change in the Federal
Communications Commission rules, regulations and orders affecting the
business of Parent or any of its subsidiaries which shall have a Material
Adverse Effect; or (g) any change in the status of any litigation, claims,
actions, proceedings or investigations pending or, to the best knowledge of
Parent, threatened against Parent or any of its subsidiaries, which, as a
result of such change, will have a Material Adverse Effect.
Section 3.10. Environmental Matters. To the best of Parent s knowledge,
there are no environmental liabilities (whether accrued, absolute,
contingent or otherwise) of Parent or any subsidiary.
Section 3.11. Labor Matters. Except as set forth in the Parent Disclosure
Schedule, (a) there are no controversies pending or, to the knowledge of
Parent or any of its subsidiaries, threatened, between Parent or any of its
subsidiaries and any of their respective employees, which controversies
have a Material Adverse Effect; (b) neither Parent nor any of its
subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by Parent or its
subsidiaries nor does Parent or any of its subsidiaries know of any
activities or proceedings of any labor union to organize any such
employees; (c) neither Parent nor any of its subsidiaries has breached or
otherwise failed to comply with any provision of any such agreement or
contract and there are no grievances outstanding against any such parties
under any such agreement or contract; (d) there are no unfair labor
practice complaints pending against Parent or any of its subsidiaries
before the National Labor Relations Board or any current union
representation questions involving employees of Parent or any of its
subsidiaries; and (e) neither Parent nor any of its subsidiaries has any
knowledge of any strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of Parent or any of its
subsidiaries.
Section 3.12. Contracts. The Parent Disclosure Schedule lists or describes
all material contracts or arrangements to which Parent or any subsidiary is
a party, or by which it is bound, as of the date hereof. All such contracts
and arrangements are in full force and effect and there has been no notice
of termination or threatened termination with respect to any such contracts
and arrangements, whether or not termination is permitted by the terms
thereof, and no event has occurred which, with the giving of notice or the
lapse of time, or both, would constitute a breach or default under any such
contract or arrangement, except for such breaches, defaults and events as
to which requisite waivers or consents have been obtained.
Section 3.13. Title to Properties. Parent has, and at the Effective Time
will have, good and marketable title to the equipment and other property
shown as assets on its records and books of account as of December 31,
1998, free and clear of all liens, encumbrances and charges, except as
reflected in such records and books of account and in the 1998 Balance Sheet.
Section 3.14. Patents. To the best knowledge of Parent, Parent or its
subsidiaries own or possess adequate licenses or other valid rights to use
all patents, patent rights, inventions, designs, processes, formulae and
other proprietary information used or held for use in connection with the
business of Parent or any of its subsidiaries as currently being, or
proposed to be, conducted and is unaware of any assertions or claims
challenging the validity of any of the foregoing which would have a
Material Adverse Effect. The conduct of the business of Parent and its
subsidiaries as now conducted or proposed to be conducted does not and will
not conflict with any patents, patent rights, licenses, trademarks,
trademark rights, trade names, trade name rights or copyrights of others in
any way which would have a Material Adverse Effect. No material
infringement of any proprietary right owned by or licensed by or to Parent
or any of its subsidiaries is known to Parent which would have a Material
Adverse Effect.
Section 3.15. Taxes. Parent and its subsidiaries have filed all federal and
state tax returns and reports and, to the best of Parent s knowledge, all
state, local and foreign tax returns and reports required to be filed by
them and have paid and discharged all taxes, including sales and use tax,
shown as due thereon and have paid all applicable state and local ad
valorem taxes as are due, except such as are being contested in good faith
by appropriate proceedings and except for such filings, payments or other
occurrences which would not have a Material Adverse Effect. Neither the IRS
nor any other taxing authority or agency is now asserting or, to the best
of Parent s knowledge, threatening to assert against parent or any of its
subsidiaries any deficiency or claim for additional taxes or interest
thereon or penalties in connection therewith. Neither Parent nor any of its
subsidiaries has granted any waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any
federal, state, county, municipal or foreign income tax.
Section 3.16. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder s or other fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of Parent or Acquiror.
Section 3.17. Full Disclosure. No statement contained in any document,
certificate or other writing furnished or to be furnished by Parent or
Acquiror to Target pursuant to the provisions of this Agreement contains or
shall contain any untrue statement of a material fact or omits or shall
omit to state any material fact necessary , in light of the circumstances
under which it was or may be made, in order to make the statements herein
or therein not misleading.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF TARGET
Target and the Shareholder, and each of them, hereby, jointly and
severally, represent and warrant to Parent and Acquiror that, except as set
forth in the Disclosure Schedule delivered prior to the date which is three
days prior to the Closing Date by Target to Parent (the "Target Disclosure
Schedule"):
Section 4.1. Organization and Qualification: Subsidiaries. Target is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New Mexico and has the requisite corporate power and
authority and is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders
to own, operate or lease the properties that it purports to own, operate or
lease and to carry on its business as it is now being conducted, and is
duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except for such failures which, when taken together with all
other such failures, would not have a Material Adverse Effect. Target has
not received any notice of proceedings relating to the revocation or
modification of any such franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals or orders. The term
"Material Adverse Effect" as used in this Article IV, means any change in
or effect on the business of Target that is or is reasonably likely to be
materially adverse to the business, operations, properties (including
intangible properties), prospects, condition (financial or otherwise),
assets or liabilities of Target taken as a whole. Target has no subsidiaries.
Section 4.2. Articles of Incorporation and Bylaws. Target shall, as part of
the Target Disclosure Schedule, furnish to Parent a complete and correct
copy of the Articles of Incorporation and the Bylaws, each as amended to
date, of Target. Such Articles of Incorporation and Bylaws are in full
force and effect.
Section 4.3. Capitalization. The authorized capital stock of Target
consists of 1 ,500 shares of Target Common Stock, no par value per share.
As of the date hereof, (a) 1 ,500 shares of Target Common Stock are issued
and outstanding, all of which are validly issued, fully paid and
non-assessable, and (b) no shares of Target Common Stock are held in the
treasury of Target or by any subsidiary of Target. Except as set forth in
the Target Disclosure Schedule, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of Target or obligating Target to
issue or sell any shares of capital stock of, or other equity interests in,
Target. All shares of Target Common Stock subject to issuance shall be duly
authorized, validly issued, fully paid and non-assessable. There are no
outstanding contractual obligations of Target to repurchase, redeem or
otherwise acquire any shares of Target Common Stock.
Section 4.4. Authority Relative to this Agreement. Target has all necessary
corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder. The execution and delivery of this Agreement by
Target and the consummation by Target of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of Target subject to the approval of the Merger and adoption of this
Agreement by Shareholder in accordance with the New Mexico Law. This
Agreement has been duly executed and delivered by Target and, assuming the
due authorization, execution and delivery by Parent and Acquiror,
constitutes a legal, valid and binding obligation of Target.
Section 4.5. No Conflict: Required Filings and Consents. (a) The execution
and delivery of this Agreement by Target does not, and the performance of
this Agreement by Target shall not, (i) conflict with or violate the
Articles of Incorporation or Bylaws of Target, (i) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to Target
or by which its properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of
Target pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Target is a party or by which Target or its properties
are bound or affected, except for such breaches, defaults or other
occurrences which would not, individually or in the aggregate have a
Material Adverse Effect.
(b) The execution and delivery of this Agreement by Target does not, and
the performance of this Agreement shall not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign.
Section 4.6. Compliance. Target is not in conflict with, or in default or
violation of, (a) its Articles of Incorporation or Bylaws or equivalent
organizational documents, (b) any law, rule, regulation, order, judgment or
decree applicable to Target or by which its properties are bound or
affected, including, without limitation, health and safety, environmental
and civil rights laws and regulations and zoning ordinances and building
codes, or (c) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise, easement, consent, order or other
instrument or obligation to which Target is a party or by which Target or
its properties are bound or affected, except for any such conflicts,
defaults or violations which would not, individually or in the aggregate,
have a Material Adverse Effect.
Section 4.7. Financial Statements. Target has delivered to Parent and
Acquiror copies of the its unaudited financial statements for the years
ended December 31' 1998, 1997, 1996 and I 995, and a statement of
operations and balance sheet as at March 31' 1999. All of such statements
are true and complete and have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the periods
indicated, except as indicated in the notes thereto. Each of such balance
sheets presents a true and complete statement, as of its date, of the
financial condition and assets and liabilities of Target. Except to the
extent reflected or reserved against therein (including the notes thereto),
Target did not have, as of the date thereof, any liabilities or obligations
(whether accrued, absolute, contingent or otherwise) of a nature
customarily reflected in a corporate balance sheet or notes thereto,
prepared in accordance with generally accepted accounting principles. Each
of such statements of operations presents a true and complete statement of
the results of operations of Target.
Section 4.8. Bank Account Statements. Target has delivered to Parent and
Acquiror copies of the its bank account statements for the months of
August, September, October, November and December 1998 and January,
February and March 1999. All of such statements are true and complete.
Section 4.9. Absence of Certain Changes or Events. Since March 31' 1999,
except as contemplated by this Agreement or disclosed in the Target
Disclosure Schedule, Target has conducted its business only in the ordinary
course and in a manner consistent with past practice and, since such date,
there has not been (a) any change in the financial condition, results of
operations, business or prospects of Target having a Material Adverse
Effect, (b) any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of Target having a Material Adverse
Effect, (c) any material change by Target in its accounting methods,
principles or practices, (d) any revaluation by Target of any of its
assets, including, without limitation, writing down the value of inventory
or any notes, accounts receivable or other investments which would,
individually or in the aggregate, exceed five percent of the total assets
of Target as reflected on the financial statements for the period ended
March 31' 1999, or (e) any declaration, setting aside or payment of any
dividends or distributions in respect of shares of Target Common Stock or
any redemption, purchase or other acquisition of any of its securities,
except in the ordinary course of business consistent with past practice.
Section 4.10. Absence of Litigation. Except as disclosed in Target
Disclosure Schedule, there are no claims, actions, proceedings or
investigations pending or, to the best knowledge of Target, threatened
against Target, or any properties or rights of Target, before any court,
arbitrator, or administrative, governmental or regulatory authority or
body, that, individually or in the aggregate, would have a Material Adverse
Effect. As of the date hereof, neither Target nor its properties is subject
to any order, writ, judgment, injunction, decree, determination or award
having a Material Adverse Effect.
Section 4.11. Labor Matters. Except as set forth in the Target Disclosure
Schedule, (a) there are no controversies pending or, to the knowledge of
Target, threatened, between Target and any of its employees, which
controversies have a Material Adverse Effect; and (b) Target is not a party
to any collective bargaining agreement or other labor union contract.
Section 4.12. Contracts. The Target Disclosure Schedule lists or describes
all contracts, authorizations, approvals or arrangements to which Target is
a party, or by which it is bound, as of the date hereof, and which (a)
obligates or may obligate Target to pay more than $500; or (b) are
financing documents, loan agreements or agreements providing for the
guarantee of the obligations of any party in each case involving an
obligation in excess of $1,000.
Section 4.13. Title to Property and Leases. (a) Each asset owned or leased
by Target is owned or leased free and clear of any mortgages, pledges,
liens, security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any kind.
(b) All leases of real property leased for the use or benefit of Target to
which Target is a party, and all amendments and modifications thereof are
in full force and effect and have not been modified or amended and there
exists no material default under the leases by Target, nor any event which,
with the giving of notice or lapse of time, or both, would constitute a
material default thereunder by Target.
(c) A statement describing all assets of Target is included in the Target
Disclosure Schedule.
Section 4.14. Insurance. All material properties and risks of Target are
covered by valid and currently effective insurance policies issued in favor
of Target, in such amounts and against such risks and losses as are
customary in their locales of operation for companies operating similar
businesses and operations, and Target is included as an insured party under
such policies, with full rights as a loss payee. Copies of all such
insurance policies shall be included in the Target Disclosure Schedule.
Section 4.15. Taxes. Target has filed all federal and state tax returns and
reports and, to the best of Target s knowledge, all state, local and
foreign tax returns and reports required to be filed have been filed and
Target has paid and discharged all taxes, including sales and use taxes,
shown as due thereon and has paid all applicable state and local ad valorem
taxes as are due, except such as are being contested in good faith by
appropriate proceedings and except for such filings, payments or other
occurrences which would not have a Material Adverse Effect. Neither the IRS
nor any other taxing authority or agency is now asserting or, to the best
of Target s knowledge, threatening to assert against Target any deficiency
or claim for additional taxes or interest thereon or penalties in
connection therewith. Target has not granted any waiver of any statute of
limitations with respect to, or any extension of a period for the
assessment of, any federal, state, county, municipal or foreign income tax.
Section 4.16. Full Disclosure. No statement contained in any document,
certificate or other writing furnished or to be furnished by Target or the
Shareholder to Parent and Acquiror pursuant to the provisions of this
Agreement contains or shall contain any untrue statement of a material fact
or omits or shall omit to state any material fact necessary, in light of
the circumstances under which it was or may be made, in order to make the
statements herein or therein not misleading.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder hereby represents and warrants to Parent and Acquiror that:
Section 5.1. No Legal Disability. The Shareholder is under no legal
disability with respect to entering into this Agreement.
Section 5.2. Receipt of Disclosure The Shareholder hereby represents and
warrants that he has received and reviewed all of the information
concerning Parent required to be delivered by Parent hereunder. With
respect to such information, the Shareholder further represents and
warrants that he has had an opportunity to ask questions of, and to receive
answers from, the officers of Parent.
Section 5.3. Representation Relating to Parent Common Stock. The
Shareholder represents and warrants to Parent that the shares of Parent
Common Stock being acquired pursuant to this Agreement are being acquired
for his own account and for investment and not with a view to the public
resale or distribution of such shares and further acknowledge that the
shares being issued have not been registered under the Securities Act or
any state securities law and are "restricted securities", as that term is
defined in Rule 144 promulgated by the SEC. and must be held indefinitely,
unless they are subsequently registered or an exemption from such
registration is available.
Section 5.4. Consent to Legend. The Shareholder consents to the placement
of a legend restricting future transfer on the share certificates
representing the Parent Common Stock delivered hereunder, which legend
shall be in the following, or similar, form:
"THE STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ISSUED IN RELIANCE UPON
THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2) OF THE SECURITIES
ACT OF 1933, AS AMENDED. THE STOCK MAY NOT BE TRANSFERRED WITHOUT
REGISTRATION EXCEPT IN TRANSACTIONS EXEMPT FROM SUCH REGISTRATION."
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. Conduct of Business by Target Pending the Merger. Target
covenants and agrees that, between the date of this Agreement and the
Effective Time, unless Parent shall otherwise agree in writing, the
business of Target shall be conducted only in, and Target shall not take
any action except in, the ordinary course of business and in a manner
consistent with past practice; and Target shall use its best efforts to
preserve substantially intact the business organization of Target, to keep
available the services of the present officers, employees and consultants
of Target and to preserve the present relationships of Target with
customers, suppliers and other persons with which Target has significant
business relations. By way of amplification and not limitation, except as
contemplated by this Agreement, Target shall not, directly or indirectly,
do, or propose to do, any of the following without the prior written
consent of Parent, which consent shall not be unreasonably withheld:
(a) amend or otherwise change its Articles of Incorporation or Bylaws or
equivalent organizational documents;
(b) issue, sell, pledge, dispose of, encumber or authorize the issuance,
sale, pledge, disposition or encumbrance of (i) any shares of capital stock
of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest, of Target or (ii) any assets of Target or any other
material assets of Target other than in the ordinary course of business
consistent with past practices;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock;
( d) reclassify , combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guaranty or endorse or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans or advances, except in the ordinary course of business and
consistent with past practice; (iii) authorize any single capital
expenditure which is in excess of $1 ,000 or capital expenditures which
are, in the aggregate, in excess of $3,000 for Target; or (iv) enter into
or amend any contract, agreement, commitment or arrangement to any of the
effects set forth in this paragraph (e) of Section 6.1 ;
(1) increase the compensation payable or to become payable to its officers
or employees, except for increases in salary or wages of employees of
Target who are not officers of Target in accordance with past practices, or
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director or officer of Target, or establish,
adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any directors, officers or employees;
(g) take any action other than in the ordinary course of business and in a
manner consistent with past practice with respect to accounting policies or
procedures (including, without limitation, procedures with respect to the
payments of accounts payable and collection of accounts receivable);
(h) settle or compromise any material federal, state, local or foreign
income tax liability; or
(i) pay, discharge, compromise or consent to any arrangements concerning or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge,
compromise, settlement, arrangement or satisfaction in the ordinary course
of business and consistent with past practice of liabilities reflected or
reserved against in the financial statements of Target or incurred in the
ordinary course of business and consistent with past practice.
Section 6.2. Conduct of Business by Parent and Acquiror Pending the Merger.
Parent and Acquiror covenant and agree that, between the date of this
Agreement and the Effective Time, Parent shall not sell or otherwise
dispose of all or substantially all of its assets.
Section 6.3. Approval of Shareholders. Target shall secure the written
consent of all of the shareholders of Target to this Agreement, the Merger
Agreement and the Merger.
Section 6.4. Securities Law Compliance. Parent shall take any action
required to be taken under applicable Federal and/or state securities laws
applicable to (a) the Merger and (b) the issuance of Parent Common Stock
pursuant to the Merger. Parent shall promptly deliver to Target copies of
any filings made by Parent and/or Acquiror pursuant to this Section 6.4.
Section 6.5. Third Party Consents. Each party to this Agreement shall use
its best efforts to obtain, as soon as reasonably practicable, all permits,
authorizations, consents, waivers and approvals from third parties or
governmental authorities necessary to consummate this Agreement and the
Merger Agreement and the transactions contemplated hereby and thereby,
including, without limitation, any permits, authorizations, consents,
waivers and approvals required in connection with the Merger.
ARTICLE VII. CONDITIONS OF MERGER
Section 7.1. Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment of all of the following conditions precedent at
or prior to the Effective Time:
(a) Shareholder Approval. This Agreement shall have been approved and
adopted by all of the shareholders of Target.
(b) No Order. No United States or state governmental authority or other
agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and has the effect
of making the conversion of Target Common Stock into the Merger
Consideration illegal or otherwise prohibiting consummation of the
transactions contemplated by this Agreement.
(c) No Challenge. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency by
any government agency or any other person challenging, or seeking material
damages in connection with the conversion of Target Common Stock into the
Merger Consideration pursuant to the Merger or otherwise materially
adversely affecting the business, assets, prospects, financial condition or
results of operations of Target, Acquiror, Parent or any of their
respective subsidiaries or affiliates.
(d) Tax Opinions. Target and the Shareholder shall receive an opinion of
James S. Rubin, Esquire, to the effect that under the provisions of United
States federal income tax laws, rules and regulations, provided that the
Merger qualifies as a statutory merger under the applicable laws of the
State of New Mexico, it will be a reorganization within the meaning of
Sections 368(a)(1 )(A) and 368(a)(2)(D) of the Code and that, with respect
to the Parent Common Stock to be issued to the shareholders in the Merger,
the exchange provided for in Section 1.7 will not result in current income
to Target or the Shareholder.
Such opinions will be based upon certain assumptions and representations of
the respective managements of Parent and Target.
Section 7.2. Additional Conditions to Obligations of Parent and Acquiror.
The obligations of Parent and Acquiror to effect the Merger are also
subject to the fulfillment of all of the following conditions precedent at
or prior to the Effective Time:
(a) Audit of Target. Target shall have delivered to Parent and Acquiror
audited financial statements for each of the years ending December 31,
1998, 1997 and 1996, which financial statements shall contain balance
sheets, statements of operations and statements of cash flows for each of
such periods and shall not be materially different from the unaudited
financial statements of Target required to be delivered by Target
hereunder. The cost of such audit shall be borne solely by Target.
(b) Customers of Target. The actual number of customers of Target who shall
be current in their accounts as of the last billing date immediately
preceding the Closing Date shall equal or exceed 2,100 customers. For
purposes of this Section 7.2(b), "customers" shall mean actually subscribed
and paying customers and shall exclude, without limitation, customers
obtained through free promotions, free bases or any other manner not
requiring payment for services.
(c) Representations and Warranties. The representations and warranties of
Target and the Shareholder contained in this Agreement shall be true and
correct in all material respects on and as of the Effective Time, except
for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), with
the same force and effect as if made on and as of the Effective Time, and
Parent and Acquiror shall have received a Certificate of the President of
Target which is to that effect, which certificate shall be in the form
attached hereto as Exhibit "H .
(d) Agreements and Covenants. Target and the Shareholder shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, and Parent and Acquiror shall have
received a Certificate of the President of Target to that effect, which
certificate shall be in the form attached hereto as Exhibit "H".
(e) Consents Obtained. All consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made, by
Target for the authorization, execution and delivery of this Agreement and
the consummation by it of the transactions contemplated hereby shall have
been obtained and made by Target.
(f) Employment Agreement -Shareholder. Acquiror and the Shareholder shall
have executed the Davis Employment Agreement.
(g) Non-Competition Agreement. Acquiror and the Shareholder shall have
executed the Agreement Not to Compete.
(h) Confidentiality Agreement. Acquiror and the Shareholder shall have
executed the Confidentiality Agreement.
(i) Continuity of Interest Agreement. Parent, Acquiror and the Shareholder
shall have executed the Continuity of Interest Agreement.
(j) Escrow Agreement. Parent and Target shall have executed the Escrow
Agreement.
(k) Registration Agreement. Parent shall have delivered a Registration
Agreement to each of the persons receiving shares of Parent Common Stock
hereunder.
(I) Opinion of Counsel. Parent and Acquiror shall have received, from
counsel for Target, an opinion substantially in the form attached hereto as
Exhibit "I", dated as of the Closing Date.
(m) No Material Adverse Change. There shall have been no material adverse
change in the condition, financial or otherwise, of Target.
Section 7.3. Additional Conditions to Obligation of Target. The obligation
of Target to effect the Merger is also subject to fulfillment of all of the
following conditions precedent, at or prior to the Effective Time:
(a) Representations and Warranties. The representations and warranties of
Parent and Acquiror contained in the Agreement shall be true and correct in
all material respects on and as of the Effective Time, except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as
if made on and as of the Effective Time, and Target shall have received a
Certificate of the President of Parent which is to that effect, which
certificate shall be in the form attached hereto as Exhibit "J".
(b) Agreements and Covenants. Parent and Acquiror shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Effective Time, and Target shall have received a Certificate
of the President of Parent which is to that effect, which certificate shall
be in the form attached hereto as Exhibit "J".
{c) Consents Obtained. All consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made, by
Parent and Acquiror for the authorization, execution and delivery of this
Agreement and the consummation by them of the transactions contemplated
hereby shall have been obtained and made by Parent and Acquiror.
{d) Employment Agreement -Shareholder. Acquiror and the Shareholder shall
have executed the Davis Employment Agreement.
{e) Non-Competition Agreement. Acquiror and the Shareholder shall have
executed the Agreement Not to Compete.
{f) Confidentiality Agreement. Acquiror and the Shareholder shall have
executed the Confidentiality Agreement.
{g) Continuity of Interest Agreement. Parent, Acquiror and the Shareholder
shall have executed the Continuity of Interest Agreement.
{h) Escrow Agreement. Parent and Target shall have executed the Escrow
Agreement.
{i) Registration Agreement. Parent shall have delivered a Registration
Agreement to each of the persons receiving shares of Parent Common Stock
hereunder.
{j) Opinion of Counsel. Target shall have received from Newlan & Newlan,
counsel for Parent and Acquiror, an opinion in substantially the form
attached hereto as Exhibit "K", dated as of the Closing Date.
{k) No Material Adverse Change. There shall have been no material adverse
change in the condition, financial or otherwise, of Parent.
ARTICLE VIII. INDEMNIFICATION
Section 8.1. General Indemnification Covenants. The Shareholder shall
indemnify , save and keep Parent and its affiliates, agents, attorneys,
successors and permitted assigns {including the Surviving Corporation) {the
"Parent Indemnitees"), harmless against and from all liability, demands,
claims, actions or causes of action, assessments, losses, fines, penalties,
costs, damages and expenses, including reasonable attorneys fees,
disbursements and expenses {collectively, the "Damages"), sustained or
incurred by any of the Parent Indemnitees as a result of, arising out of or
by virtue of any misrepresentation, breach of any warranty or
representation or non-fulfillment of any agreement or covenant on the part
of Target or the Shareholder, whether contained in this Agreement or the
Merger Agreement or any exhibit or schedule hereto or thereto or any
written statement or certificate furnished or to be furnished to Parent or
Acquiror pursuant hereto or in any closing document delivered by Target or
the Shareholder to Parent or Acquiror in connection herewith.
Section 8.2. Tax Indemnity. {a) The Shareholder hereby agrees to pay,
indemnify, defend and hold Parent and Acquiror harmless from and against
any and all taxes of Target with respect to any period {or any portion
thereof) up to and including the Effective Time, except for taxes of Target
which are reflected as current liabilities for taxes that exist as of the
Effective Time {"Current Tax Liabilities") on the financial statements
delivered to Parent and Acquiror hereunder, together with all reasonable
legal fees, disbursements and expenses incurred by Parent and Acquiror in
connection therewith.
{b) The Shareholder shall prepare and file any tax return of Target
required to be filed after the Effective Time and which relates to any
period or portion thereof up to and including the Effective Time.
{c) The indemnity provided for in this Section 8.2 shall be independent of
any other indemnity provision hereof and, anything in this Agreement to the
contrary notwithstanding, shall survive until the expiration of the
applicable statutes of limitation for the taxes referred to herein, and any
taxes subject to the indemnification for taxes set forth in this Section
7.2 shall not be subject to the provisions of Sections 9.1 or 9.4 hereof.
Notwithstanding anything in this Agreement to the contrary, the Shareholder
will not be obligated to indemnify Parent and Acquiror under any provision
of this Agreement, with respect to taxes or other liabilities that arise as
a direct result of a failure of the Merger to qualify as a reorganization
within the meaning of Section 368{a){1 ){A) and 368{a){2){D) of the Code,
provided that the Shareholder is not in breach of any of his
representations, covenants or agreements contained in the Continuity of
Interest Agreement.
Section 8.3. Release by the Shareholder. The Shareholder hereby releases
and discharges Parent and Acquiror and each of its officers, directors,
agents and attorneys from, and agree and covenant that, in no event, will
the Shareholder commence any litigation or other legal or administrative
proceeding against Parent, Acquiror or any of their officers, directors,
agents or attorneys, whether in law or equity, relating to any and all
claims and demands, known and unknown, suspected and unsuspected, disclosed
and undisclosed, for damages, actual or consequential, past, present and
future, arising out of or in any way connected with his ownership or
alleged ownership of Target Common Stock prior to the Effective Time, other
than claims or demands arising out of the transactions contemplated by this
Agreement and the Merger Agreement.
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of Target:
(a) By mutual consent of the Boards of Directors of Parent and Target.
(b) By either Parent or Target, if (i) the Merger shall not have been
consummated by July 31' 1999 (the "Termination Date"); (ii) the requisite
consent of the shareholders of Target to approve this Agreement, the Merger
Agreement and the transactions contemplated hereby and thereby shall not be
obtained; (iii) any governmental or regulatory body, the consent of which
is a condition to the obligations of Parent, Acquiror and Target to
consummate the transactions contemplated hereby or by the Merger Agreement,
shall have been unsuccessful, or (iv) any court of competent jurisdiction
in the United States or any state shall have issued an order, judgment or
decree (other than a temporary restraining order) restraining, enjoining or
otherwise prohibiting the Merger and such order, judgment or decree shall
have become final and non-appealable; provided however, that the right to
terminate this Agreement under this Section 8.1 (b) shall not be available
to any party whose willful failure to fulfill any material obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date.
Section 9.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become
void and there shall be no liability on the part of either Parent, Acquiror
or Target or their respective officers or directors, except that nothing in
this Section 9.2 shall relieve any party from liability for any breach of
this Agreement.
Section 9.3. Expenses. Unless otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
Section 9.4. Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at
any time prior to the Effective Time. This Agreement may not be amended
except by an instrument in writing signed by each of the parties hereto.
Section 9.5. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party
or parties to be bound thereby.
ARTICLE X. GENERAL PROVISIONS
Section 10.1. Survival of Representation. Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall survive
the Merger indefinitely.
Section 10.2. Publicity. There shall be no public announcements with
respect to the Merger made by Target. The right to publicize the execution
of this Agreement and the Merger Agreement, as well as the consummation of
the Merger, shall be that of Parent.
Section 10.3. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or mailed if delivered personally or
mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice, except that
notices of changes of address shall be effective upon receipt):
(a) If to Parent or Acquiror: Internet Media Corporation
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
with copies to: Newlan & Newlan, Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
(b) if to Target or
the Shareholder: Santa Fe Trail Internet Plus, Inc.
P.O. Drawer 250
Los Alamos, New Mexico 87504-0250
with copies to: James S. Rubin, Esquire
Rubin, Katz, Salazar, Alley & Rouse
123 East Marcy Street, Suite 200
Santa Fe, New Mexico 87501
Section 10.4. Non-Waiver. The failure in anyone or more instances of a
party to insist upon performance of any of the terms, covenants or
conditions of this Agreement, to exercise any right or privilege conferred
in this Agreement, or the waiver by said party of any breach of any of the
terms, covenants or conditions of this Agreement, shall not be construed as
a subsequent waiver of any such terms, covenants, conditions, rights or
privileges, but the same shall continue and remain in full force and effect
as if no such forbearance or waiver had occurred. No waiver shall be
effective unless it is in writing and signed by an authorized
representative of the waiving party.
Section 10.5. Arbitration. Any dispute arising under this Agreement and/or
the Merger Agreement, as well as any of the transactions contemplated
hereby and thereby, shall be resolved by arbitration in Dallas, Texas,
under the Rules of the American Arbitration Association, as then in effect.
The determination and award of the arbitrator, which aware may include
punitive damages, shall be final and binding on the parties and may be
entered as a judgment in any court of competent jurisdiction. It is
expressly agreed that the arbitrators, as part of their award, can award
attorneys fees to the prevailing party.
Section 10.6. Binding Effect: Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their successors and
permitted assigns. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, including,
without limitation, third party beneficiary rights.
Section 10.7. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
Section 10.8. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings, both oral
and written, among the parties, or any of them, with respect to the subject
matter hereof and, except as otherwise expressly provided herein, are not
intended to confer upon any other person any rights or remedies hereunder.
Section 10.9. Assignability. This Agreement shall not be assignable by
either party or by operation of law, except with the express written
consent of each other party.
Section 10.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas applicable to
contracts executed in and to be performed in such State.
Section 10.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 10.12. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Parent, Acquiror and Target, by their respective
officers thereunto duly authorized, and the Shareholder have caused this
Agreement to be executed as of the date first written above.
INTERNET MEDIA CORPORATION
ATTEST:
By: /s/ David M. Loflin
David M. Loflin, President
/s/ Waddell D. Loflin
Waddell D. Loflin Secretary
SANTA FE WIRELESS INTERNET, INC.
ATTEST:
/s/ David M. Loflin
David M. Loflin Secretary
By: /s/ Waddell D. Loflin
Waddell D. Loflin
Chief Executive Officer
SANTA FE TRAIL INTERNET PLUS, INC.
ATTEST:
/s/ Secretary By: /s/ Darrell Davis
Darrell Davis
President
/s/ Darrell Davis
Darrell Davis, individually
- ------------------------
EXHIBIT 10.21.1
- ------------------------
AGREEMENT OF MERGER
AGREEMENT OF MERGER, dated as of June 2, 1999 (the "Merger Agreement"), by
and among Internet Media Corporation, a Nevada corporation ("Parent"),
Santa Fe Wireless Internet, Inc., a New Mexico corporation ("Acquiror"),
and Santa Fe Trail Internet Plus, Inc., a New Mexico corporation ("Target")
(Acquiror and Target being hereinafter collectively referred to as the
"Constituent Corporations").
WHEREAS, prior to the execution of this Merger Agreement, Parent, Acquiror
and Target have entered into an Agreement and Plan of Reorganization dated
as of April 28, 1999 (the "Plan of Reorganization"), providing for certain
representations, warranties and agreements in connection with the
transaction contemplated; and
WHEREAS, the Board of Directors of Parent, Acquiror and Target have
approved the acquisition of Target by Acquiror; and
WHEREAS, the Boards of Directors of Parent, Acquiror and Target have
approved the merger of Target into Acquiror (the "Merger") upon the terms
and subject to the conditions set forth herein and in the Plan of
Reorganization; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization with the meaning of Section 368(a)(1)(A)
and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Acquiror and Target agree as follows:
ARTICLE I. THE MERGER
Section 1.1. The Merger. (a) At the Effective Time (as defined in
Section 1.2) and subject to the terms and conditions of this Merger
Agreement and the Plan of Reorganization, Target shall be merged into
Acquiror and the separate existence of Target shall thereupon cease, in
accordance with the applicable provisions of the Business Corporation Law
of the State of New Mexico (the "New Mexico Law").
(b) Acquiror will be the surviving corporation in the Merger (sometimes
referred to herein as the "Surviving Corporation") and will continue to be
governed by the laws of the State of New Mexico, and the separate corporate
existence of Acquiror and all of its rights, privileges, immunities and
franchises, public or private, and all its duties and liabilities as a
corporation organized under the laws of the State of New Mexico will
continue unaffected by the Merger.
(c) The Merger will have the effects specified by the New Mexico Law.
Section 1.2. Effective Time. As soon as practicable following
fulfillment or waiver of the conditions specified in Article 1.2 of the
Plan of Reorganization and provided that this Merger Agreement has not been
terminated or abandoned pursuant to Article IV hereof, the Constituent
Corporations will cause a Certificate of Merger (the "Certificate of
Merger") to be filed with the office of the Secretary of State of New
Mexico, as provided in the New Mexico Law. Subject to and in accordance
with the New Mexico Law, the Merger will become effective at the date and
time the Certificate of Merger is filed with the office of the Secretary of
State of New Mexico, or such later time or date as may be specified in the
Certificate of Merger (the "Effective Time").
ARTICLE II. THE SURVIVING CORPORATION
Section 2.1. Articles of Incorporation. The Articles of Incorporation of
Acquiror as in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation after the Effective
Time.
Section 2.2. Bylaws. The Bylaws of Acquiror as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving
Corporation after the Effective Time.
Section 2.3. Board of Directors. From and after the Effective Time, the
Board of Directors of Acquiror shall be the Board of Directors of the
Surviving Corporation.
ARTICLE III. CONVERSION OF SHARES
Section 3.1. Conversion of Target Shares in the Merger. Pursuant to this
Merger Agreement, at the Effective Time, by virtue of the Merger and
without any action on the part of any holder of any capital stock of Target:
(a) all shares of Common Stock of Target (the "Target Common Stock") owned
by Parent or any subsidiary of Parent or Target shall be cancelled and
shall cease to exist from and after the Effective Time; and
(b) each remaining issued and outstanding share of Target Common Stock
shall be converted into, and become exchangeable for 66.66 shares of the
$.0001 par value per share common stock of Parent (the "Parent Common
Stock"), a total of 100,000 shares of Parent Common Stock. The
consideration referred to in this Section 3.1(b) is hereinafter referred to
as the "Merger Consideration".
Section 3.2. Status of Acquiror Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of any
capital stock of Acquiror, each issued and outstanding share of common
stock of Acquiror shall continue unchanged and remain outstanding as a
share of common stock of the Surviving Corporation.
Section 3.3. Exchange of Target Common Stock Certificates. As soon as
practicable after the Effective Time, Parent shall cause the exchange of
Target Common Stock for Parent Common Stock (as required in Section 3.1(b)
herein and Section 1.6 of the Plan of Reorganization) to occur and (b)
deliver to the shareholder of Target the sum of cash required to be so
delivered in Section 3.1(b) herein and in Section 1.6 of the Plan of
Reorganization. Shares of Parent Common Stock into which shares of Target
Common Stock shall be converted in the Merger shall be deemed to have been
issued at the Effective Time.
ARTICLE IV. TERMINATION AND AMENDMENT
Section 4.1. Termination. This Merger Agreement shall terminate in the
event of, and upon termination of, the Plan of Reorganization.
Section 4.2. Amendments. This Merger Agreement may be amended by the
parties hereto, at any time before or after approval hereof by the
shareholders of Target, but, after any such approval, no amendment shall be
made which (a) changes the ratio at which Target Common Stock is to be
converted into Parent Common Stock pursuant to Section 3.1, (b) in any way
materially adversely affects the rights of holders of Target Common Stock
or (c) changes in any of the principal terms of this Merger Agreement, in
each case, without the further approval of such shareholder. This Merger
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 4.3. Waiver. At any time prior to the Effective Time, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid if set
foth in an instrument in writing signed on behalf of such party.
Section 4.4. Notices. All notices required to be given hereunder shall
be in writing and shall be deemed given when delivered in person or sent by
confirmed facsimile, or when received if given by Federal Express or other
nationally recognized overnight courier service, or five (5) buisness days
after being deposited in the United States mail, postage prepaid,
registered or certified mail, addressed to the applicable parties as follows:
(a) If to Parent or Acquiror:
Internet Media Corporation
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
with copies to:
Newlan & Newlan
Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
(b) if to Target:
Santa Fe Trail Internet Plus, Inc.
P.O. Drawer 250
Los Alamos, New Mexico 87504-0250
with copies to:
James S. Rubin, Esquire
Rubin, Katz, Salazar, Alley & Rouse
123 East Marcy Street
Suite 200
Santa Fe, New Mexico 87501
Section 4.5. Arbitration. Any dispute arising under this Merger
Agreement shall be resolved by arbitration in Dallas, Texas, under the
Rules of the American Arbitration Association, as then in effect. The
determination and award of the arbitrator, which aware may include punitive
damages, shall be final and binding on the parties and may be entered as a
judgment in any court of competent jurisdiction. It is expressly agreed
that the arbitrators, as part of their award, can award attorneys' fees to
the prevailing party.
Section 4.6. Entire Agreement. This Merger Agreement and the Plan of
Reorganization constitute the entire agreement between the parties and
shall be binding upon and inure to the benefit of the parties hereto and
their respective legal representatives, successors and permitted assigns.
The parties and their respective affiliates make no representations or
warranties to each other, except as contained in the Plan of
Reorganization, and any and all prior representations and statements made
by any party or its representatives, whether verbally or in writing, are
deemed to have been merged into this Merger Agreement and the Plan of
Reorganization, it being intended that no such representations or
statements shall survive the execution and delivery of this Merger
Agreement and the Plan of Reorganization.
Section 4.7. Non-Waiver. The failure in any one or more instances of a
party to insist upon performance of any of the terms, covenants or
conditions of this Merger Agreement, to exercise any right or privilege
conferred in this Merger Agreement, or the waiver by said party of any
breach of any of the terms, covenants or conditions of this Merger
Agreement, shall not be construed as a subsequent waiver of any such terms,
covenants, conditions, rights or privileges, but the same shall continue
and remain in full force and effect as if no such forbearance or waiver had
occurred. No waiver shall be effective unless it is in writing and signed
by an authorized representative of the waiving party.
Section 4.8. Counterparts. This Merger Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
Section 4.9. Severability. The invalidity of any provision of this
Merger Agreement or portion of a provision shall not affect the validity of
any other provision of this Merger Agreement or the remaining portion of
the applicable provision.
Section 4.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas applicable to
contracts executed in and to be performed in such State.
Section 4.11. Binding Effect; Benefit. This Merger Agreement shall inure
to the benefit of and be binding upon the parties hereto and their
successors and permitted assigns. Nothing in this Merger Agreement,
express or implied, is intended to confer on any person other than the
parties hereto and their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Merger Agreement, including, without limitation, third party beneficiary
rights.
Section 4.12. Assignability. This Merger Agreement shall not be
assignable by either party or by operation of law, except with the express
written consent of each other party.
Section 4.13. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, Parent, Acquiror and Target have executed this
Agreement of Merger on the date first above written.
PARENT: TARGET:
INTERNET MEDIA CORPORATION SANTA FE TRAIL INTERNET PLUS, INC.
By: /s/ Waddell D. Loflin By: /s/ Darrell Davis
Waddell D. Loflin Darrell Davis
Vice President President
ACQUIROR:
SANTA FE WIRELESS INTERNET, INC.
By: /s/ Waddell D. Loflin
Waddell D. Loflin
Chief Executive Officer
- -------------------------
EXHIBIT 10.22
- -------------------------
June 2, 1999
Darrell and Deanna Davis
P.O. Drawer 250
Los Alamos, New Mexico 87504-0250
Registration Rights Letter Agreement
Dear Mr. and Mrs. Davis:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to thirty percent (30%) of the shares of the $.0001
par value common stock (the "Subject Shares") of Internet Media
Corporation, a Nevada corporation (the "Company"), received, and currently
owned, by you under that certain Agreement and Plan of Reorganization (the
"Reorganization Agreement") among the Company, Santa Fe Wireless Internet,
Inc. and Santa Fe Trail Internet Plus, Inc. It is our understanding that:
1. Registration Rights. Should the Company file a registration statement
(the "Registration Statement") under the Act, you may demand, in writing,
the inclusion of the Subject Shares in the Registration Statement. Your
right to such registration is exercisable only with respect to the
Registration Statement first filed by the Company following the closing
under the Reorganization Agreement. Not less than 15 days prior to the
filing of the Registration Statement, the Company shall notify you in
writing of its intention to file the Registration Statement. Within 10
days from receipt of the Company's notice, you shall provide the Company
written advice as to your desire to have the Subject Shares included in the
Registration Statement.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you, on a pro rata
basis, based on the percentage that your shares bear to all shares being
registered under the Registration Statement. In this regard, the Company
reserves the right to include additional selling shareholders in any
registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
INTERNET MEDIA CORPORATION
By: /s/ Waddell D. Loflin
Waddell D. Loflin
Vice President
AGREED AND ACCEPTED as of the
date and year first above written:
/s/ Darrell Davis
Darrell Davis
/s/ Deanna Davis
Deanna Davis
- ---------------------
EXHIBIT 10.23
- ---------------------
June 2, 1999
Roger and Gloria C. Davis
P.O. Drawer 250
Los Alamos, New Mexico 87504-0250
Registration Rights Letter Agreement
Dear Mr. and Mrs. Davis:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to thirty percent (30%) of the shares of the $.0001
par value common stock (the "Subject Shares") of Internet Media
Corporation, a Nevada corporation (the "Company"), received, and currently
owned, by you under that certain Agreement and Plan of Reorganization (the
"Reorganization Agreement") among the Company, Santa Fe Wireless Internet,
Inc. and Santa Fe Trail Internet Plus, Inc. It is our understanding that:
1. Registration Rights. Should the Company file a registration statement
(the "Registration Statement") under the Act, you may demand, in writing,
the inclusion of the Subject Shares in the Registration Statement. Your
right to such registration is exercisable only with respect to the
Registration Statement first filed by the Company following the closing
under the Reorganization Agreement. Not less than 15 days prior to the
filing of the Registration Statement, the Company shall notify you in
writing of its intention to file the Registration Statement. Within 10
days from receipt of the Company's notice, you shall provide the Company
written advice as to your desire to have the Subject Shares included in the
Registration Statement.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you, on a pro rata
basis, based on the percentage that your shares bear to all shares being
registered under the Registration Statement. In this regard, the Company
reserves the right to include additional selling shareholders in any
registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
INTERNET MEDIA CORPORATION
By: /s/ Waddell D. Loflin
Waddell D. Loflin
Vice President
AGREED AND ACCEPTED as of the
date and year first above written:
/s/ Roger Davis
Roger Davis
/s/ Gloria C. Davis
Gloria C. Davis
- ---------------------
EXHIBIT 10.24
- ---------------------
BUSINESS PURCHASE AGREEMENT
BUSINESS PURCHASE AGREEMENT, dated as of July 14, 1999 (the 'Agreement"),
between USURF America, Inc., a Nevada corporation ("Purchaser"), and Mark
Bove ('Owner"), d/b/a usurf.com, a sole proprietorship (the "Proprietorship").
WHEREAS, the Proprietorship operates as an Internet web site facilitating
and conducting electronic commerce, or e-commerce, over the Internet; and
WHEREAS, Owner is the sole owner of the Proprietorship; and
WHEREAS, Purchaser desires to purchase all of the assets of the
Proprietorship, including the name, good will and contract rights, from
Owner, and Owner desires to sell all of the assets, including the name,
good will and contract rights, of the Proprietorship to Purchaser (the
"Purchase"); and
WHEREAS, each of the parties to this Agreement desires to make certain
representations, warranties and agreements in connection herewith and also
to prescribe various conditions thereto; and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Purchaser and Owner hereby agree as follows:
ARTICLE I. THE PURCHASE
Section 1.1. Purchase and Sale. Owner hereby sells to Purchaser and
Purchaser hereby buys from Owner all of the assets of the Proprietorship (a
list of such assets being attached hereto as Exhibit "A" and incorporated
herein by this reference), including, but not limited to, (a) the name and
good will, (b) the following Internet domain names, and all of the rights
thereto and content contained therein, (i) www.usurf.com, (ii)
www.yousurf.com and (iii) www.yousurf.net, (c) all of the content of each
such Internet domain and (d) any and all rights arising out of
revenue-sharing arrangements and "click- through" relationships with
e-commerce companies, all at the price and subject to all of the terms and
conditions set forth herein.
Section 1 2. Liabilities. Purchaser does not assume, nor does Purchaser
agree to assume, pay, discharge or perform any obligations, liabilities,
including, without limitation, taxes of any nature and description owed or
accrued as of the date of this Agreement and as of Closing, or commitments
of Owner, including, but not limited to, any equipment or real estate
leases, obligations of any kind to present or former employees, sales
representatives and independent contractors. Further, Owner hereby
indemnifies and holds Purchaser harmless as to any and all liabilities,
claims, loss or damage arising out of the operations of the business
conducted under the name "usurf.com" carried on by Owner prior to the
Closing and, in the event of any suit or other proceeding related to any
such liability, claim, loss or damage, Owner shall provide, at his sole
expense, a defense thereto.
Section 1.3. Purchase Price; Payment. The purchase price for the
Proprietorship, including the assets described in Section 1.1, shall be
$600,000, payable by delivery, at the Closing hereunder, of 150,000 of
Purchaser s $0001 par value common stock (the "Acquisition Stock"), which
shares shall be valued at $4.00 per share.
Section 1.4. Delivery of Bill of Sale and Assignment. At the Closing, Owner
shall deliver to Purchaser a Bill of Sale and Assignment, substantially in
the form of Exhibit "B" attached hereto, relating to the assets of the
Proprietorship purchased and sold hereunder.
Section 1.5. Allocation of Purchase Price. The purchase price may be
allocated among the assets acquired hereunder by Purchaser, in its sole
discretion.
Section 1.6. Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place (a) at the offices of the
Proprietorship at 2:00 p.m., local time, on July 27,1999, or (b) at such
other time and place and on such other date as all of the parties shall
agree in writing (the "Closing Date").
ARTICLE II. FURTHER AGREEMENTS
Section 2.1. Registration Rights. Owner, as the recipient of the shares of
Acquisition Stock to be delivered by Purchaser hereunder, shall have the
registration rights with respect to his shares of the Acquisition Stock as
are set forth in the form of Registration Rights Letter Agreement (the
"Registration Agreement") attached hereto as Exhibit "C". Purchaser agrees
and undertakes that is shall, with all reasonable diligence, prepare, file
and pursue to effectiveness a registration statement which shall include,
in part, certain of the shares of the Acquisition Stock as required by the
Registration Agreement.
Section 2.2. Consulting. As further inducement for Purchaser to execute
this Agreement, Owner agrees that, for a period of two months following the
Closing hereunder, Owner shall provide consulting services to Purchaser
relating to the business and assets that are the subject of this Agreement.
During such two- month period, Owner shall provide to Purchaser up to 15
hours of consulting services per week, during normal business hours of
Owner; provided, however, that Purchaser shall pay Owner s reasonable out-
of-pocket expenses, including, without limitation, travel, lodging and per
diem expenses, associated with his performing the consulting services on
behalf of Purchaser.
Section 2.3. Further Action. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.
Section 2.4. Public Announcements. Purchaser shall have the exclusive right
to issue a press release or otherwise make any public statements with
respect to the transactions contemplated by this Agreement.
Section 2.5. Access to Information: Confidentiality. (a) From the date
hereof to the Closing Date, Owner shall, and shall cause his affiliates,
managers, officers, employees, auditors and agents to, afford the officers,
employees and agents of Purchaser complete access at all reasonable times
to the Proprietorship s officers, employees, agents, properties, offices,
plants and other facilities and to all books and records, and shall furnish
Purchaser with all financial, operating and other data and information as
Purchaser, through its officers, employees or agents, may reasonably
request; provided, however, that Owner shall not be required to provide
access or furnish information which it is prohibited by law or contract to
provide or furnish.
(b) Each of Purchaser and Owner shall, and shall cause their respective
affiliates and their respective officers, directors, employees and agents,
to hold in strict confidence all data and information obtained by them from
one another or their respective subsidiaries, affiliates, directors,
officers, employees and agents (unless such information is or becomes
readily ascertainable from public or published information or trade sources
or public disclosure or such information is required by law) and shall
insure that such officers, directors, employees and agents do not disclose
such information to others without the prior written consent of Purchaser
and Owner, as the case may be.
(c) In the event of the termination of this Agreement, Purchaser shall, and
shall cause its affiliates, officers, directors, employees and agents to,
(i) return promptly every document furnished to it by Owner or any of Owner
s affiliates, managers, officers, employees and agents in connection with
the transactions contemplate hereby and any copies thereof, and (ii) cause
others to whom such documents may have been furnished promptly to return
such documents and any copies thereof Purchaser may have made.
(d) No investigation pursuant to this Article II shall affect any
representations or warranties of the parties herein or the conditions to
the obligations of the parties hereto.
Section 2.6. Notification of Certain Matters. Owner shall give prompt
notice to Purchaser of (a) the occurrence or non-occurrence of any event,
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate, and (b) any failure of Owner to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to
this Article II shall not limit or otherwise affect the remedies available
to Purchaser hereunder. Purchaser shall give prompt notice to Owner of (a)
the occurrence or non-occurrence of any event, the occurrence or
non-occurrence of which would be likely to cause a representation or
warranty contained in this Agreement to be untrue or inaccurate, and (b)
any failure of Purchaser to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Article II shall
not limit or otherwise affect the remedies available to Owner hereunder.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Owner that:
Section 3.1. Organization and Corporate Authority. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and is qualified to do business as a foreign
corporation in all jurisdictions where the ownership of property or
maintenance of an office would require qualification. Purchaser has all
requisite corporate power and authority, governmental permits, consents,
authorizations, registrations, licenses and memberships necessary to own
its property and to carry on its business in the places where such
properties are now owned and operated or such business is being conducted.
Section 3.2 Authority Relative to this Agreement. Purchaser has all
necessary corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by Purchaser and the consummation by Purchaser if the
transactions contemplated hereby have been duly authorize by all necessary
corporate action on the part of Purchaser. This Agreement has been duly
executed and delivered by Purchaser and, assuming the due execution and
delivery by Owner, constitutes a legal, valid and binding obligation of
Purchaser.
Section 3.3. No Conflict: Required Filings and Consents. (a) The execution
and delivery of this Agreement by Purchaser do not, and the performance of
this Agreement by Purchaser shall not, (i) conflict with or violate either
the Articles of Incorporation or Bylaws of Purchaser, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Purchaser or by which it or its properties is bound or affected, or (iii)
result in any breach of or constitute a default ( or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or encumbrance on any of the
property or assets of Purchaser pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Purchaser is a party or by which
Purchaser or any of its properties is bound or affected, except for any
such breaches, defaults or other occurrences which would not, individually
or in the aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by Purchaser do not, and
the performance of this Agreement by Purchaser shall not, require any
consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic or
foreign, except for applicable requirements of the Securities Act of 1933,
as amended (the "'33 Act"), the Securities Exchange Act of 1934 (the "'34
Act") and State securities laws.
Section 3.4. Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
and on behalf of Purchaser.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF OWNER
Owner hereby represents and warrants to Purchaser that, except as set forth
in the Disclosure Schedule delivered prior to the date which is three days
prior to the Closing Date by Owner to Purchaser (the "Owner Disclosure
Schedule"):
Section 4.1. Status. The Proprietorship is the sole proprietorship of Owner
doing business under the fictitious name "usurf.com" in the City of
Burbank, County of Los Angeles, California, and has the requisite power and
authority and is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders
to own, operate or lease the properties that it purports to own, operate or
lease and to carryon its business as it is now being conducted, and is duly
qualified as a foreign entity to do business, and is in good standing, in
each jurisdiction where the character of its properties owned, operated or
leased or the nature of its activities makes such qualification necessary,
except for such failures which, when taken together with all other such
failures, would not have a Material Adverse Effect. The Proprietorship has
not received any notice of proceedings relating to the revocation or
modification of any such franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals or orders. The term
"Material Adverse Effect" as used in this Article IV, means any change in
or effect on the business of the Proprietorship that is or is reasonably
likely to be materially adverse to the business, operations, properties
(including intangible properties), prospects, condition (financial or
otherwise), assets or liabilities of the Proprietorship taken as a whole.
Section 4.2. Options. Except as set forth in the Owner Disclosure Schedule,
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character relating to the purchase of any such interest
in the Proprietorship or obligating Owner to sell any interest in the
Proprietorship.
Section 4.3. No Conflict: Required Filings and Consents. (a) The execution
and delivery of this Agreement by Owner does not, and the performance of
this Agreement by Owner shall not, (i) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Owner or the
Proprietorship or by which its properties are bound or affected, or (ii)
result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a lien or encumbrance on any of the
properties or assets of the Proprietorship pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which the Proprietorship is a party or
by which the Proprietorship or its properties are bound or affected, except
for such breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by Owner does not, and the
performance of this Agreement shall not, require any consent, approval,
authorization or permit of, or filing with or notification of, any
governmental or regulatory authority, domestic or foreign.
Section 4.4. Compliance. The Proprietorship is not in conflict with, or in
default or violation of, (a) any law, rule, regulation, order, judgment or
decree applicable to the Proprietorship or by which its properties are
bound or affected, including, without limitation, health and safety,
environmental and civil rights laws and regulations and zoning ordinances
and building codes, or (b) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise, easement, consent, order or
other instrument or obligation to which the Proprietorship is a party or by
which the Proprietorship or its properties are bound or affected, except
for any such conflicts, defaults or violations which would not have,
individually or in the aggregate, a Material Adverse Effect.
Section 4.5. Financial Statements. Owner has delivered, as part of the
Owner Disclosure Schedule, to Purchaser copies of the unaudited financial
statements of the Proprietorship since inception through June 30, 1999,
which financial statements are accurate to the best knowledge of Owner.
Section 4.6. Absence of Certain Changes or Events. Since June 30, 1999,
except as contemplated by this Agreement or disclosed in the Owner
Disclosure Schedule, the Proprietorship has conducted its business only in
the ordinary course and in a manner consistent with past practice and,
since such date, there has not been (a) any change in the financial
condition, results of operations, business or prospects of the
Proprietorship having a Material Adverse Effect, (b) any damage,
destruction or loss (whether or not covered by insurance) with respect to
any assets of the Proprietorship having a Material Adverse Effect, (c) any
material change by the Proprietorship in its accounting methods, principles
or practices, or (d) any revaluation by the Proprietorship of any of its
assets, including, without limitation, writing down the value of inventory
or any notes, accounts receivable or other investments which would,
individually or in the aggregate, exceed five percent of the total assets
of the Proprietorship as reflected on the financial statements of the
Proprietorship delivered to Purchaser hereunder.
Section 4.7. Absence of Litigation. Except as disclosed in the Owner
Disclosure Schedule, there are no claims, actions, proceedings or
investigations pending or, to the best knowledge of Owner, threatened
against the Proprietorship, or any properties or rights of the
Proprietorship, before any court, arbitrator, or administrative,
governmental or regulatory authority or body, that, individually or in the
aggregate, would have a Material Adverse Effect. As of the date hereof,
neither Owner, the Proprietorship nor its properties is subject to any
order, writ, judgment, injunction, decree, determination or award having a
Material Adverse Effect.
Section 4.8. Labor Matters. Except as set forth in the Owner Disclosure
Schedule, (a) there are no controversies pending or, to the knowledge of
Owner, threatened, between the Proprietorship and any of its employees,
which controversies have a Material Adverse Effect; and (b) the
Proprietorship is not a party to any collective bargaining agreement or
other labor union contract.
Section 4.9. Contracts. The Owner Disclosure Schedule lists or describes
all contracts authorizations, approvals or arrangements to which Owner
and/or the Proprietorship is a party, or by which it is bound, as of the
date hereof, and which (a) obligates or may obligate Owner and/or the
Proprietorship to pay more than $500; or (b) are financing documents, loan
agreements or agreements providing for the guarantee of the obligations of
any party in each case involving an obligation in excess of $1,000.
Section 4.10. Title to Property and Leases. (a) Each asset owned or leased
by Owner and/or the Proprietorship is owned or leased free and clear of any
mortgages, pledges, liens, security interests, conditional and installment
sale agreements, encumbrances, charges or other claims of third parties of
any kind.
(b) All leases of real property leased for the use or benefit of the
Proprietorship to which Owner and/or the Proprietorship is a party, and all
amendments and modifications thereof are in full force and effect and have
not been modified or amended and there exists no material default under the
leases by Owner and/or the Proprietorship, nor any event which, with the
giving of notice or lapse of time, or both, would constitute a material
default thereunder by Owner and/or the Proprietorship.
(c) A statement describing all assets and liabilities, absolute and
contingent, of the Proprietorship is included in the Owner Disclosure
Schedule.
Section 4.11. Insurance. All material properties of the Proprietorship are
covered by valid and currently effective insurance policies issued in favor
of Owner and/or the Proprietorship, in such amounts and against such risks
and losses as are customary in their locales of operation for companies
operating similar businesses and operations, and Owner and/or the
Proprietorship is included as an insured party under such policies, with
full rights as a loss payee. Copies of all such insurance policies shall be
included in the Owner Disclosure Schedule.
Section 4.12. Taxes. Owner has filed all federal and state tax returns and
reports and, to the best of Owner s knowledge, all state, local and foreign
tax returns and reports required to be filed have been filed and Owner has
paid and discharged all taxes, including sales and use taxes, shown as due
thereon and has paid all applicable state and local ad valorem taxes as are
due, except such as are being contested in good faith by appropriate
proceedings and except for such filings, payments or other occurrences
which would not have a Material Adverse Effect. Neither the IRS nor any
other taxing authority or agency is now asserting or, to the best of Owner
s knowledge, threatening to assert against Owner any deficiency or claim
for additional taxes or interest thereon or penalties in connection
therewith. Owner has not granted any waiver of any statute of limitations
with respect to, or any extension of a period for the assessment of, any
federal, state, county, municipal or foreign income tax.
Section 4.13. No Legal Disability. Owner represents and warrants to
Purchaser that he is under no legal disability with respect to entering
into this Agreement.
Section 4.14. Ownership of the Proprietorship. Owner represents and
warrants that he is the sole owner of the Proprietorship free and clear of
any encumbrances and liens, except as disclosed in the Owner Disclosure
Schedule.
Section 4.15. Cooperation of Owner. Owner represents and warrants that he
will assist and cooperate with Purchaser s attorneys and accountants as is
necessary for Purchaser to comply with applicable provisions of the '33 Act
and the '34 Act, including the rules and regulations promulgated thereunder.
Section 4.16. Receipt of Disclosure. Owner hereby represents and warrants
that he has received and reviewed all of the following documents: (a)
Annual Report on Form 1 O-KSB for the year ended December 31, 1998, (b)
Quarterly Report on Form 10-QSB for the period ended March 31, 1999, (c)
Current Report on Form 8-K/A, date of event reported: January 29, 1999, and
( d) Current Report on Form 8-K, date of event reported: July 6, 1999. With
respect to such information, Owner further represents and warrants that he
has had an opportunity to ask questions of, and to receive answers from,
the officers of Purchaser.
Section 4.17. Representations Relating to Acquisition Stock. Owner
represents and warrants to Purchaser that the shares of Acquisition Stock
being acquired pursuant to this Agreement are being acquired for his
account and for investment and not with a view to the public resale or
distribution of such shares and further acknowledges that the shares of
Acquisition Stock being issued have not been registered under the '33 Act
or any state securities law and are "restricted securities, as that term is
defined in Rule 144 promulgated by the Securities and Exchange Commission,
and must be held indefinitely, unless they are subsequently registered or
an exemption from such registration is available.
Section 4.18. Consent to Legend. Owner consents to the placement of a
legend restricting future transfer on the share certificates representing
the Acquisition Stock delivered hereunder, which legend shall be in the
following, or similar, form:
"THE STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ISSUED IN RELIANCE UPON
THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2) OF THE SECURITIES
ACT OF 1933, AS AMENDED. THE STOCK MAY NOT BE TRANSFERRED WITHOUT
REGISTRATION EXCEPT IN TRANSACTIONS EXEMPT FROM SUCH REGISTRATION."
ARTICLE V. CONDUCT OF BUSINESS PRIOR TO THE CLOSING
Section 5.1. Conduct of Business by the Proprietorship Prior to the
Closing. Owner covenants and agrees that, between the date of this
Agreement and the Closing Date, unless Purchaser shall otherwise agree in
writing, the business of the Proprietorship shall be conducted only in, and
the Proprietorship shall not take any action except in, the ordinary course
of business and in a manner consistent with past practice; and Owner shall
use its best efforts to preserve substantially intact the business
organization of the Proprietorship, to keep available the services of the
present officers, managers, employees and consultants of the Proprietorship
and to preserve the present relationships of the Proprietorship with
customers, suppliers and other persons with which the Proprietorship has
significant business relations. By way of amplification and not limitation,
except as contemplated by this Agreement, Owner shall not cause the
Proprietorship to do, or propose to do, any of the following without the
prior written consent of Purchaser, which consent shall not be unreasonably
withheld: (a) issue, sell, pledge, dispose of, encumber or authorize the
issuance, sale, pledge, disposition or encumbrance of (i) any interest of
any class, or any options, warrants, convertible securities or other rights
of any kind to acquire any ownership interest, in the Proprietorship or
(ii) any assets of the Proprietorship or any other material assets of the
Proprietorship other than in the ordinary course of business consistent
with past practices;
(b) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guaranty or endorse or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans or advances, except in the ordinary course of business and
consistent with past practice; (iii) authorize any single capital
expenditure which is in excess of $1,000 or capital expenditures which are,
in the aggregate, in excess of $3,000 for the Proprietorship, or (iv) enter
into or amend any contract, agreement, commitment or arrangement to any of
the effects set forth in this paragraph (b) of Section 5.1 ;
(c) increase the compensation payable or to become payable to its managers,
officers or employees, except for increases in salary or wages of employees
of the Proprietorship who are not managers or officers of the
Proprietorship in accordance with past practices, or grant any severance or
termination pay to, or enter into any employment or severance agreement
with, any manager, officer or employee of the Proprietorship, or establish,
adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any managers, officers or employees;
(d) take any action other than in the ordinary course of business and in a
manner consistent with past practice with respect to accounting policies or
procedures (including, without limitation, procedures with respect to the
payments of accounts payable and collection of accounts receivable);
(e) settle or compromise any material federal, state, local or foreign
income tax liability; or
(f) pay, discharge, compromise or consent to any arrangements concerning or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge,
compromise, settlement, arrangement or satisfaction in the ordinary course
of business and consistent with past practice of liabilities reflected or
reserved against in the financial statements of the Proprietorship or
incurred in the ordinary course of business and consistent with past practice.
Section 5.2. Third Party Consents. Each party to this Agreement shall use
its best efforts to obtain, as soon as reasonably practicable, all permits,
authorizations, consents, waivers and approvals from third parties or
governmental authorities necessary to consummate this Agreement and the
transactions contemplated hereby.
ARTICLE VI. CONDITIONS OF THE PURCHASE
Section 6.1. Conditions to Obligation of Each Party to Effect the Purchase.
The respective obligations of each party to effect the Purchase shall be
subject to the fulfillment of all of the following conditions precedent at
or prior to the Closing Date:
(a) No Order. No United States or state governmental authority or other
agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and has the effect
of making the purchase and sale of the Interests contemplated hereunder
illegal or otherwise prohibiting consummation of the transactions
contemplated by this Agreement.
(b) No Challenge. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency by
any government agency or any other person challenging, or seeking material
damages in connection with the purchase and sale of the assets of the
Proprietorship contemplated hereunder or otherwise materially adversely
affecting the business, assets, prospects, financial condition or results
of operations of the Proprietorship.
Section 6.2. Additional Conditions to Obligations of Purchaser. The
obligations of Purchaser to effect the Purchase are also subject to the
fulfillment of all of the following conditions precedent at or prior to the
Closing Date:
(a) Due Diligence Investigation. Purchaser s obligations hereunder shall be
subject to its due diligence investigation of the Proprietorship whereby
Purchaser shall not find any unacceptable (as determined by Purchaser in
its sole discretion) item, condition or liability (an "Unacceptable Item").
Should Purchaser find an Unacceptable Item with respect to the
Proprietorship, Purchaser shall notify Owner in writing of such finding and
this Agreement shall become null and void, with no party having liability
hereunder. Purchaser s written notice pursuant to this Section 6.2(a) shall
be delivered to Owner prior to the close of business on the date that is 14
days from the date of the mutual execution of this Agreement. Should no
written notice be delivered by Purchaser under this Section 6.2(a) prior to
such date, Purchaser will be deemed to have not found an Unacceptable Item
with respect to the Proprietorship.
(b) Representations and Warranties. The representations and warranties of
Owner contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date, except for changes contemplated by
this Agreement and except for those representations and warranties which
address matters only as of a particular date (which shall remain true and
correct as of such date), with the same force and effect as if made on and
as of the Closing Date, and Purchaser shall have received a Certificate of
the Owner of the Proprietorship which is to that effect, which certificate
shall be in the form attached hereto as Exhibit "D".
(c) Consents Obtained. All consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made, by
Owner for the authorization, execution and delivery of this Agreement and
the consummation by her of the transactions contemplated hereby shall have
been obtained and made by Owner.
(d) No Material Adverse Change. There shall have been no material adverse
change in the condition, fina.ncial or otherwise, of the Proprietorship.
(e) Deliveries at Closing. At or prior to the Closing, Owner shall have
delivered to Purchaser the following:
(1) A Bill of Sale and Assignment, in the form of Exhibit 'B" attached
hereto, duly executed;
(2) One or more duly executed Assignments of the Proprietorship s rights
under thee-commerce agreements listed in Exhibit "A" attached hereto, which
Assignments shall be in a form acceptable to Purchaser; and
(3) A Certificate of the Owner, in the form of Exhibit "D" attached hereto,
duly executed.
Section 6.3. Additional Conditions to Obligation of Owner. The obligation
of Owner to effect the Purchase is also subject to fulfillment of all of
the following conditions precedent, at or prior to the Closing Date:
(a) Representations and Warranties. The representations and warranties of
Purchaser contained in this Agreement shall be true and correct in all
material respects on and as of the Closing Date, except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as
if made on and as of the Closing Date, and the Company shall have received
a Certificate of the President of Purchaser which is to that effect, which
certificate shall be in the form attached hereto as Exhibit "E".
(b) Consents Obtained. All consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made, by
Purchaser for the authorization, execution and delivery of this Agreement
and the consummation by them of the transactions contemplated hereby shall
have been obtained and made by Purchaser.
(c) Deliveries at Closing. At or prior to the Closing, Purchaser shall have
delivered to Owner the following:
(1) A certificate representing 150,000 shares (the Acquisition Stock) of
the $0001 par value common stock of Purchaser;
(2) The Registration Agreement, in the form of Exhibit "C" attached hereto,
duly executed; and
(3) A Certificate of the President of Purchaser, in the form of Exhibit "E"
attached hereto, duly executed.
ARTICLE VII. INDEMNIFICATION
Section 7.1. General Indemnification Covenants -Owner. Owner shall
indemnify, save and keep Purchaser and its affiliates, agents, attorneys,
successors and permitted assigns (the "Purchaser Indemnitees"), harmless
against and from all liability , demands, claims, actions or causes of
action, assessments, losses, fines, penalties, costs, damages and expenses,
including reasonable attorneys fees, disbursements and expenses
(collectively, the "Damages"), sustained or incurred by any of the
Purchaser Indemnitees as a result of, arising out of or by virtue of any
misrepresentation, breach of any warranty or representation or
non-fulfillment of any agreement or covenant on the part of Owner, whether
contained in this Agreement or any exhibit or schedule hereto or any
written statement or certificate furnished or to be furnished to Purchaser
pursuant hereto or in any closing document delivered by Owner in connection
herewith.
Section 7.2. General Indemnification Covenants -Purchaser. Purchaser shall
indemnify, save and keep Owner and his affiliates, agents, attorneys,
successors and permitted assigns (the "Owner Indemnitees"), harmless
against and from all liability, demands, claims, actions or causes of
action, assessments, losses, fines, penalties, costs, damages and expenses,
including reasonable attorneys fees, disbursements and expenses
(collectively, the "Damages"), sustained or incurred by any of the Owner
Indemnitees as a result of, arising out of or by virtue of any
misrepresentation, breach of any warranty or representation or
non-fulfillment of any agreement or covenant on the part of Purchaser,
whether contained in this Agreement or any exhibit or schedule hereto or
any written statement or certificate furnished or to be furnished to Owner
pursuant hereto or in any closing document delivered by Purchaser in
connection herewith.
Section 7.3. Tax Indemnity. (a) Owner hereby agrees to pay, indemnify,
defend and hold Purchaser harmless from and against any and all taxes
associated with the operations of the Proprietorship with respect to any
period (or any portion thereof) up to and including the Closing Date,
except for taxes associated with the operations of the Proprietorship which
are reflected as current liabilities for taxes that exist as of the Closing
Date ("Current Tax Liabilities") on the financial statements delivered to
Purchaser hereunder, together with all reasonable legal fees, disbursements
and expenses incurred by Purchaser in connection therewith.
(b) Owner shall prepare and file any tax return with respect to the
operations of the Proprietorship which is required to be filed after the
Closing Date and which relates to any period (or portion thereof) up to and
including the Closing Date.
(c) The indemnity provided for in this Section 7.3 shall be independent of
any other indemnity provision hereof and, anything in this Agreement to the
contrary notwithstanding, shall survive until the expiration of the
applicable statutes of limitation for the taxes referred to herein, and any
taxes subject to the indemnification for taxes set forth in this Section
7.3 shall not be subject to the provisions of Sections 8.1 or 8.4 hereof.
Section 7.4. Release by Owner. Owner hereby releases and discharges
Purchaser and each of its officers, directors, agents and attorneys from,
and agrees and covenants that, in no event, will Owner commence any
litigation or other legal or administrative proceeding against, Purchaser
or any of its officers, directors, agents or attorneys, whether in law or
equity, relating to any and all claims and demands, known and unknown,
suspected and unsuspected, disclosed and undisclosed, for damages, actual
or consequential, past, present and future, arising out of or in any way
connected with her ownership or alleged ownership of the Proprietorship
prior to the Closing Date, other than claims or demands arising out of the
transactions contemplated by this Agreement.
Section 7.5. Release by Purchaser. Purchaser hereby releases and discharges
Owner and each of his affiliates, agents and attorneys from, and agrees and
covenants that, in no event, will Purchaser commence any litigation or
other legal or administrative proceeding against, Owner or any of his
affiliates agents or attorneys, whether in law or equity, relating to any
and all claims and demands, known and unknown, suspected and unsuspected,
disclosed and undisclosed, for damages, actual or consequential, past,
present and future, other than claims or demands arising out of the
transactions contemplated by this Agreement.
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER
Section 8.1. Termination. This Agreement may be terminated at any time
prior to the Closing Date:
(a) By mutual written consent of the parties hereto; or
(b) By either Purchaser or Owner, if (i) any governmental or regulatory
body, the consent of which is a condition to the obligations of Purchaser
and Owner to consummate the transactions contemplated hereby, shall not
have been secured, or (ii) any court of competent jurisdiction in the
United States or any state shall have issued an order, judgment or decree
(other than a temporary restraining order) restraining, enjoining or
otherwise prohibiting the purchase and sale of the Interests contemplated
hereunder and such order, judgment or decree shall have become final and
non-appealable.
Section 8.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become
void and there shall be no liability on the part of either Purchaser or its
officers or directors, or Owner, except that nothing in this Section 8.2
shall relieve any party from liability for any breach of this Agreement.
Section 8.3. Expenses. Unless otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses,
whether or not the Purchase is consummated.
Section 8.4. Amendment. This Agreement may be amended by the parties hereto
at any time prior to the Closing Date. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
Section 8.5. Waiver. At any time prior to the Closing Date, any party
hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (C) waive compliance with any of
the agreements or conditions contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party
or parties to be bound thereby.
ARTICLE IX. GENERAL PROVISIONS
Section 9.1. Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall survive
the Closing Date indefinitely.
Section 9.2. Publicity. (a) The right to publicize the execution of this
Agreement and the Closing hereunder shall be that of Purchaser.
(b) The existence of this Agreement and the knowledge of the future
consummation or termination of this Agreement constitutes privileged and
"insider" information as that term is used in the securities markets. Owner
and each of the employees of the Proprietorship each agree that they will
refrain from purchasing or selling any of the stock of Purchaser at any
time when a material fact relating to this Agreement, its existence or
performance, breach or termination are not made publicly announced by
Purchaser.
Section 9.3. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or mailed if delivered personally or
mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice, except that
notices of changes of address shall be effective upon receipt):
(a) If to Purchaser: USURF America, Inc.
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
with copies to: Newlan & Newlan, Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
(b) if to Owner: Mark Bove
714 East Walnut Street
Burbank, California 91501
with copies to: Natasha Hoiseck
7844 Forsythe Street
Sunland, California 91040
Section 9.4. Non-Waiver. The failure in anyone or more instances of a party
to insist upon performance of any of the terms, covenants or conditions of
this Agreement, to exercise any right or privilege conferred in this
Agreement, or the waiver by said party of any breach of any of the terms,
covenants or conditions of this Agreement, shall not be construed as a
subsequent waiver of any such terms, covenants, conditions, rights or
privileges, but the same shall continue and remain in full force and effect
as if no such forbearance or waiver had occurred. No waiver shall be
effective unless it is in writing and signed by an authorized
representative of the waiving party.
Section 9.5. Arbitration. Any dispute arising under this Agreement, as well
as any of the transactions contemplated hereby, shall be resolved by
arbitration in Dallas, Texas, under the Rules of the American Arbitration
Association, as then in effect. The determination and award of the
arbitrator, which award may include punitive damages, shall be final and
binding on the parties and may be entered as a judgment in any court of
competent jurisdiction. It is expressly agreed that the arbitrators, as
part of their award, can award attorneys fees to the prevailing party.
Section 9.6. Binding Effect: Benefit. This Agreement shall inure to the
benefit of and be binding upon the
parties hereto and their successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer on any person other
than the parties hereto and their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, including, without limitation, third party
beneficiary rights.
Section 9.7. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the extent possible.
Section 9.8. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings, both oral
and written, among the parties, or any of them, with respect to the subject
matter hereof and, except as otherwise expressly provided herein, are not
intended to confer upon any other person any rights or remedies hereunder.
Section 9.9. Assignability. This Agreement shall not be assignable by
either party or by operation of law, except with the express written
consent of each other party.
Section 9.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas applicable to
contracts executed in and to be performed in such State.
Section 9.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.12. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Purchaser and Owner have caused this Agreement to be
executed as of the date first written above.
PURCHASER:
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin, President
OWNER:
/s/ Mark Bove
Mark Bove
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EXHIBIT 10.25
- -----------------------
August 11, 1999
Mr. Mark Bove
714 East Walnut Street
Burbank, California 91501
Registration Rights Letter Agreement
Dear Mr. Bove:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to twenty percent (20%) of the shares of the $.0001
par value common stock (the "Subject Shares") of USURF America, Inc., a
Nevada corporation (the "Company"), received, and currently owned, by you
under that certain Business Purchase Agreement (the "Purchase Agreement")
between the Company and you. It is our understanding that:
1. Registration Rights. Should the Company file a registration statement
(the "Registration Statement") under the Act, you may demand, in writing,
the inclusion of the Subject Shares in the Registration Statement. Your
right to such registration is exercisable only with respect to the
Registration Statement first filed by the Company following the closing
under the Purchase Agreement. Not less than 15 days prior to the filing of
the Registration Statement, the Company shall notify you in writing of its
intention to file the Registration Statement. Within 10 days from receipt
of the Company's notice, you shall provide the Company written advice as to
your desire to have the Subject Shares included in the Registration Statement.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you, on a pro rata
basis, based on the percentage that your shares bear to all shares being
registered under the Registration Statement. In this regard, the Company
reserves the right to include additional selling shareholders in any
registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
USURF AMERICA, INC.
By: /s/ James Kaufman
James Kaufman
Vice President - Corporate Development
AGREED AND ACCEPTED as of the
date and year first above written:
/s/ Mark Bove
Mark Bove
- ----------------------
EXHIBIT 10.26
- ----------------------
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of August 24, 1999 (the
"Agreement"), among USURF America, Inc., a Nevada corporation ("Parent"),
CyberHighway, Inc., an Idaho corporation wholly owned by Parent
("Acquiror"), Premier Internet Services, Inc., d/b/a CyberHighway of
Southeast Idaho, an Idaho corporation ("Target") (Acquiror and Target being
hereinafter collectively referred to as the "Constituent Corporations"),
and Alan Taylor ("Taylor"), the controlling shareholder of Target,
executing this Agreement.
WHEREAS, the Boards of Directors of Parent, Acquiror and Target have
approved the acquisition of Target by Parent;
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
Parent, Acquiror and Target have each approved the merger of Target into
Acquiror (the "Merger"), pursuant to an Agreement of Merger in the form
attached hereto as Exhibit "A" (the "Merger Agreement"), and the
transactions contemplated hereby, in accordance with the applicable
provisions of the statutes of the States of Nevada and Idaho and upon the
terms and subject to the conditions set forth herein; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization with the meaning of Section 368(a)(1)(A)
and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, each of the parties to this Agreement desires to make certain
representations, warranties and agreements in connection with the Merger
and also to prescribe various conditions thereto; and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Acquiror, Target and Taylor hereby agree as follows:
ARTICLE I. THE MERGER
Section 1.1. The Merger. At the Effective Time (as defined in Section
1.2) and subject to and upon the terms and conditions of this Agreement and
the Merger Agreement, Target shall be merged with and into Acquiror, the
separate corporate existence of Target shall cease and Acquiror shall
continue as the surviving corporation, in accordance with the applicable
provisions of the Idaho Business Corporation Act (the "Idaho Law").
Acquiror, as the surviving corporation after the Merger, is hereinafter
sometimes referred to as the "Surviving Corporation".
Section 1.2. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, and
provided that this Agreement has not been terminated or abandoned pursuant
to Article IX, the Constituent Corporations shall cause the Merger to be
consummated by filing a Certificate of Merger (the "Certificate of Merger")
with the office of the Secretary of State of the State of Idaho, in such
form as required by, and executed in accordance with, the relevant
provisions of the Idaho Law. Subject to, and in accordance with, the Idaho
Law, the Merger will become effective at the date and time the Certificate
of Merger is filed with the office of the Secretary of State of the State
of Idaho or such later time or date as may be specified in the Certificate
of Merger (the "Effective Time"). Each of the parties shall use its best
efforts to cause the Merger to be consummated as soon as practicable
following the fulfillment or waiver of the conditions specified in Article
VII hereof.
Section 1.3. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the Idaho
Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, except as otherwise provided herein, all
the property, rights, privileges, powers and franchises of Target shall
vest in the Surviving Corporation, and all debts, liabilities and duties of
Target shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 1.4. Articles of Incorporation; Bylaws. (a) At the Effective
Time, the Articles of Incorporation of Acquiror, as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Articles of Incorporation.
(b) The Bylaws of Acquiror, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by law, the Articles of Incorporation of the
Surviving Corporation and such Bylaws.
Section 1.5. Directors and Officers. The directors of Acquiror
immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation, each to hold office in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation, and the
officers of Acquiror immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
Section 1.6. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Acquiror, the following
shall occur:
(a) each share of common stock of Target (the "Target Common Stock") held
in the treasury of Target and each such share of Target Common Stock owned
by Acquiror, Parent or any direct or indirect wholly-owned subsidiary of
Parent or of Target immediately prior to the Effective Time shall be
cancelled and extinguished without any conversion thereof and no payment
shall be made with respect thereto;
(b) each share of Target Common Stock which is outstanding immediately
prior to the Effective Time, other than those shares of Target Common Stock
cancelled as set forth in subsection (a) hereof, shall be converted into
the right to receive 3.648 shares of the $.0001 par value per share common
stock of Parent (the "Parent Common Stock"), a total of 127,000 shares of
Parent Common Stock; and
(c) the common stock, no par value per share, of Acquiror issued and
outstanding immediately prior to the Effective Time shall remain validly
issued, fully paid and non-assessable common stock of the Surviving
Corporation.
Section 1.7. Surrender of and Exchange of Target Common Stock. (a) As
soon as practicable after the Effective Time, the stock certificates
representing Target Common Stock issued and outstanding at the Effective
Time shall be surrendered for exchange to the Surviving Corporation. Until
so surrendered for exchange, each such stock certificate nominally
representing Target Common Stock shall be deemed for all purposes (except
for payment of dividends thereon or redemption thereof) to evidence the
ownership of the number of shares of Parent Common Stock that the holder
would be entitled to receive upon surrender thereof to the Surviving
Corporation.
(b) No redemption with respect to Parent Common Stock shall be made with
respect to any unsurrendered certificates representing shares of Target
Common Stock with respect to which the shares of Parent Common Stock are to
have been issued in the Merger, until such certificates shall be
surrendered as provided herein.
(c) All rights to receive the Merger Consideration into which shares of
Target Common Stock shall have been converted pursuant to this Article I
shall be deemed to have been paid or issued, as the case may be, in full
satisfaction of all rights pertaining to such shares of Target Common Stock.
1.8. Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place (a) at the offices of
Target at 11:00 a.m., local time, on the earlier of (i) September 30, 1999,
and (ii) the third business day immediately following the date on which the
last of the conditions set forth in Article VII is fulfilled or waived, or
(b) at such other time and place and on such other date as Parent and
Target shall agree (the "Closing Date").
ARTICLE II. FURTHER AGREEMENTS
Section 2.1. Non-Competition Agreement - Taylor. Prior to or at the
Closing, Parent and Taylor shall execute a non-competition agreement (the
"Taylor Agreement Not to Compete") substantially in the form attached
hereto as Exhibit "B".
Section 2.2. Confidentiality Agreement - Taylor. Prior to or at the
Closing, Parent and Taylor shall execute a confidentiality agreement (the
"Taylor Confidentiality Agreement") substantially in the form attached
hereto as Exhibit "C".
Section 2.3. Continuity of Interest Agreement. Prior to or at the
Closing, Parent, Acquiror and Taylor shall execute a continuity of interest
agreement (the "Continuity of Interest Agreement") substantially in the
form attached hereto as Exhibit "D".
Section 2.4. Registration Rights Letter Agreements. Prior to or at the
Closing, Parent shall deliver to the holders of shares of Parent Common
Stock received hereunder a registration rights letter agreement (the
"Registration Agreement") substantially in the form attached hereto as
Exhibit "E".
Section 2.5. Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time, each of Parent, Acquiror and Target shall,
and shall cause their respective subsidiaries, affiliates, officers,
directors, employees, auditors and agents to, afford the officers,
employees and agents of one another complete access at all reasonable times
to one another's officers, employees, agents, properties, offices, plants
and other facilities and to all books and records, and shall furnish one
another with all financial, operating and other data and information as
each, through its officers, employees or agents, may reasonably request;
provided, however, that no party shall be required to provide access or
furnish information which it is prohibited by law or contract to provide or
furnish.
(b) Each of Parent, Acquiror and Target shall, and shall cause their
respective affiliates and their respective officers, directors, employees
and agents, to hold in strict confidence all data and information obtained
by them from one another or their respective subsidiaries, affiliates,
directors, officers, employees and agents (unless such information is or
becomes readily ascertainable from public or published information or trade
sources or public disclosure or such information is required by law) and
shall insure that such officers, directors, employees and agents do not
disclose such information to others without the prior written consent of
Parent, Acquiror or Target, as the case may be.
(c) In the event of the termination of this Agreement, Parent, Acquiror
and Target shall, and shall cause their respective affiliates, officers,
directors, employees and agents to, (i) return promptly every document
furnished to them by one another or any of their respective subsidiaries,
affiliates, officers, directors, employees and agents in connection with
the transactions contemplated hereby and any copies thereof, and (ii) shall
cause others to whom such documents may have been furnished promptly to
return such documents and any copies thereof any of them may have made.
(d) No investigation pursuant to this Section II shall affect any
representations or warranties of the parties herein or the conditions to
the obligations of the parties hereto.
Section 2.6. Notification of Certain Matters. Target shall give prompt
notice to Parent, and Parent shall give prompt notice to Target, of (a) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence
of which would be likely to cause any representation or warranty contained
in this Agreement to be untrue or inaccurate, and (b) any failure of
Target, Parent or Acquiror, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to
this Article II shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 2.7. Further Action. Upon the terms and subject to the
conditions hereof, each of the parties hereto shall use its best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement.
Section 2.8. Public Announcements. Parent shall have the exclusive right
to issue a press release or otherwise make any public statements with
respect to the Merger.
Section 2.9. Registration Rights. The holders of Parent Common Stock
received hereunder shall have the registration rights with respect to their
respective shares of Parent Common Stock as are set forth in the
Registration Agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUIROR
Parent and Acquiror hereby, jointly and severally, represent and warrant
to Target that, except as set forth in the Disclosure Schedule delivered
prior to the date which is three days prior to the Closing Date by Parent
and Acquiror to Target (the "Parent Disclosure Schedule"):
Section 3.1. Organization and Qualification; Subsidiaries. Each of
Parent and Acquiror and each of Parent's other subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite
corporate power and authority and is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders to own, operate or lease the properties
that it purports to own, operate or lease and to carry on its business as
it is now being conducted, and is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such failures
which, when taken together with all other such failures, would not have a
Material Adverse Effect. Neither Parent nor any subsidiary has received
any notice of proceedings relating to revocation or modification of any
such franchises, grants, authorizations, licenses, permits, easements,
consents, certificates, approvals or orders. The term "Material Adverse
Effect", as used herein, means any change in or effect on the business of
Parent or any of its Acquirors or other subsiaries that is or is reasonably
likely to be materially adverse to the business operations, properties
(including intangible properties), prospects, condition (financial or
otherwise), assets or subsidiaries, taken as a whole. Parent has three
wholly-owned subsidiaries: (a) USURF America (Alabama), Inc., an Alabama
corporation (Acquiror); (b) Santa Fe Wireless Internet, Inc., a New Mexico
corporation; and (c) CyberHighway, Inc., an Idaho corporation.
Section 3.2. Articles of Incorporation and Bylaws. Parent shall, as part
of the Parent Disclosure Schedule, furnish to Target a complete and correct
copy of the Articles of Incorporation and the Bylaws, each as amended to
date, of Parent and Acquiror. Such Articles of Incorporation and Bylaws
are in full force and effect.
Section 3.3. Capitalization. The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock, $.0001 par value per
share. As of the date hereof, (a) 12,121,977 shares of Parent Common Stock
are issued and outstanding, all of which are validly issued, fully paid and
non-assessable, and (b) no shares of Parent Common Stock are held in the
treasury of Parent or by subsidiaries of Parent. Approximately 2,400,000
shares of Parent Common Stock are reserved for future issuance under
certain contracts, all as described in the Parent Disclosure Schedule.
Each of the outstanding shares of capital stock of each of Parent's
subsidiaries is duly authorized, validly issued, fully paid and
non-assessable and such shares owned by Parent are owned free and clear of
all security interests, liens, claims, pledges, agreements, limitations on
Parent's voting rights, charges or other encumbrances of any nature
whatsoever.
Section 3.4. Authority Relative to this Agreement. Each of Parent and
Acquiror has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement by Parent and Acquiror and the consummation by
Parent and Acquiror of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and
Acquiror other than filing and recordation of appropriate merger documents
as required by the Idaho Law. This Agreement has been duly executed and
delivered by Parent and Acquiror and, assuming the due authorization,
execution and delivery by Target, constitutes a legal, valid and binding
obligation of each such corporation.
Section 3.5. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent and Acquiror do not, and
the performance of this Agreement by Parent and Acquiror shall not, (i)
conflict with or violate either the Articles of Incorporation or Bylaws of
Parent or the Articles of Incorporation or Bylaws of Acquiror, (ii)
conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent or Acquiror or by which either of them or their
respective properties is bound or affected, or (iii) result in any breach
of or constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of
Parent or Acquiror pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
or obligation to which Parent or Acquiror is a party or by which Parent or
Acquiror or any of their respective properties is bound or affected, except
for any such breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and Acquiror
does not, and the performance of this Agreement by Parent and Acquiror
shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except for applicable requirements of the Securities
Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act
of 1934 (the "Exchange Act") and State securities laws ("Blue Sky Laws").
Section 3.6. Compliance. Neither Parent nor any of its subsidiaries is
in conflict with, or in default or violation of, (a) its Articles of
Incorporation or Bylaws or equivalent organizational documents, (b) any
law, rule, regulation, order, judgment or decree applicable to Parent or
any of its subsidiaries or by which its or any of their respective
properties is bound or affected, including, without limitation, health and
safety, environmental, civil rights laws and regulations and zoning
ordinances and building codes, or (c) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, easement, consent,
order or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or
its or any of their respective properties is bound or affected, except for
any such conflicts, defaults or violations which would not, individually or
in the aggregate, have a Material Adverse Effect.
Section 3.7. SEC Filings; Financial Statements. (a) Parent has filed
all forms, reports and documents required to be filed with the SEC and has
heretofore delivered to Target, in the form filed with the SEC, (i) its
Annual Report on Form 10-KSB for the year ended December 31, 1998; (ii) its
Quarterly Report on Form 10-QSB for the period ended June 30, 1999, (iii)
all other reports or registration statements filed by Parent with the SEC
since June 30, 1999, and (iv) all amendments and supplements to all such
reports and registration statements filed by Parent with the SEC since June
30, 1999 (collectively, the "Parent SEC Reports"). The Parent SEC Reports
(x) were, and will be, prepared in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (y) did not,
and will not, at the time they were, or will be, filed, contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(b) Each consolidated financial statement (including, in each case, any
related notes thereto) contained in the Parent SEC Reports has been, and
will be, prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto) and each fairly presents,
and will present, the financial position of Parent and its subsidiaries as
at the respective dates thereof and the results of its operations and
changes in financial position for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount.
(c) Except as and to the extent set forth on the consolidated balance
sheet of Parent and its subsidiaries as at June 30, 1999, including the
notes thereto (the "1999 Balance Sheet"), neither Parent nor any of its
subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which would be required to be
reflected on a balance sheet, or in the notes thereto, prepared in
accordance with generally accepted accounting principles, except for
liabilities or obligations incurred in the ordinary course of business
since June 30, 1999, which would not, individually or in the aggregate,
have a Material Adverse Effect.
(d) Parent has heretofore furnished to Target a complete and correct copy
of any amendments or modifications, which have not yet been filed with the
SEC, to agreements, documents or other instruments which previously had
been filed by Parent with the SEC pursuant to the Securities Act or the
Exchange Act.
Section 3.8. Absence of Litigation. Except as disclosed in the Parent
Disclosure Schedule, there are no claims, actions, proceedings or
investigations pending or, to the best knowledge of Parent, threatened
against Parent or any of its subsidiaries, or any properties or rights of
Parent or any of its subsidiaries, before any court, arbitrator, or
administrative, governmental or regulatory authority or body, domestic or
foreign, that, individually or in the aggregate, would have a Material
Adverse Effect. As of the date hereof, neither Parent nor any of its
subsidiaries nor any of their properties is subject to any order, writ,
judgment, injunction, decree, determination or award having a Material
Adverse Effect.
Section 3.9. Absence of Certain Changes or Events. Since June 30, 1999,
except as contemplated or permitted by this Agreement or disclosed in
Parent SEC Reports filed since that date and through the date hereof,
Parent and its subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since
such date, there has not been (a) any change in the financial condition,
results of operations, business or prospects of Parent or any of its
subsidiaries having a Material Adverse Effect, (b) any damage, destruction
or loss (whether or not covered by insurance) with respect to any assets of
Parent or any of its subsidiaries having a Material Adverse Effect, (c) any
material change by Parent in its accounting methods, principles or
practices, (d) any revaluation by Parent of any of its assets, including,
without limitation, writing down the value of inventory or any notes,
accounts receivable or other investments which would, individually or in
the aggregate, exceed five percent of the total assets of Parent and its
subsidiaries as reflected on the consolidated balance sheets in Parent's
Annual Report on Form 10-KSB for the period ended December 31, 1998, and
Quarterly Report on Form 10-QSB for the period ended June 30, 1999; (e) any
declaration, setting aside or payment of any dividends or distributions in
respect of shares of Parent Common Stock or any redemption, purchase or
other acquisition of any of its securities; (f) any change in the Federal
Communications Commission rules, regulations and orders affecting the
business of Parent or any of its subsidiaries which shall have a Material
Adverse Effect; or (g) any change in the status of any litigation, claims,
actions, proceedings or investigations pending or, to the best knowledge of
Parent, threatened against Parent or any of its subsidiaries, which, as a
result of such change, will have a Material Adverse Effect.
Section 3.10. Environmental Matters. To the best of Parent's knowledge,
there are no environmental liabilities (whether accrued, absolute,
contingent or otherwise) of Parent or any subsidiary.
Section 3.11. Labor Matters. Except as set forth in the Parent
Disclosure Schedule, (a) there are no controversies pending or, to the
knowledge of Parent or any of its subsidiaries, threatened, between Parent
or any of its subsidiaries and any of their respective employees, which
controversies have a Material Adverse Effect; (b) neither Parent nor any of
its subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by Parent or its
subsidiaries nor does Parent or any of its subsidiaries know of any
activities or proceedings of any labor union to organize any such
employees; (c) neither Parent nor any of its subsidiaries has breached or
otherwise failed to comply with any provision of any such agreement or
contract and there are no grievances outstanding against any such parties
under any such agreement or contract; (d) there are no unfair labor
practice complaints pending against Parent or any of its subsidiaries
before the National Labor Relations Board or any current union
representation questions involving employees of Parent or any of its
subsidiaries; and (e) neither Parent nor any of its subsidiaries has any
knowledge of any strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of Parent or any of its
subsidiaries.
Section 3.12. Contracts. Except as described in the Parent Disclosure
Schedule, all material contracts and arrangements to which Parent or any
subsidiary is a party, or by which it is bound, are in full force and
effect and there has been no notice of termination or threatened
termination with respect to any such contracts and arrangements, whether or
not termination is permitted by the terms thereof, and no event has
occurred which, with the giving of notice or the lapse of time, or both,
would constitute a breach or default under any such contract or
arrangement, except for such breaches, defaults and events as to which
requisite waivers or consents have been obtained.
Section 3.13. Title to Properties. Parent has, and at the Effective Time
will have, good and marketable title to the equipment and other property
shown as assets on its records and books of account as of June 30, 1999,
free and clear of all liens, encumbrances and charges, except as reflected
in the such records and books of account and in the 1999 Balance Sheet.
Section 3.14. Patents. To the best knowledge of Parent, Parent or its
subsidiaries own or possess adequate licenses or other valid rights to use
all patents, patent rights, inventions, designs, processes, formulae and
other proprietary information used or held for use in connection with the
business of Parent or any of its subsidiaries as currently being, or
proposed to be, conducted and is unaware of any assertions or claims
challenging the validity of any of the foregoing which would have a
Material Adverse Effect. The conduct of the business of Parent and its
subsidiaries as now conducted or proposed to be conducted does not and will
not conflict with any patents, patent rights, licenses, trademarks,
trademark rights, trade names, trade name rights or copyrights of others in
any way which would have a Material Adverse Effect. No material
infringement of any proprietary right owned by or licensed by or to Parent
or any of its subsidiaries is known to Parent which would have a Material
Adverse Effect.
Section 3.15. Taxes. Parent and its subsidiaries have filed all federal
and state tax returns and reports and, to the best of Parent's knowledge,
all state, local and foreign tax returns and reports required to be filed
by them and have paid and discharged all taxes, including sales and use
tax, shown as due thereon and have paid all applicable state and local ad
valorem taxes as are due, except such as are being contested in good faith
by appropriate proceedings and except for such filings, payments or other
occurrences which would not have a Material Adverse Effect. Neither the
IRS nor any other taxing authority or agency is now asserting or, to the
best of Parent's knowledge, threatening to assert against parent or any of
its subsidiaries any deficiency or claim for additional taxes or interest
thereon or penalties in connection therewith. Neither Parent nor any of
its subsidiaries has granted any waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any
federal, state, county, municipal or foreign income tax.
Section 3.16. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Parent or Acquiror.
Section 3.17. Full Disclosure. No statement contained in any document,
certificate or other writing furnished or to be furnished by Parent or
Acquiror to Target pursuant to the provisions of this Agreement contains or
shall contain any untrue statement of a material fact or omits or shall
omit to state any material fact necessary, in light of the circumstances
under which it was or may be made, in order to make the statements herein
or therein not misleading.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF TARGET
Target and Taylor, and each of them, hereby, jointly and severally,
represent and warrant to Parent and Acquiror that, except as set forth in
the Disclosure Schedule delivered prior to the date which is three days
prior to the Closing Date by Target to Parent (the "Target Disclosure
Schedule"):
Section 4.1. Organization and Qualification; Subsidiaries. Target is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Idaho and has the requisite corporate power and
authority and is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders
to own, operate or lease the properties that it purports to own, operate or
lease and to carry on its business as it is now being conducted, and is
duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except for such failures which, when taken together with all
other such failures, would not have a Material Adverse Effect. Target has
not received any notice of proceedings relating to the revocation or
modification of any such franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals or orders. The term
"Material Adverse Effect" as used in this Article IV, means any change in
or effect on the business of Target that is or is reasonably likely to be
materially adverse to the business, operations, properties (including
intangible properties), prospects, condition (financial or otherwise),
assets or liabilities of Target taken as a whole. Target has no subsidiaries.
Section 4.2. Articles of Incorporation and Bylaws. Target shall, as part
of the Target Disclosure Schedule, furnish to Parent a complete and correct
copy of the Articles of Incorporation and the Bylaws, each as amended to
date, of Target. Such Articles of Incorporation and Bylaws are in full
force and effect.
Section 4.3. Capitalization. The authorized capital stock of Target
consists of 100,000 shares of Target Common Stock, with no par value. As
of the date hereof, (a) 34,814 shares of Target Common Stock are issued and
outstanding, all of which are validly issued, fully paid and
non-assessable, and (b) no shares of Target Common Stock are held in the
treasury of Target or by any subsidiary of Target. Except as set forth in
the Target Disclosure Schedule, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of Target or obligating Target to
issue or sell any shares of capital stock of, or other equity interests in,
Target. All shares of Target Common Stock subject to issuance shall be
duly authorized, validly issued, fully paid and non-assessable. There are
no outstanding contractual obligations of Target to repurchase, redeem or
otherwise acquire any shares of Target Common Stock.
Section 4.4. Authority Relative to this Agreement. Target has all
necessary corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by Target and the consummation by Target of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Target subject to the approval of the Merger and
adoption of this Agreement by its shareholders in accordance with the Idaho
Law. This Agreement has been duly executed and delivered by Target and,
assuming the due authorization, execution and delivery by Parent and
Acquiror, constitutes a legal, valid and binding obligation of Target.
Section 4.5. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Target does not, and the
performance of this Agreement by Target shall not, (i) conflict with or
violate the Articles of Incorporation or Bylaws of Target, (ii) conflict
with or violate any law, rule, regulation, order, judgment or decree
applicable to Target or by which its properties are bound or affected, or
(iii) result in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any
of the properties or assets of Target pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which Target is a party or by which
Target or its properties are bound or affected, except for such breaches,
defaults or other occurrences which would not, individually or in the
aggregate have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by Target does not, and
the performance of this Agreement shall not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign.
Section 4.6. Compliance. Target is not in conflict with, or in default
or violation of, (a) its Articles of Incorporation or Bylaws or equivalent
organizational documents, (b) any law, rule, regulation, order, judgment or
decree applicable to Target or by which its properties are bound or
affected, including, without limitation, health and safety, environmental
and civil rights laws and regulations and zoning ordinances and building
codes, or (c) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise, easement, consent, order or other
instrument or obligation to which Target is a party or by which Target or
its properties are bound or affected, except for any such conflicts,
defaults or violations which would not, individually or in the aggregate,
have a Material Adverse Effect.
Section 4.7. Financial Statements. Target has delivered to Parent and
Acquiror copies of the its unaudited financial statements for the years
ended December 31, 1998, 1997 and 1996, and a statement of operations and
balance sheet as at July 31, 1999. All of such statements are true and
complete and have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods
indicated, except as indicated in the notes thereto. Each of such balance
sheets presents a true and complete statement, as of its date, of the
financial condition and assets and liabilities of Target. Except to the
extent reflected or reserved against therein (including the notes thereto),
Target did not have, as of the date thereof, any liabilities or obligations
(whether accrued, absolute, contingent or otherwise) of a nature
customarily reflected in a corporate balance sheet or notes thereto,
prepared in accordance with generally accepted accounting principles. Each
of such statements of operations presents a true and complete statement of
the results of operations of Target.
Section 4.8. Bank Account Statements. Target has delivered to Parent and
Acquiror copies of its bank account statements, for each of its bank
accounts, for the months of January, February, March, April, May, June and
July 1999. All of such statements are true and complete and reflect all
revenues received and all expenses incurred by Target in its business;
except as disclosed in the Target Disclosure Schedule, no such statement
reflects revenues or expenses from any other source.
Section 4.9. Absence of Certain Changes or Events. Since June 30, 1999,
except as contemplated by this Agreement or disclosed in the Target
Disclosure Schedule, Target has conducted its business only in the ordinary
course and in a manner consistent with past practice and, since such date,
there has not been (a) any change in the financial condition, results of
operations, business or prospects of Target having a Material Adverse
Effect, (b) any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of Target having a Material Adverse
Effect, (c) any material change by Target in its accounting methods,
principles or practices, (d) any revaluation by Target of any of its
assets, including, without limitation, writing down the value of inventory
or any notes, accounts receivable or other investments which would,
individually or in the aggregate, exceed five percent of the total assets
of Target as reflected on the financial statements for the period ended
June 30, 1999, or (e) any declaration, setting aside or payment of any
dividends or distributions in respect of shares of Target Common Stock or
any redemption, purchase or other acquisition of any of its securities,
except in the ordinary course of business consistent with past practice.
Section 4.10. Absence of Litigation. Except as disclosed in Target
Disclosure Schedule, there are no claims, actions, proceedings or
investigations pending or, to the best knowledge of Target, threatened
against Target, or any properties or rights of Target, before any court,
arbitrator, or administrative, governmental or regulatory authority or
body, that, individually or in the aggregate, would have a Material Adverse
Effect. As of the date hereof, neither Target nor its properties is
subject to any order, writ, judgment, injunction, decree, determination or
award having a Material Adverse Effect.
Section 4.11. Labor Matters. Except as set forth in the Target
Disclosure Schedule, (a) there are no controversies pending or, to the
knowledge of Target, threatened, between Target and any of its employees,
which controversies have a Material Adverse Effect; and (b) Target is not a
party to any collective bargaining agreement or other labor union contract.
Section 4.12. Contracts. The Target Disclosure Schedule lists or
describes all contracts, authorizations, approvals or arrangements to which
Target is a party, or by which it is bound, as of the date hereof, and
which (a) obligates or may obligate Target to pay more than $500; or (b)
are financing documents, loan agreements or agreements providing for the
guarantee of the obligations of any party in each case involving an
obligation in excess of $1,000.
Section 4.13. Title to Property and Leases. (a) Each asset owned or
leased by Target is owned or leased free and clear of any mortgages,
pledges, liens, security interests, conditional and installment sale
agreements, encumbrances, charges or other claims of third parties of any
kind.
(b) All leases of real property leased for the use or benefit of Target to
which Target is a party, and all amendments and modifications thereof are
in full force and effect and have not been modified or amended and there
exists no material default under the leases by Target, nor any event which,
with the giving of notice or lapse of time, or both, would constitute a
material default thereunder by Target.
(c) A statement describing all assets of Target is included in the Target
Disclosure Schedule.
Section 4.14. Insurance. All material properties and risks of Target are
covered by valid and currently effective insurance policies issued in favor
of Target, in such amounts and against such risks and losses as are
customary in their locales of operation for companies operating similar
businesses and operations, and Target is included as an insured party under
such policies, with full rights as a loss payee. Copies of all such
insurance policies shall be included in the Target Disclosure Schedule.
Section 4.15. Taxes. Target has filed all federal and state tax returns
and reports and, to the best of Target's knowledge, all state, local and
foreign tax returns and reports required to be filed have been filed and
Target has paid and discharged all taxes, including sales and use taxes,
shown as due thereon and has paid all applicable state and local ad valorem
taxes as are due, except such as are being contested in good faith by
appropriate proceedings and except for such filings, payments or other
occurrences which would not have a Material Adverse Effect. Neither the
IRS nor any other taxing authority or agency is now asserting or, to the
best of Target's knowledge, threatening to assert against Target any
deficiency or claim for additional taxes or interest thereon or penalties
in connection therewith. Target has not granted any waiver of any statute
of limitations with respect to, or any extension of a period for the
assessment of, any federal, state, county, municipal or foreign income tax.
Section 4.16. Full Disclosure. No statement contained in any document,
certificate or other writing furnished or to be furnished by Target or
Taylor to Parent and Acquiror pursuant to the provisions of this Agreement
contains or shall contain any untrue statement of a material fact or omits
or shall omit to state any material fact necessary, in light of the
circumstances under which it was or may be made, in order to make the
statements herein or therein not misleading.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF TAYLOR
Taylor hereby represents and warrants to Parent and Acquiror that:
Section 5.1. No Legal Disability. Taylor is under no legal disability
with respect to entering into this Agreement.
Section 5.2. Receipt of Disclosure. Taylor hereby represents and
warrants that he has received and reviewed all of the information
concerning Parent required to be delivered by Parent hereunder. With
respect to such information, Taylor further represents and warrants that he
has had an opportunity to ask questions of, and to receive answers from,
the officers of Parent.
Section 5.3. Representations Relating to Parent Common Stock. Taylor
represents and warrants to Parent that the shares of Parent Common Stock he
is acquiring pursuant to this Agreement are being acquired for his own
account and for investment and not with a view to the public resale or
distribution of such shares and further acknowledges that the shares being
issued have not been registered under the Securities Act or any state
securities law and are "restricted securities", as that term is defined in
Rule 144 promulgated by the SEC, and must be held indefinitely, unless they
are subsequently registered or an exemption from such registration is
available.
Section 5.4. Consent to Legend. Taylor consents to the placement of a
legend restricting future transfer on the share certificates representing
the Parent Common Stock delivered hereunder, which legend shall be in the
following, or similar, form:
"THE STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ISSUED IN RELIANCE
UPON THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2) OF THE
SECURITIES ACT OF 1933, AS AMENDED. THE STOCK MAY NOT BE TRANSFERRED
WITHOUT REGISTRATION EXCEPT IN TRANSACTIONS EXEMPT FROM SUCH REGISTRATION."
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. Conduct of Business by Target Pending the Merger. Target
covenants and agrees that, between the date of this Agreement and the
Effective Time, unless Parent shall otherwise agree in writing, the
business of Target shall be conducted only in, and Target shall not take
any action except in, the ordinary course of business and in a manner
consistent with past practice; and Target shall use its best efforts to
preserve substantially intact the business organization of Target, to keep
available the services of the present officers, employees and consultants
of Target and to preserve the present relationships of Target with
customers, suppliers and other persons with which Target has significant
business relations. By way of amplification and not limitation, except as
contemplated by this Agreement, Target shall not, directly or indirectly,
do, or propose to do, any of the following without the prior written
consent of Parent, which consent shall not be unreasonably withheld:
(a) amend or otherwise change its Articles of Incorporation or Bylaws or
equivalent organizational documents;
(b) issue, sell, pledge, dispose of, encumber or authorize the issuance,
sale, pledge, disposition or encumbrance of (i) any shares of capital stock
of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest, of Target or (ii) any assets of Target or any other
material assets of Target other than in the ordinary course of business
consistent with past practices;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guaranty or endorse or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans or advances, except in the ordinary course of business and
consistent with past practice; (iii) authorize any single capital
expenditure which is in excess of $1,000 or capital expenditures which are,
in the aggregate, in excess of $3,000 for Target; or (iv) enter into or
amend any contract, agreement, commitment or arrangement to any of the
effects set forth in this paragraph (e) of Section 6.1;
(f) increase the compensation payable or to become payable to its officers
or employees, except for increases in salary or wages of employees of
Target who are not officers of Target in accordance with past practices, or
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director or officer of Target, or establish,
adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any directors, officers or employees;
(g) take any action other than in the ordinary course of business and in a
manner consistent with past practice with respect to accounting policies or
procedures (including, without limitation, procedures with respect to the
payments of accounts payable and collection of accounts receivable);
(h) settle or compromise any material federal, state, local or foreign
income tax liability; or
(i) pay, discharge, compromise or consent to any arrangements concerning
or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge, compromise, settlement, arrangement or satisfaction in the
ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the financial statements of
Target or incurred in the ordinary course of business and consistent with
past practice.
Section 6.2. Conduct of Business by Parent and Acquiror Pending the
Merger. Parent and Acquiror covenant and agree that, between the date of
this Agreement and the Effective Time, Parent shall not sell or otherwise
dispose of all or substantially all of its assets.
Section 6.3. Approval of Shareholders. Target shall secure the written
consent of all of the shareholders of Target to this Agreement, the Merger
Agreement and the Merger.
Section 6.4. Securities Law Compliance. Parent shall take any action
required to be taken under applicable Federal and/or state securities laws
applicable to (a) the Merger and (b) the issuance of Parent Common Stock
pursuant to the Merger. Parent shall promptly deliver to Target copies of
any filings made by Parent and/or Acquiror pursuant to this Section 6.4.
Section 6.5. Third Party Consents. Each party to this Agreement shall
use its best efforts to obtain, as soon as reasonably practicable, all
permits, authorizations, consents, waivers and approvals from third parties
or governmental authorities necessary to consummate this Agreement and the
Merger Agreement and the transactions contemplated hereby and thereby,
including, without limitation, any permits, authorizations, consents,
waivers and approvals required in connection with the Merger.
ARTICLE VII. CONDITIONS OF MERGER
Section 7.1. Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment of all of the following conditions precedent at
or prior to the Effective Time:
(a) Shareholder Approval. This Agreement shall have been approved and
adopted by the shareholder of Target.
(b) No Order. No United States or state governmental authority or other
agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and has the effect
of making the conversion of Target Common Stock into the Merger
Consideration illegal or otherwise prohibiting consummation of the
transactions contemplated by this Agreement.
(c) No Challenge. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency by
any government agency or any other person challenging, or seeking material
damages in connection with the conversion of Target Common Stock into the
Merger Consideration pursuant to the Merger or otherwise materially
adversely affecting the business, assets, prospects, financial condition or
results of operations of Target, Acquiror, Parent or any of their
respective subsidiaries or affiliates.
(d) Tax Opinions. Target and Taylor shall receive an opinion of Gregory
Meacham, Esquire, to the effect that under the provisions of United States
federal income tax laws, rules and regulations, provided that the Merger
qualifies as a statutory merger under the applicable laws of the State of
Idaho, it will be a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code and that, with respect to the
Parent Common Stock to be issued to the shareholders in the Merger, the
exchange provided for in Section 1.7 will not result in current income to
Target or Taylor.
Section 7.2. Additional Conditions to Obligations of Parent and Acquiror.
The obligations of Parent and Acquiror to effect the Merger are also
subject to the fulfillment of all of the following conditions precedent at
or prior to the Effective Time:
(a) Customers of Target. The actual number of (i) dial-up customers of
Target who shall be current in their accounts as of the last billing date
30 days prior to the Closing Date shall equal or exceed 1,700 customers;
and (ii) wireless-access customers of Target who shall be current in their
accounts as of the last billing date immediately preceding the Closing Date
shall equal or exceed 6 customers. For purposes of this Section 7.2(a),
"customers" shall mean actually subscribed and paying customers and shall
exclude customers obtained through free promotions, free bases or any other
manner not requiring payment for services.
(b) Representations and Warranties. The representations and warranties of
Target and Taylor contained in this Agreement shall be true and correct in
all material respects on and as of the Effective Time, except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as
if made on and as of the Effective Time, and Parent and Acquiror shall have
received a Certificate of the President of Target which is to that effect,
which certificate shall be in the form attached hereto as Exhibit "F".
(c) Agreements and Covenants. Target and Taylor shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Effective Time, and Parent and Acquiror shall have received a
Certificate of the President of Target to that effect, which certificate
shall be in the form attached hereto as Exhibit "F".
(d) Consents Obtained. All consents, waivers, approvals, authorizations
or orders required to be obtained, and all filings required to be made, by
Target for the authorization, execution and delivery of this Agreement and
the consummation by it of the transactions contemplated hereby shall have
been obtained and made by Target.
(e) Non-Competition Agreement - Taylor. Parent and Taylor shall have
executed the Taylor Agreement Not to Compete.
(f) Confidentiality Agreement - Taylor. Parent and Taylor shall have
executed the Taylor Confidentiality Agreement.
(g) Continuity of Interest Agreement. Parent, Acquiror and Taylor shall
have executed the Continuity of Interest Agreement.
(h) Registration Agreements. Parent shall have delivered a Registration
Agreement to each of the persons receiving shares of Parent Common Stock
hereunder.
(i) Opinion of Counsel. Parent and Acquiror shall have received, from
counsel for Target, an opinion substantially in the form attached hereto as
Exhibit "G", dated as of the Closing Date.
(l) No Material Adverse Change. There shall have been no material adverse
change in the condition, financial or otherwise, of Target.
Section 7.3. Additional Conditions to Obligation of Target. The
obligation of Target to effect the Merger is also subject to fulfillment of
all of the following conditions precedent, at or prior to the Effective Time:
(a) Representations and Warranties. The representations and warranties of
Parent and Acquiror contained in the Agreement shall be true and correct in
all material respects on and as of the Effective Time, except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as
if made on and as of the Effective Time, and Target shall have received a
Certificate of the President of Parent which is to that effect, which
certificate shall be in the form attached hereto as Exhibit "H".
(b) Agreements and Covenants. Parent and Acquiror shall have performed or
complied in all material respects with all agreements and convenants
required by this Agreement to be performed or complied with by them on or
prior to the Effective Time, and Target shall have received a Certificate
of the President of Parent which is to that effect, which certificate shall
be in the form attached hereto as Exhibit "H".
(c) Consents Obtained. All consents, waivers, approvals, authorizations
or orders required to be obtained, and all filings required to be made, by
Parent and Acquiror for the authorization, execution and delivery of this
Agreement and the consummation by them of the transactions contemplated
hereby shall have been obtained and made by Parent and Acquiror.
(d) Non-Competition Agreement - Taylor. Parent and Taylor shall have
executed the Taylor Agreement Not to Compete.
(e) Confidentiality Agreement - Taylor. Parent and Taylor shall have
executed the Taylor Confidentiality Agreement.
(f) Continuity of Interest Agreement. Parent, Acquiror and Taylor shall
have executed the Continuity of Interest Agreement.
(g) Registration Agreements. Parent shall have delivered a Registration
Agreement to each of the persons receiving shares of Parent Common Stock
hereunder.
(h) Opinion of Counsel. Target shall have received from Newlan & Newlan,
counsel for Parent and Acquiror, an opinion in substantially the form
attached hereto as Exhibit "I", dated as of the Closing Date.
(i) No Material Adverse Change. There shall have been no material adverse
change in the condition, financial or otherwise, of Parent.
ARTICLE VIII. INDEMNIFICATION
Section 8.1. General Indemnification Covenants. Taylor shall indemnify,
save and keep Parent and its affiliates, agents, attorneys, successors and
permitted assigns (including the Surviving Corporation) (the "Parent
Indemnitees"), harmless against and from all liability, demands, claims,
actions or causes of action, assessments, losses, fines, penalties, costs,
damages and expenses, including reasonable attorneys' fees, disbursements
and expenses (collectively, the "Damages"), sustained or incurred by any of
the Parent Indemnitees as a result of, arising out of or by virtue of any
misrepresentation, breach of any warranty or representation or
non-fulfillment of any agreement or covenant on the part of Target or
Taylor, whether contained in this Agreement or the Merger Agreement or any
exhibit or schedule hereto or thereto or any written statement or
certificate furnished or to be furnished to Parent or Acquiror pursuant
hereto or in any closing document delivered by Target or Taylor to Parent
or Acquiror in connection herewith.
Section 8.2. Tax Indemnity. (a) Taylor hereby agrees to pay, indemnify,
defend and hold Parent and Acquiror harmless from and against any and all
taxes of Target with respect to any period (or any portion thereof) up to
and including the Effective Time, except for taxes of Target which are
reflected as current liabilities for taxes that exist as of the Effective
Time ("Current Tax Liabilities") on the financial statements delivered to
Parent and Acquiror hereunder, together with all reasonable legal fees,
disbursements and expenses incurred by Parent and Acquiror in connection
therewith.
(b) Taylor shall prepare and file, or cause to be prepared and filed, any
tax return of Target required to be filed after the Effective Time and
which relates to any period or portion thereof up to and including the
Effective Time.
(c) The indemnity provided for in this Section 8.2 shall be independent of
any other indemnity provision hereof and, anything in this Agreement to the
contrary notwithstanding, shall survive until the expiration of the
applicable statutes of limitation for the taxes referred to herein, and any
taxes subject to the indemnification for taxes set forth in this Section
8.2 shall not be subject to the provisions of Sections 9.1 or 9.4 hereof.
Notwithstanding anything in this Agreement to the contrary, Taylor will not
be obligated to indemnify Parent and Acquiror under any provision of this
Agreement, with respect to taxes or other liabilities that arise as a
direct result of a failure of the Merger to qualify as a reorganization
within the meaning of Section 368(a)(1)(A) and 368(a)(2)(D) of the Code,
provided that Taylor is not in breach of any of his representations,
covenants or agreements contained in the Continuity of Interest Agreement.
Section 8.3. Release by Taylor. Taylor hereby releases and discharges
Parent and Acquiror and each of its officers, directors, agents and
attorneys from, and agree and covenant that, in no event, will Taylor
commence any litigation or other legal or administrative proceeding against
Parent, Acquiror or any of their officers, directors, agents or attorneys,
whether in law or equity, relating to any and all claims and demands, known
and unknown, suspected and unsuspected, disclosed and undisclosed, for
damages, actual or consequential, past, present and future, arising out of
or in any way connected with his ownership of Target Common Stock prior to
the Effective Time, other than claims or demands arising out of the
transactions contemplated by this Agreement and the Merger Agreement.
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of Target:
(a) By mutual consent of the Boards of Directors of Parent and Target.
(b) By either Parent or Target, if (i) the Merger shall not have been
consummated by September 30, 1999 (the "Termination Date"); (ii) the
requisite consent of the shareholders of Target to approve this Agreement,
the Merger Agreement and the transactions contemplated hereby and thereby
shall not be obtained; (iii) any governmental or regulatory body, the
consent of which is a condition to the obligations of Parent, Acquiror and
Target to consummate the transactions contemplated hereby or by the Merger
Agreement, shall have been unsuccessful, or (iv) any court of competent
jurisdiction in the United States or any state shall have issued an order,
judgment or decree (other than a temporary restraining order) restraining,
enjoining or otherwise prohibiting the Merger and such order, judgment or
decree shall have become final and non-appealable; provided, however, that
the right to terminate this Agreement under this Section 9.1(b) shall not
be available to any party whose willful failure to fulfill any material
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such date.
Section 9.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become
void and there shall be no liability on the part of either Parent, Acquiror
or Target or their respective officers or directors, except that nothing in
this Section 9.2 shall relieve any party from liability for any breach of
this Agreement.
Section 9.3. Expenses. Unless otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
Section 9.4. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time. This Agreement may not
be amended except by an instrument in writing signed by each of the parties
hereto.
Section 9.5. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by
the party or parties to be bound thereby.
ARTICLE X. GENERAL PROVISIONS
Section 10.1. Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement shall
survive the Merger indefinitely.
Section 10.2. Publicity. There shall be no public announcements with
respect to the Merger made by Target. The right to publicize the execution
of this Agreement and the Merger Agreement, as well as the consummation of
the Merger, shall be that of Parent.
Section 10.3. Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been
duly given or made as of the date delivered or mailed if delivered
personally or mailed by registered or certified mail (postage prepaid,
return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice, except
that notices of changes of address shall be effective upon receipt):
(a) If to Parent or Acquiror: USURF America, Inc.
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
with copies to: Newlan & Newlan
Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
(b) if to Target or Taylor: Alan L. Taylor
Premier Internet Services,
Inc.
P.O. Box 436
Rigby, Idaho 83442
with copies to: Gregory Meacham, Esquire
1970 East 17th Street
Suite 103
Idaho Falls, Idaho 83404
Section 10.4. Non-Waiver. The failure in any one or more instances of a
party to insist upon performance of any of the terms, covenants or
conditions of this Agreement, to exercise any right or privilege conferred
in this Agreement, or the waiver by said party of any breach of any of the
terms, covenants or conditions of this Agreement, shall not be construed as
a subsequent waiver of any such terms, covenants, conditions, rights or
privileges, but the same shall continue and remain in full force and effect
as if no such forbearance or waiver had occurred. No waiver shall be
effective unless it is in writing and signed by an authorized
representative of the waiving party.
Section 10.5. Arbitration. Any dispute arising under this Agreement
and/or the Merger Agreement, as well as any of the transactions
contemplated hereby and thereby, shall be resolved by arbitration in
Dallas, Texas, under the Rules of the American Arbitration Association, as
then in effect. The determination and award of the arbitrator, which aware
may include punitive damages, shall be final and binding on the parties and
may be entered as a judgment in any court of competent jurisdiction. It is
expressly agreed that the arbitrators, as part of their award, can award
attorneys' fees to the prevailing party.
Section 10.6. Binding Effect; Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their successors and
permitted assigns. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, including,
without limitation, third party beneficiary rights.
Section 10.7. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
Section 10.8. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings, both oral
and written, among the parties, or any of them, with respect to the subject
matter hereof and, except as otherwise expressly provided herein, are not
intended to confer upon any other person any rights or remedies hereunder.
Section 10.9. Assignability. This Agreement shall not be assignable by
either party or by operation of law, except with the express written
consent of each other party.
Section 10.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Nevada applicable to
contracts executed in and to be performed in such State.
Section 10.11. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 10.12. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Parent, Acquiror and Target, by their respective
officers thereunto duly authorized, and Taylor have caused this Agreement
to be executed as of the date first written above.
USURF AMERICA, INC.
ATTEST:
By: /s/ David M. Loflin
/s/ Waddell D. Loflin David M. Loflin
Waddell D. Loflin President
Secretary
CYBERHIGHWAY, INC.
ATTEST:
By: /s/ Darrell Davis
/s/ Darrell Davis
Secretary President
PREMIER INTERNET SERVICES, INC.
ATTEST: d/b/a CyberHighway of Southeast Idaho
By: /s/ Alan Taylor
/s/ Alan Taylor
Secretary President
/s/ Alan Taylor
Alan Taylor, individually
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EXHIBIT 10.27
- ----------------------
AGREEMENT OF MERGER
AGREEMENT OF MERGER, dated as of August 30, 1999 (the "Merger Agreement"),
by and among USURF America, Inc., a Nevada corporation ("Parent"),
CyberHighway, Inc. , an Idaho corporation ("Acquiror"), and Premier
Internet Services, Inc. , d/b/a CyberHighway of Southeast Idaho, an Idaho
corporation ("Target") (Acquiror and Target being hereinafter collectively
referred to as the "Constituent Corporations").
WHEREAS, prior to the execution of this Merger Agreement, Parent, Acquiror
and Target have entered into an Agreement and Plan of Reorganization dated
as of August 21' 1999 (the "Plan of Reorganization"), providing for certain
representations, warranties and agreements in connection with the
transaction contemplated; and
WHEREAS, the Board of Directors of Parent, Acquiror and Target have
approved the acquisition of Target by Acquiror; and
WHEREAS, the Boards of Directors of Parent, Acquiror and Target have
approved the merger of Target into Acquiror (the "Merger") upon the terms
and subject to the conditions set forth herein and in the Plan of
Reorganization; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization with the meaning of Section 368(a)(1 )(A)
and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Acquiror and Target agree as follows:
ARTICLE I. THE MERGER
Section 1.1. The Merger. (a) At the Effective Time (as defined in Section
1.2) and subject to the terms and conditions of this Merger Agreement and
the Plan of Reorganization, Target shall be merged into Acquiror and the
separate existence of Target shall thereupon cease, in accordance with the
applicable provisions of the Idaho Business Corporation Act (the "Idaho Law").
(b) Acquiror will be the surviving corporation in the Merger (sometimes
referred to herein as the "Surviving Corporation") and will continue to be
governed by the laws of the State of Idaho, and the separate corporate
existence of Acquiror and all of its rights, privileges, immunities and
franchises, public or private, and all its duties and liabilities as a
corporation organized under the laws of the State of Idaho will continue
unaffected by the Merger.
(c) The Merger will have the effects specified by the Idaho Law.
Section 1.2. Effective Time. As soon as practicable following fulfillment
or waiver of the conditions specified in Article 1.2 of the Plan of
Reorganization and provided that this Merger Agreement has not been
terminated or abandoned pursuant to Article IV hereof, the Constituent
Corporations will cause a Certificate of Merger (the "Certificate of
Merger") to be filed with the office of the Secretary of State of Idaho, as
provided in the Idaho Law. Subject to and in accordance with the Idaho Law,
the Merger will become effective at the date and time the Certificate of
Merger is filed with the office of the Secretary of State of Idaho, or such
later time or date as may be specified in the Certificate of Merger (the
"Effective Time").
ARTICLE II. THE SURVIVING CORPORATION
Section 2.1. Articles of Incorporation. The Articles of Incorporation of
Acquiror as in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation after the Effective
Time.
Section 2.2. Bylaws. The Bylaws of Acquiror as in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation
after the Effective Time.
Section 2.3. Board of Directors. From and after the Effective Time, the
Board of Directors of Acquiror shall be the Board of Directors of the
Surviving Corporation.
ARTICLE III. CONVERSION OF SHARES
Section 3. 1. Conversion of Target Shares in the Merger. Pursuant to this
Merger Agreement, at the Effective Time, by virtue of the Merger and
without any action on the part of any holder of any capital stock of Target:
(a) all shares of Target (the "Target Common Stock") owned by Parent or
any subsidiary of Parent or Target shall be cancelled and shall cease to
exist from and after the Effective Time; and
(b) each remaining issued and outstanding Target share shall be converted
into, and become exchangeable for 3.648 shares of the $.0001 par value per
share common stock of Parent (the "Parent Common Stock"), a total of
127,000 shares of Parent Common Stock. The consideration referred to in
this Section 3.1 (b) is hereinafter referred to as the "Merger Consideration".
Section 3.2. Status of Acquiror Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of any
capital stock of Acquiror, each issued and outstanding share of common
stock of Acquiror shall continue unchanged and remain outstanding as a
share of common stock of the Surviving Corporation.
Section 3.3. Exchange of Target Common Stock Certificates. As soon as
practicable after the Effective Time, Parent shall cause the exchange of
Target Common Stock for Parent Common Stock (as required in Section 3.1 (b)
herein and Section 1.6 of the Plan of Reorganization) to occur. Shares of
Parent Common Stock into which shares of Target Common Stock shall be
converted in the Merger shall be deemed to have been issued at the
Effective Time.
ARTICLE IV. TERMINATION AND AMENDMENT
Section 4.1. Termination. This Merger Agreement shall terminate in the
event of, and upon termination of, the Plan of Reorganization.
Section 4.2. Amendments. This Merger Agreement may be amended by the
parties hereto, at any time before or after approval hereof by the
shareholders of Target, but, after any such approval, no amendment shall be
made which (a) changes the ratio at which Target Common Stock is to be
converted into Parent Common Stock pursuant to Section 3.1, (b) in anyway
materially adversely affects the rights of holders of Target Common Stock
or (c) changes in any of the principal terms of this Merger Agreement, in
each case, without the further approval of such shareholder. This Merger
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 4.3. Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part of
a party hereto to any such extension or waiver shall be valid if set forth
in an instrument in writing signed on behalf of such party.
Section 4.4. Notices. All notices required to be given hereunder shall be
in writing and shall be deemed given when delivered in person or sent by
confirmed facsimile, or when received if given by Federal Express or other
nationally recognized overnight courier service, or five (5) business days
after being deposited in the United States mail, postage prepaid,
registered or certified mail, addressed to the applicable parties as follows:
(a) If to Parent or Acquiror:
USURF America, Inc.
CyberHighway, Inc.
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
with copies to:
Newlan & Newlan Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
(b) if to Target:
Alan L. Taylor
Premier Internet Services, Inc.
P.O. Box 436
Rigby, Idaho 83442
with copies to:
Gregory Meacham, Esquire
1970 East 17th Street
Suite 103
Idaho Falls, Idaho 83404
Section 4.5. Arbitration. Any dispute arising under this Merger Agreement
shall be resolved by arbitration in Dallas, Texas, under the Rules of the
American Arbitration Association, as then in effect. The determination and
award of the arbitrator, which aware may include punitive damages, shall be
final and binding on the parties and may be entered as a judgment in any
court of competent jurisdiction. It is expressly agreed that the
arbitrators, as part of their award, can award attorneys' fees to the
prevailing party.
Section 4.6. Entire Agreement. This Merger Agreement and the Plan of
Reorganization constitute the entire agreement between the parties and
shall be binding upon and inure to the benefit of the parties hereto and
their respective legal representatives, successors and permitted assigns.
The parties and their respective affiliates make no representations or
warranties to each other, except as contained in the Plan of
Reorganization, and any and all prior representations and statements made
by any party or its representatives, whether verbally or in writing, are
deemed to have been merged into this Merger Agreement and the Plan of
Reorganization, it being intended that no such representations or
statements shall survive the execution and delivery of this Merger
Agreement and the Plan of Reorganization.
Section 4.7. Non-Waiver. The failure in anyone or more instances of a
party to insist upon performance of any of the terms, covenants or
conditions of this Merger Agreement, to exercise any right or privilege
conferred in this Merger Agreement, or the waiver by said party of any
breach of any of the terms, covenants or conditions of this Merger
Agreement, shall not be construed as a subsequent waiver of any such terms,
covenants, conditions, rights or privileges, but the same shall continue
and remain in full force and effect as if no such forbearance or waiver had
occurred. No waiver shall be effective unless it is in writing and signed
by an authorized representative of the waiving party.
Section 4.8. Counterparts. This Merger Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
Section 4.9. Severability. The invalidity of any provision of this Merger
Agreement or portion of a provision shall not affect the validity of any
other provision of this Merger Agreement or the remaining portion of the
applicable provision.
Section 4.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Idaho applicable to
contracts executed in and to be performed in such State.
Section 4. 11. Binding Effect: Benefit. This Merger Agreement shall inure
to the benefit of and be binding upon the parties hereto and their
successors and permitted assigns. Nothing in this Merger Agreement, express
or implied, is intended to confer on any person other than the parties
hereto and their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Merger
Agreement, including, without limitation, third party beneficiary rights.
Section 4.12. Assignability. This Merger Agreement shall not be assignable
by either party or by operation of law, except with the express written
consent of each other party.
Section 4.13. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, Parent, Acquiror and Target have executed this
Agreement of Merger on the date first above written.
PARENT: TARGET:
USURF AMERICA, INC. PREMIER INTERNET SERVICES, INC.
d/b/a CyberHighway of Southeast Idaho
By: /s/ David M. Loflin By: /s/ Alan Taylor
David M. Loflin Alan Taylor
Its: President Its: President
ACQUIROR:
CYBERHIGHWAY, INC.
By: /s/ Darrell Davis
Darrell Davis
Its: President
- ---------------------
EXHIBIT 10.28
- ---------------------
August 30, 1999
USURF America, Inc.
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Re: Confidentiality Agreement
Gentlemen:
In connection with the execution of an Agreement and Plan of
Reorganization (the "Reorganization Agreement") among Premier Internet
Services, Inc., d/b/a CyberHighway of Southeast Idaho, CyberHighway, Inc.,
the undersigned, Alan Taylor, and USURF America, Inc., together with
affiliates, including, without limitation, Santa Fe Wireless Internet,
Inc., USURF America (Alabama), Inc., CyberHighway, Inc. (collectively, the
"Company"), the Company has furnished, or may furnish, to the undersigned,
Alan Taylor, certain information concerning its business, financial
position, operations, business contacts, assets and liabilities, as well as
certain items of equipment useful in the Wireless Internet access business.
As a condition to such information's being furnished to the undersigned
and as a condition to the undersigned's entering into the Reorganization
Agreement with the Company and in consideration of the Company's entering
into the Reorganization Agreement, the undersigned agrees to treat any
information concerning the Company (whether prepared by the Company, its
advisors, or otherwise, and irrespective of the form of communication)
which is furnished to the undersigned, or, in the future, will be
furnished, by or on behalf of the Company (together with the material
described below, herein collectively referred to as the "Confidential
Material") in accordance with the provisions of this letter agreement, and
to take or abstain from taking certain other actions hereinafter set forth.
The undersigned understand that the term "Confidential Material" also
includes all notes, analysis, compilations, studies, interpretations or
other documents prepared by the Company or its representatives which
contain, reflect or are based upon, in whole or in part, the information
furnished to the undersigned. The term "Confidential Material" does not
include information which (A) is or becomes generally available to the
public other than as a result of a disclosure by the undersigned, or (B)
was lawfully within the undersigned's possession prior to its being
furnished to the undersigned by or on behalf of the Company, provided that
the source of such information was not known by the undersigned to be bound
by a confidentiality agreement with, or other contractual, legal or
fiduciary obligation of confidentiality to, the Company or any other party
with respect to such information, or (C) is disclosed to the undersigned by
a third party, provided that such third party was not known by the
undersigned to be bound by a confidentiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to, the
Company or any other party with respect to such information.
The undersigned hereby agrees that he will use the Confidential Material
solely in connection with the undersigned's entering into the
Reorganization Agreement, that the Confidential Material will be kept
confidential and that the undersigned will not disclose any of the
Confidential Material in any manner whatsoever.
The undersigned hereby agrees that he shall not reverse engineer, reverse
assemble or otherwise attempt to recreate or duplicate any model or working
model capable of performing the functions of any portion or all of the
Company's Wireless Internet access system included in the Confidential
Material.
In addition, the undersigned agrees that, without the prior written
consent of the Company, the undersigned will not disclose to any other
person the fact that the Confidential Material has been made available to
the undersigned, that discussions or negotiations are taking place
concerning a possible transaction involving the Company, or any of the
terms, conditions or other facts with respect thereto (including the status
thereof), unless, in the opinion of the undersigned's counsel, such
disclosure must be made by the undersigned in order that the undersigned
not commit a violation of law. The term "person" as used in this letter
agreement shall be broadly interpreted to include the media and any
corporation, partnership, group, individual or other entity, but shall not
include the Securities and Exchange Commission or the Federal Trade
Commission as to any required filing with either such agency.
In the event that the undersigned is requested or required (by oral
questions, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process)
to disclose any of the Confidential Material, the undersigned will provide
the Company with prompt written notice of any such request or requirement
so that the Company may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this letter agreement. If,
in the absence of a protective order or other remedy or the receipt of a
waiver by the Company, the undersigned is, nonetheless, in the opinion of
counsel, legally compelled to disclose Confidential Material, the
undersigned may, without liability hereunder, disclose only that portion of
the Confidential Material specifically required by an order of Court.
Additionally, the undersigned shall make every reasonable effort and take
every reasonable action, including, without limitation, by cooperating with
the Company, to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Material.
At any time upon the request of the Company, the undersigned will promptly
deliver to the Company or certify destruction of, at the Company's
direction, all Confidential Material (and all copies thereof) furnished to
the undersigned by or on behalf of the Company pursuant hereto. All oral
Confidential Material provided to the undersigned shall continue to be held
confidential hereunder. Notwithstanding the return or destruction of the
Confidential Material, the undersigned will continue to be bound by
obligations of confidentiality hereunder.
The undersigned agrees that the Company, without prejudice to any rights
to judicial relief he may otherwise have, shall be entitled to equitable
relief, including injunctive relief and specific performance, in the event
of any breach of the provisions of this letter agreement and that the
undersigned will not oppose the granting of such relief. The undersigned
also agrees that he will not seek and agrees to waive any requirement for
the securing and posting of a bond in connection with the Company's seeking
or obtaining such relief. In the event of litigation relating to this
letter agreement, if a court of competent jurisdiction determines that the
undersigned has breached this letter agreement, then the undersigned, and
each of them, will be liable to pay to the Company the reasonable legal
fees incurred in connection with such litigation, including any appeal
therefrom. Also, in the event a court of competent jurisdiction determines
that the undersigned has not breached this letter agreement, then the
Company will be liable to pay to the undersigned the reasonable legal fees
incurred in connection with such litigation, including any appeal therefrom.
This letter agreement is for the benefit of the Company, and shall be
construed (both as to validity and performance) and enforced in accordance
with, and governed by, the laws of the State of Idaho applicable to
agreements made and to be performed wholly within such jurisdiction. This
letter agreement shall remain in full force and effect until terminated by
the Company.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned whereupon this letter agreement
shall become a binding agreement.
Very truly yours,
/s/ Alan Taylor
Alan Taylor, individually
AGREED AND ACCEPTED as
of the date first written above:
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin
Its: President
- ----------------------
EXHIBIT 10.29
- ----------------------
AGREEMENT NOT TO COMPETE
THIS AGREEMENT NOT TO COMPETE is entered into by and between USURF
America, Inc., a Nevada corporation ("Parent"), and Alan Taylor ("Taylor").
WHEREAS, Parent and Taylor are parties to an Agreement and Plan of
Reorganization (the "Reorganization Agreement") among, Parent, Taylor,
CyberHighway, Inc., and Premier Internet Services, Inc., d/b/a CyberHighway
of Southeast Idaho ("Target"), an Internet Service Provider (ISP); and
WHEREAS, as a condition to the Reorganization Agreement and in
consideration of Parent's entering into the Reorganization Agreement,
Taylor has agreed to sign and be bound by this Agreement Not to Compete; and
NOW, THEREFORE, the parties agree as follows:
Section 1. Covenant Not to Compete. Taylor acknowledges that Taylor, as
owner and operator of Target, has been involved, on a high level, in the
development, implementation and management of the business strategies and
plans of Target, and has received, or may receive, information relating to
the national and international business strategies of Parent and such other
business, units, divisions, subsidiaries or other entities of Parent. By
virtue of Taylor's unique status in the ISP business, the engagement of
Taylor in the ISP business as a competitor of Parent represents a serious
competitive danger to Parent, and the use of knowledge and information
about the business, strategies and plans of Parent can and would constitute
a valuable competitive advantage over Parent. In view of the foregoing and
in consideration of Parent's entering into the Reorganization Agreement,
Taylor covenants and agrees that, for a period of one year after the
closing date under the Reorganization Agreement, he will not engage or be
engaged, in any capacity, directly or indirectly, including, but not
limited to, as employee, agent, consultant, manager, executive, owner or
stockholder (except as a passive investor holding less than 1% equity
interest in any enterprise the securities of which are publicly traded) in
any business entity engaged in competition with any business conducted by
Parent, or any of its affiliates, as of the closing date under the
Reorganization Agreement. If any court determines that this Agreement Not
to Compete, or any part hereof, is unenforceable because the duration or
geographic scope of such provision, such court shall have the power to
reduce the duration or scope of such provision, as the case may be, and, in
its reduced form, such provision shall then be enforceable.
Section 2. Injunctive Relief. Taylor acknowledges that the violation of
the covenants contained in this Agreement would be detrimental and cause
irreparable injury to Parent and its affiliates which could not be
compensated by money damages. Taylor agrees that an injunction from a
court of competent jurisdiction is the appropriate remedy for these
provisions, and consent to the entry of an appropriate judgment enjoining
Taylor from violating these provisions in the event there is a finding of
his breach.
Section 3. Severability of Covenants. Each of the covenants contained in
this Agreement are independent covenants, which may be available to or
relied upon by Parent and its affiliates in any court of competent
jurisdiction. If any one of the separate and independent covenants shall
be deemed to be unenforceable under the laws of any state of competent
jurisdiction, each of the remaining covenants shall not be affected
thereby. Notwithstanding the provisions of this Section 3, it is
understood that every benefit received by Taylor by virtue of this
Agreement is consideration for each separate covenant contained herein.
Section 4. Governing Law. This Agreement shall be governed by the laws
of the State of Idaho.
Section 5. Other Remedies. The undertakings herein shall not be
construed as any limitation upon the remedies Employer might, in the
absence of this Agreement, have at law or in equity.
INTENDING to be legally bound hereby, Parent and Taylor hereby duly
execute this Agreement Not to Compete on the date indicated below.
USURF AMERICA, INC.
Date: August 30, 1999 By: /s/ David M. Loflin
David M. Loflin
Its: President
Date: August 30, 1999 /s/ Alan Taylor
Alan Taylor, individually
- ----------------------
EXHIBIT 10.30
- ----------------------
August 30, 1999
Alan L. Taylor
P.O. Box 436
Rigby, Idaho 83442
Registration Rights Letter Agreement
Dear Mr. Taylor:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 31,750 of the shares of the $.0001 par value common
stock (the "Subject Shares") of USURF America, Inc., a Nevada corporation
(the "Company"), received, and currently owned, by you under that certain
Agreement and Plan of Reorganization (the "Reorganization Agreement") among
the Company, CyberHighway, Inc., Premier Internet Services, Inc., d/b/a
CyberHighway of Southeast Idaho, and Alan L. Taylor. It is our
understanding that:
1. Registration Rights. At any time subsequent to the effectiveness of
the merger of Premier Internet Services, Inc., d/b/a CyberHighway of
Southeast Idaho, with and into CyberHighway, Inc., pursuant to the
Reorganization Agreement, you may demand of the Company, on one occasion,
that up to twenty-five percent (25%) of the shares received by you pursuant
to the Reorganization Agreement be registered for public sale with the
Securities and Exchange Commission (the "Commission") on the appropriate
form of Registration Statement. Registration of such shares, or any of
them, by the Company in a Registration Statement filed without regard to a
demand received from you, shall constitute a satisfaction of a demand for
such registration. In the event of the filing of a Registration Statement
by the Company to register shares of the Company for public resale, you
will be notified of such proposed registration and given the opportunity to
register the registrable portion of your shares at that time. Your failure
or refusal to so register your registrable shares at that time will
constitute a waiver of your demand registration rights.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you, on a pro rata
basis, based on the percentage that your shares bear to all shares being
registered under the Registration Statement. In this regard, the Company
reserves the right to include additional selling shareholders in any
registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Commission, a
Registration Statement with respect to the Subject Shares and use its best
efforts to cause such Registration Statement to become effective, such
Registration Statement to comply as to form and content and in all material
respects to the Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin
Its: President
AGREED AND ACCEPTED as of the
date and year first above written:
/s/ Alan Taylor
Alan L. Taylor, individually
- ----------------------
EXHIBIT 10.31
- ----------------------
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made and entered into as of the 29th day
of October, 1999, by and between CyberHighway of North Georgia, Inc., a
Georgia corporation ("Seller"), and USURF America, Inc., a Nevada
corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, certain of the assets of Seller used in connection with a
portion of Seller's business, including the good will associated therewith;
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
I. THE ASSETS
1.1 Asset Purchase. Subject to the terms and conditions of this
Agreement, and in reliance on the representations and warranties contained
in this Agreement, Seller hereby sells to Buyer, and Buyer hereby purchases
from Seller, free and clear of all liabilities, liens and encumbrances, all
of the assets described in Exhibit "A" attached hereto and incorporated
herein by this reference (the "Assets").
1.2 Liabilities. Except as set forth in Exhibit "B" attached hereto and
incorporated herein by this reference, Buyer does not assume, nor does
Buyer agree to assume, pay, discharge or perform any obligations,
liabilities, including, without limitation, taxes, duties, levies or
imposts of any nature and description owed by Seller or accrued against
Seller as of the date of this Agreement and as of Closing, or commitments
of Seller, including, but not limited to, any equipment or real estate
leases, obligations, contractual or otherwise, except as to the contracts
assigned hereunder, or obligations of any kind to present or former
employees, sales representatives and independent contractors.
Further, Seller hereby indemnifies and holds Buyer harmless as to any and
all liabilities, claims, loss or damage arising out of the operations of
the Internet Service Provider business conducted under the name
"CyberHighway of North Georgia" carried on by Seller prior to the Closing
and, in the event of any suit or other proceeding related to any such
liability, claim, loss or damage, Seller shall provide, at its sole
expense, a defense thereto. Notwithstanding anything to the contrary
contained in the foregoing provisions, Buyer hereby indemnifies and holds
harmless Seller as to any and all loss incurred by Buyer as to any
liability arising under the liabilities assumed by Buyer and listed on
Exhibit "B" and/or Exhibit "D" attached hereto.
II. PRICE AND PAYMENT
2.1 Purchase Price. The purchase price for the Assets is Two Hundred
Twelve Thousand Dollars ($212,000), payable as described in paragraph 2.3.
The entire amount of the purchase price shall be paid by Buyer to Seller at
the Closing. In the event that, for any reason a closing does not occur,
Buyer shall not be obligated to make any payment to Seller.
2.2 Allocation of Purchase Price. The purchase price may be allocated
among the Assets by Buyer, in its sole discretion.
2.3 Manner of Payment. The payment for the Assets acquired under this
Agreement shall be made by delivery of 53,000 shares of its $.0001 par
value common stock (the "Acquisition Stock"), which shares shall be valued
at $4.00 per share.
III. FURTHER AGREEMENTS
3.1 Registration Rights. Seller, as the recipient of the shares of
Acquisition Stock to be delivered by Buyer hereunder, shall have the
registration rights with respect to its shares of the Acquisition Stock as
are set forth in the form of Registration Rights Letter Agreement (the
"Registration Agreement") attached hereto as Exhibit "C". Buyer agrees and
undertakes that it shall, with all reasonable diligence, prepare, file and
pursue to effectiveness a registration statement which shall include, in
part, all of the shares of the Acquisition Stock as required by the
Registration Agreement.
3.2 Assignment of Certain Contracts. Seller shall assign to Buyer all of
its rights in and to the contracts attached hereto as Exhibit "D" and
incorporated herein by this reference, which contracts are related to the
portion of Seller's business being purchase by Buyer.
IV. THE CLOSING
4.1 Closing. The closing under this Agreement shall be held at the
offices of Seller, at the hour of 2:00 p.m., on September 29, 1999, or at
such other time or place as the parties may agree upon in writing (the
"Closing" or the "Closing Date").
4.2 Deliveries.
A. At the Closing, Seller shall deliver the following:
1. A Bill of Sale and Assignment, in the form of Exhibit "E" attached
hereto, duly executed;
2. An Agreement Not to Compete, in the form of Exhibit "F" attached
hereto, duly executed;
3. A Confidentiality Agreement, in the form of Exhibit "G" attached
hereto, duly executed;
4. A Certificate of the President of Seller, in the form of Exhibit "H"
attached hereto, duly executed;
5. An opinion of counsel of Seller, in the form of Exhibit "K" attached
hereto;
6. An opinion of counsel, addressed to Seller, to the effect that Seller
shall have complied with the bulk sale laws of the State of Georgia; and
7. Any and all consents of third parties required to be obtained by Seller.
B. At the Closing, Buyer shall deliver the following:
1. A certificate evidencing 53,000 shares (the Acquisition Stock) of the
$.0001 par value common stock of Buyer;
2. A Registration Agreement, in the form of Exhibit "C" attached hereto,
duly executed;
3. An Agreement Not to Compete, in the form of Exhibit "F" attached
hereto, duly executed;
4. A Confidentiality Agreement, in the form of Exhibit "G" attached
hereto, duly executed;
5. A Certificate of the President of Buyer, in the form of Exhibit "I"
attached hereto, duly executed; and
6. An opinion of counsel of Buyer, in the form of Exhibit "L" attached
hereto.
4.3 Further Deliveries . Each party agrees that, at any time and from time
to time after the Closing, it shall, upon the request of the other, do,
execute, acknowledge and deliver or will cause to be done, executed,
acknowledged or delivered all such further acts, assignments, transfers,
powers of attorney, documents or assurances as may be required for final
and complete implementation of the transactions contemplated herein.
V. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby makes the following representations and warranties, all of
which shall be made as of and shall be true on, the Closing Date, and all
of which shall survive the Closing Date:
5.1 Organization. Seller is a corporation duly organized and existing
under the laws of the State of Georgia and is in good standing, and has the
power and authority to own its properties and carry on its business in the
manner in which such business is conducted.
5.2 Authorization for Agreement. The execution, delivery and performance
of this Agreement by Seller, in accordance with the terms and provisions of
this Agreement, have been duly authorized by appropriate action by the
board of directors of Seller.
5.3 Power to Perform. Seller has full power, right and authority to enter
into this Agreement and to perform its obligations under this Agreement,
and this Agreement is the legal, valid and binding obligation of Seller and
is enforceable against Seller in accordance with its terms.
5.4 Title to Purchased Assets. The Assets shall be owned by Seller and
transferred and sold to Buyer on the Closing Date, free and clear of any
liens, claims or encumbrances.
5.5 Assignability of Contracts. Seller represents and warrants that the
contracts assigned to Buyer (Exhibit "D") are assignable without the
consent of the other contracting party or parties, or that any consents
necessary have been obtained.
5.6 Winding Up of Seller. Seller represents and warrants that, as soon as
practicable following the Closing hereunder and after it disposes of the
remaining portion of its Internet Service Provider business, it will wind
up its affairs and will not, in any manner, engage in business as an
Internet Service Provider. In this regard, Seller represents and warrants
that it is actively seeking a purchaser for the remaining portion of its
Internet Service Provider business not being acquired by Buyer.
5.7 Cooperation of Seller. Seller represents and warrants that it will
assist and cooperate in the transfer of the Assets to Buyer and with
Buyer's attorneys, accountants and other agents as is necessary for Buyer
to comply with applicable provisions of the Securities Act of 1933, as
amended (the "'33 Act"), and the Securities Exchange Act of 1934 (the "'34
Act"), including the rules and regulations promulgated thereunder.
5.8 Receipt of Disclosure. Seller hereby represents and warrants that it
has received and reviewed all of the following documents with respect to
Buyer: (a) Annual Report on Form 10-KSB for the year ended December 31,
1998, (b) Quarterly Report on Form 10-QSB for the period ended March 31,
1999, (c) Quarterly Report on Form 10-QSB for the period ended June 30,
1999, (d) Current Report on Form 8-K/A, date of event reported: January
29, 1999, and (e) Current Report on Form 8-K, date of event reported: July
6, 1999. With respect to such information, Seller further represents and
warrants that it has had an opportunity to ask questions of, and to receive
answers from, the officers of Buyer.
5.9 Representations Relating to Acquisition Stock. Seller represents and
warrants to Purchaser that the shares of Acquisition Stock being acquired
pursuant to this Agreement are being acquired for its own account and for
investment and not with a view to the public resale or distribution of such
shares and further acknowledges that the shares of Acquisition Stock being
issued have not been registered under the '33 Act or any state securities
law and are "restricted securities", as that term is defined in Rule 144
promulgated by the Securities and Exchange Commission, and must be held
indefinitely, unless they are subsequently registered or an exemption from
such registration is available.
5.10 Consent to Legend. Seller consents to the placement of a legend
restricting future transfer on the share certificates representing the
Acquisition Stock delivered hereunder, which legend shall be in the
following, or similar, form:
"THE STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ISSUED IN RELIANCE
UPON THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2) OF THE
SECURITIES ACT OF 1933, AS AMENDED. THE STOCK MAY NOT BE TRANSFERRED
WITHOUT REGISTRATION EXCEPT IN TRANSACTIONS EXEMPT FROM SUCH REGISTRATION."
VI. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties, all of
which shall be made as of, and be true on, the Closing Date, and all of
which shall survive the Closing Date:
6.1 Corporate. Buyer is a corporation duly organized and existing under
the laws of the State of Nevada and is in good standing, and has the power
and authority to own its properties and carry on its business in the manner
in which such business is to be conducted.
6.2 Authorization for Agreement. The execution, delivery and performance
of this Agreement by Buyer in accordance with the terms and provisions of
this Agreement have been duly authorized by appropriate corporate action of
Buyer.
6.3 Power to Perform. Buyer has full power, right and authority to enter
into this Agreement and to perform its obligations under this Agreement,
and this Agreement is the legal, valid and binding obligation of Buyer and
is enforceable against Buyer in accordance with its terms.
6.4 Non-disclosure of Customer Information. Buyer represents and
warrants, for itself and for its wholly-owned subsidiary, CyberHighway,
Inc., an Idaho corporation, that it shall not, at any time following the
closing under this Agreement, disclose to any third party any information
regarding any of Seller's customers associated with Seller's Internet
Service Provider business in Demorest, Georgia.
VII. CONDITIONS TO CLOSING
7.1 Conditions to Buyer's Obligations. The obligations of Buyer under
this Agreement are subject to the occurrence at or before the Closing Date
of the following conditions:
A. Seller's representations and warranties shall be true and correct in
all material respects as of the Closing Date, and Seller shall have
performed and complied with all agreements and conditions of this Agreement
to be performed or complied with by Seller before or at the Closing.
B. It is expressly understood and agreed that Buyer's obligation to
consummate the Closing is conditioned upon the occurrence of each of the
events described below at or prior to Closing (which may be waived by Buyer):
1. The delivery of an opinion of counsel, addressed to Seller, to the
effect that Seller shall have complied with the bulk sale laws of the State
of Georgia;
2. The execution and delivery of an Agreement Not to Compete, in the
form attached hereto as Exhibit "F";
3. The execution and delivery of a Confidentiality Agreement, in the
form attached hereto as Exhibit "G"; and
4. The delivery of an opinion of counsel of Seller, in the form of
Exhibit "K" attached hereto.
7.2 Conditions to Seller's Obligations. The obligations of Seller under
this Agreement are subject to the occurrence at or before the Closing Date
of the following conditions:
A. Buyer's representations and warranties shall be true and correct in
all material respects as of the Closing, and Buyer shall have performed and
complied with all agreements and conditions of this Agreement to be
performed or complied with by Buyer before or at the Closing;
B. Buyer shall have delivered a certificate representing the Acquisition
Stock, as required in Section 2.3.
C. Buyer shall have delivered a duly executed Registration Agreement, in
the form of Exhibit "C" attached hereto.
D. The delivery of an opinion of counsel of Buyer, in the form of Exhibit
"L" attached hereto.
VIII. MISCELLANEOUS
8.1 Sales and Related Taxes. Any income, sales, purchase, documentary
recording, transfer or use tax under the law of any state, county, city or
subdivision thereof, which may be due as a result of the transfer of the
Assets under this Agreement, shall be paid by Seller.
8.2 Governing Law. This Agreement shall be governed by, interpreted under
and construed in accordance with the laws of the State of Georgia.
8.3 Arbitration. In the event of any dispute between the parties arising
out of the performance of this Agreement, both Seller and Buyer agree to
settle said dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorney's fees to the
prevailing party.
8.4 Binding Effect. All of the terms of this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the respective parties,
together with their agents, officers, directors, employees, successors,
legal representatives and assigns.
8.5 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to its subject matter.
8.6 Amendments. No modification, amendment, discharge or change of this
Agreement, except as otherwise provided herein, shall be valid unless the
same is in writing and signed by the party against which the enforcement of
such modification, amendment, discharge or change is sought.
8.7 Notices. All notices, demands, requests and other communications
under this Agreement shall be in writing and shall be deemed properly
served when received if delivered by hand or messenger service with proof
of receipt of the party to whose attention it is directed, or three
business days after deposit in the U.S. Mail, postage prepaid, if forwarded
via registered U.S. Mail:
If to Buyer: USURF America, Inc.
Attention: David M. Loflin
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
with a copy to: Newlan & Newlan, Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
If to Seller: CyberHighway of North Georgia
Attention: Anthony Woodall
101 Demorest Square, Suite D
Demorest, Georgia 30585
with a copy to: Winslow H. Verdery, Jr., Esquire
P.O. Box 1556
Cornelia, Georgia 30531
or such other address as may be designated in writing to the other parties
from time to time.
8.8 Assignment. Neither Seller nor Buyer may assign this Agreement or any
of their respective rights, nor delegate any of their respective duties or
obligations hereunder, without the prior written consent of the other party.
8.9 Public Announcements. Buyer shall have the exclusive right to issue a
press release or otherwise make any public statements with respect to the
transactions contemplated by this Agreement.
8.10 Termination of Agreement with CyberHighway, Inc. Upon consummation
of the transaction contemplated hereby, Buyer shall cause CyberHighway,
Inc., a wholly-owned subsidiary, to deliver to Seller a letter stating that
that certain License Agreement, dated as of December 15, 1997, between
CyberHighway, Inc. and Seller with respect to Seller's Gainesville,
Georgia, operations (the "Gainesville Agreement"), is terminated; provided,
however, that Buyer shall not be required to cause CyberHighway, Inc. to
deliver such letter, should Seller not be current in its payment
obligations under the Gainesville Agreement.
8.11 Sale of Remaining Assets; Termination of Agreement with CyberHighway,
Inc. Upon consummation of the transaction contemplated hereby, Buyer shall
cause CyberHighway, Inc. to deliver to Seller a letter stating that
CyberHighway, Inc. will not object to the sale of Seller's Habersham
County, Georgia-related assets to a third party and that CyberHighway, Inc.
will agree to terminate that certain License Agreement, dated as of
December 15, 1997, between CyberHighway, Inc. and Seller with respect to
Seller's Demorest, Georgia, operations (the "Demorest Agreement"), upon the
closing of any such sale of assets by Seller, except that CyberHighway,
Inc. will agree, if the buyer of such remaining assets of Seller desires,
to maintain, at such buyer's expense, the circuit to its Boise, Idaho,
Network Operations Center, through and including February 29, 2000;
provided, however, that Buyer shall not be required to cause CyberHighway,
Inc. to deliver such letter, should Seller not be current in its payment
obligations under the Demorest Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Asset Purchase
Agreement as of the date first written above.
USURF AMERICA, INC.
ATTEST:
/s/ Waddell D. Loflin By: /s/ David M. Loflin
Waddell D. Loflin David M. Lofin
Secretary President
CYBERHIGHWAY OF NORTH GEORGIA, INC.
ATTEST:
/s/ Grady E. Brooks, Jr. By: /s/ Anthony Woodall
Grady E. Brooks, Jr. Anthony Woodall
Secretary President
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EXHIBIT 10.32
- ----------------------
December 20, 1999
USURF America, Inc.
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Re: Confidentiality Agreement
Gentlemen:
In connection with the execution of an Asset Purchase Agreement (the
"Purchase Agreement") between CyberHighway of North Georgia, Inc. ("CHNG"),
and USURF America, Inc., together with affiliates, including, without
limitation, Santa Fe Wireless Internet, Inc., USURF America (Alabama),
Inc., CyberHighway, Inc. (collectively, the "Company"), the Company has
furnished, or may furnish, to each of the undersigned certain information
concerning its business, financial position, operations, business contacts,
assets and liabilities, as well as certain items of equipment useful in the
Wireless Internet access business. As a condition to the furnishing of
such information to each of the undersigned and as a condition to the
Company's entering into the Purchase Agreement and in consideration of the
Company's entering into the Purchase Agreement, each of the undersigned
agrees to treat any information concerning the Company (whether prepared by
the Company, its advisors, or otherwise, and irrespective of the form of
communication) which is furnished to each of the undersigned or, in the
future, will be furnished, by or on behalf of the Company (together with
the material described below, herein collectively referred to as the
"Confidential Material") in accordance with the provisions of this letter
agreement, and to take or abstain from taking certain other actions
hereinafter set forth.
Each of the undersigned understands that the term "Confidential Material"
also includes all notes, analysis, compilations, studies, interpretations
or other documents prepared by the Company or its representatives which
contain, reflect or are based upon, in whole or in part, the information
furnished to each of the undersigned. The term "Confidential Material"
does not include information which (A) is or becomes generally available to
the public other than as a result of a disclosure by any of the
undersigned, or (B) was lawfully within the possession of any of the
undersigned, prior to its being furnished to any of the undersigned by or
on behalf of the Company, provided that the source of such information was
not known by any of the undersigned to be bound by a confidentiality
agreement with, or other contractual, legal or fiduciary obligation of
confidentiality to, the Company or any other party with respect to such
information, or (C) is disclosed to any of the undersigned by a third
party, provided that such third party was not known by any of the
undersigned to be bound by a confidentiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to, the
Company or any other party with respect to such information.
Each of the undersigned hereby agrees that it will use the Confidential
Material solely in connection with the undersigneds' entering into the
Purchase Agreement, that the Confidential Material will be kept
confidential and that neither of the undersigned will disclose any of the
Confidential Material in any manner whatsoever.
Each of the undersigned hereby agrees that it shall not reverse engineer,
reverse assemble or otherwise attempt to recreate or duplicate any model or
working model capable of performing the functions of any portion or all of
the Company's Wireless Internet access system included in the Confidential
Material.
In addition, each of the undersigned agrees that, without the prior
written consent of the Company, neither of the undersigned will disclose to
any other person the fact that the Confidential Material has been made
available to each of the undersigned, that discussions or negotiations are
taking place concerning a possible transaction involving the Company, or
any of the terms, conditions or other facts with respect thereto (including
the status thereof), unless, in the opinion of the undersigneds' counsel,
such disclosure must be made by any such person in order that any such
person not commit a violation of law. The term "person" as used in this
letter agreement shall be broadly interpreted to include the media and any
corporation, partnership, group, individual or other entity, but shall not
include the Securities and Exchange Commission or the Federal Trade
Commission as to any required filing with either such agency.
In the event that any of the undersigned is requested or required (by oral
questions, written interrogatories, requests for information or documents
in legal proceedings, subpoena, civil investigative demand or other similar
process) to disclose any of the Confidential Material, each of the
undersigned will provide the Company with prompt written notice of any such
request or requirement so that the Company may seek a protective order or
other appropriate remedy and/or waive compliance with the provisions of
this letter agreement. If, in the absence of a protective order or other
remedy or the receipt of a waiver by the Company, any of the undersigned
is, nonetheless, in the opinion of counsel, legally compelled to disclose
Confidential Material, such person may, without liability hereunder,
disclose only that portion of the Confidential Material specifically
required by an order of Court. Additionally, each of the undersigned shall
make every reasonable effort and take every reasonable action, including,
without limitation, by cooperating with the Company, to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Material.
At any time upon the request of the Company, each of the undersigned will
promptly deliver to the Company or certify destruction of, at the Company's
direction, all Confidential Material (and all copies thereof) furnished to
each of the undersigned by or on behalf of the Company pursuant hereto.
All oral Confidential Material provided to each of the undersigned shall
continue to be held confidential hereunder. Notwithstanding the return or
destruction of the Confidential Material, each of the undersigned will
continue to be bound by obligations of confidentiality hereunder.
Each of the undersigned agrees that the Company, without prejudice to any
rights to judicial relief he or it may otherwise have, shall be entitled to
equitable relief, including injunctive relief and specific performance, in
the event of any breach of the provisions of this letter agreement and that
each of the undersigned will not oppose the granting of such relief. Each
of the undersigned also agrees that he or it will not seek and agrees to
waive any requirement for the securing and posting of a bond in connection
with the Company's seeking or obtaining such relief. In the event of
litigation relating to this letter agreement, if a court of competent
jurisdiction determines that any of the undersigned has breached this
letter agreement, then such breaching party will be liable to pay to the
Company the reasonable legal fees incurred in connection with such
litigation, including any appeal therefrom. Also, in the event a court of
competent jurisdiction determines that neither of the undersigned has
breached this letter agreement, then the Company will be liable to pay to
each of the undersigned the reasonable legal fees incurred in connection
with such litigation, including any appeal therefrom.
This letter agreement is for the benefit of the Company, and shall be
construed (both as to validity and performance) and enforced in accordance
with, and governed by, the laws of the State of Georgia applicable to
agreements made and to be performed wholly within such jurisdiction. This
letter agreement shall remain in full force and effect until terminated by
the Company.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned whereupon this letter agreement
shall become a binding agreement.
Very truly yours,
CYBERHIGHWAY OF NORTH GEORGIA, INC.
By: /s/ Anthony Woodall
Anthony Woodall, President
/s/ Anthony Woodall
Anthony Woodall, individually
/s/ Grady E. Brooks, Jr.
Grady E. Brooks, Jr., individually
AGREED AND AFFIRMED:
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin
President
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EXHIBIT 10.33
- ---------------------
AGREEMENT NOT TO COMPETE
THIS AGREEMENT NOT TO COMPETE is entered into by and among USURF America,
Inc., a Nevada corporation ("Buyer"), CyberHighway of North Georgia, Inc.,
a Georgia corporation ("Seller"), Anthony Woodall ("Woodall") and Grady E.
Brooks, Jr. ("Brooks").
WHEREAS, Buyer and Seller are parties to an Asset Purchase Agreement (the
"Purchase Agreement"); and
WHEREAS, as a condition to the Purchase Agreement and in consideration of
Buyer's entering into the Purchase Agreement, Seller, Woodall and Brooks
have agreed to sign and be bound by this Agreement Not to Compete; and
NOW, THEREFORE, the parties agree as follows:
Section 1. Covenant Not to Compete. Seller, Woodall and Brooks
acknowledge that Seller, as operator of an Internet Service Provider (ISP)
business, and Woodall and Brooks as owners of Seller have received, or may
receive, information relating to the national and international business
strategies of Buyer and other businesses, units, divisions, subsidiaries or
other entities of Buyer. By virtue of the unique status of Seller, Woodall
and Brooks in the ISP business, the engagement of Seller, Woodall and
Brooks in the ISP business as a competitor of Buyer represents a serious
competitive danger to Buyer, and the use of knowledge and information about
the business, strategies and plans of Buyer can and would constitute a
valuable competitive advantage over Buyer. In view of the foregoing and in
consideration of Buyer's entering into the Purchase Agreement, Seller,
Woodall and Brooks covenant and agree that, for a period of one year after
the closing date under the Purchase Agreement and except as set forth in
Section 2 below, neither of them will engage or be engaged, in any
capacity, directly or indirectly, including, but not limited to, as
employee, agent, consultant, manager, executive, owner or stockholder
(except as a passive investor holding less than 1% equity interest in any
enterprise the securities of which are publicly traded) in any business
entity engaged in competition with any business conducted by Buyer, or any
of its affiliates, existing on the closing date under the Purchase
Agreement. If any court determines that this Agreement Not to Compete, or
any part hereof, is unenforceable because the duration or geographic scope
of such provision, such court shall have the power to reduce the duration
or scope of such provision, as the case may be, and, in its reduced form,
such provision shall then be enforceable.
Section 2. Continued ISP Operations. Buyer acknowledges that, under the
Purchase Agreement, it is to acquire from Seller only a portion of
Seller's ISP business. Buyer specifically agrees that Seller may continue
to operate that portion of its ISP business not being acquired by Buyer
until such other portion of Seller's ISP business shall have been sold to
another person; provided, however, that Seller shall, in any event, be
entitled to continue to so operate its remaining ISP business only until
the close of business December 31, 1999. Should Seller fail to dispose of
its remaining ISP business by such date, Seller shall terminate its
remaining ISP operations as of such date.
Section 3. Injunctive Relief. Seller, Woodall and Brooks acknowledge
that the violation of the covenants contained in this Agreement would be
detrimental and cause irreparable injury to Buyer and its affiliates which
could not be compensated by money damages. Seller, Woodall and Brooks
agree that an injunction from a court of competent jurisdiction is the
appropriate remedy for these provisions, and consent to the entry of an
appropriate judgment enjoining Seller, Woodall and/or Brooks from violating
these provisions in the event there is a finding of his or its breach.
Section 4. Severability of Covenants. Each of the covenants contained in
this Agreement are independent covenants, which may be available to or
relied upon by Buyer and its affiliates in any court of competent
jurisdiction. If any one of the separate and independent covenants shall
be deemed to be unenforceable under the laws of any state of competent
jurisdiction, each of the remaining covenants shall not be affected
thereby. Notwithstanding the provisions of this Section 4, it is
understood that every benefit received by Seller, Woodall and Brooks by
virtue of this Agreement is consideration for each separate covenant
contained herein.
Section 5. Governing Law. This Agreement shall be governed by the laws
of the State of Georgia.
Section 6. Other Remedies. The undertakings herein shall not be
construed as any limitation upon the remedies Buyer might, in the absence
of this Agreement, have at law or in equity.
Section 7. Arbitration. In the event of any dispute between the parties
arising out of the performance of this Agreement, each of the parties agree
to settle said dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorney's fees to the
prevailing party.
Section 8. Binding Effect. All of the terms of this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the respective
parties, together with their agents, officers, directors, employees,
successors, legal representatives and assigns.
Section 9. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to its subject matter.
Section 10. Amendments. No modification, amendment, discharge or change
of this Agreement, except as otherwise provided herein, shall be valid
unless the same is in writing and signed by the party against which the
enforcement of such modification, amendment, discharge or change is sought.
Section 11. Notices. All notices, demands, requests and other
communications under this Agreement shall be in writing and shall be deemed
properly served when received if delivered by hand or messenger service
with proof of receipt of the party to whose attention it is directed, or
three business days after deposit in the U.S. Mail, postage prepaid, if
forwarded via registered U.S. Mail:
If to Buyer: USURF America, Inc.
Attention: David M. Loflin
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
with a copy to: Newlan & Newlan, Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
If to Seller,
Woodall
or Brooks: CyberHighway of North Georgia, Inc.
101 Demorest Square
Suite D
Demorest, Georgia 30585
with a copy to: Winslow H. Verdery, Jr., Esquire
One Professional Drive
Baldwin, Georgia 30511
or such other address as may be designated in writing to the other parties
from time to time.
Section 12. Assignment. Neither party hereto may assign this Agreement
or any of their respective rights, nor delegate any of their respective
duties or obligations hereunder, without the prior written consent of the
other party.
INTENDING to be legally bound hereby, Buyer, Seller, Woodall and Brooks
hereby duly execute this Agreement Not to Compete on the date indicated below.
USURF AMERICA, INC.
Date: December 20, 1999 By: /s/ David M.Loflin
David M. Loflin
President
CYBERHIGHWAY OF NORTH GEORGIA, INC.
Date: December 20, 1999 By: /s/ Anthony Woodall
Anthony Woodall
President
Date: December 20, 1999 /s/ Anthony Woodall
Anthony Woodall, individually
Date: December 20, 1999 /s/ Grady E. Brooks
Grady E. Brooks, Jr., individually
- -----------------------
EXHIBIT 10.34
- -----------------------
December 20, 1999
CyberHighway of North Georgia, Inc.
101 Demorest Square, Suite D
Demorest, Georgia 30585
Registration Rights Letter Agreement
Gentlemen:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 53,000 of the shares of the $.0001 par value common
stock (the "Subject Shares") of USURF America, Inc., a Nevada corporation
(the "Company"), received, and currently owned, by you under that certain
Asset Purchase Agreement (the "Purchase Agreement") between the Company,
and CyberHighway of North Georgia, Inc. It is our understanding that:
1. Registration Rights. At any time subsequent to the closing of the
Purchase Agreement, you may demand of the Company, on one occasion, that up
to 53,000 of the shares received by you pursuant to the Purchase Agreement
be registered for public sale with the Securities and Exchange Commission
(the "Commission") on the appropriate form of Registration Statement.
Registration of such shares, or any of them, by the Company in a
Registration Statement filed without regard to a demand received from you,
shall constitute a satisfaction of a demand for such registration. For
purposes hereof, upon completion of the closing of the Purchase Agreement,
you will be deemed to have made a demand for such registration. In the
event of the filing of a Registration Statement by the Company to register
shares of the Company for public resale, you will be notified of such
proposed registration and given the opportunity to register the registrable
portion of your shares at that time. Your failure or refusal to so
register your registrable shares at that time will constitute a waiver of
your demand registration rights.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by the Company. The
Company reserves the right to include additional selling shareholders in
any registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Commission, a
Registration Statement with respect to the Subject Shares and use its best
efforts to cause such Registration Statement to become effective, such
Registration Statement to comply as to form and content and in all material
respects to the Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Nevada. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin
President
AGREED AND ACCEPTED as of the
date and year first above written:
CYBERHIGHWAY OF NORTH GEORGIA, INC.
By: /s/ Anthony Woodall
Anthony Woodall
President
- ---------------------
EXHIBIT 10.35
- ---------------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between Internet
Media Corporation, a duly organized Nevada corporation ("Employer"), and
James Kaufman, a resident of the State of California ("Employee").
WITNESSETH:
WHEREAS, Employer is in need of a person with expertise in corporate
development strategies, in general, and structuring and negotiating
business acquisitions and strategic business alliances and relationships,
in particular; and
WHEREAS, Employee has a substantial amount of expertise in corporate
development strategies, including negotiating business acquisitions and
strategic business alliances and relationships; and
WHEREAS, Employee is willing to be employed by Employer, and Employer is
willing to employ Employee, on the terms, covenants and conditions
hereinafter set forth; and
WHEREAS, Employer has accumulated valuable and confidential information
including, without limitation, trade secrets and know-how relating to
technology, equipment, marketing plans, acquisition plans, sources of
supply, business strategies and other business records; and
WHEREAS, the giving of the covenants contained herein is a condition
precedent to the employment of Employee by Employer and Employee
acknowledges that the execution of this Agreement and the entering into of
these covenants is an express condition of his employment by Employer and
that said covenants are given in consideration for such employment and the
other benefits conferred upon him by this Agreement; and
NOW, THEREFORE, in consideration of such employment and other valuable
consideration, the receipt and adequacy of which is hereby acknowledged,
Employer and Employee hereby agree as follows:
SECTION I. EMPLOYMENT OF EMPLOYEE
Employer hereby employs, engages and hires Employee as Vice President
- -Corporate Development of Employer, and Employee hereby accepts and agrees
to such hiring, engagement and employment, subject to the general
supervision and pursuant to the orders, advice and direction of the Board
of Directors of Employer. Employee shall perform duties as are customarily
performed by one holding such position in other, same or similar businesses
or enterprises as that engaged in by Employer, and shall also additionally
render such other and unrelated services and duties as may be assigned to
him from time to time by Employer.
Employee shall devote his full-time efforts to the performance of his
duties as Vice President -Corporate Development of Employer.
SECTION II. EMPLOYEE'S PERFORMANCE
Employee hereby agrees that he will, at all times, faithfully,
industriously and to the best of his ability, experience and talents,
perform all of the duties that may be required of and from him pursuant to
the express and implicit terms hereof, to the reasonable satisfaction of
Employer.
SECTION III. COMPENSATION OF EMPLOYEE
Employer shall pay Employee, and Employee shall accept from Employer, in
full payment for Employee's services hereunder, compensation as follows:
A. Salary. Employee shall be paid as and fora salary the sum of$120,000.00
per year, which salary shall be payable in equal quarterly installments on
the 1 st day of each of May, August and November 1999, and February 2000,
in arrears, subject to deduction of all lawful and required withholding.
Employer may, in its sole discretion, for any payment period hereunder,
elect to pay up to 80% of Employee's salary in shares of Employer's $.0001
par value Common Stock. Any such shares so issued to Employee shall be
valued as follows: each share of Employer Common Stock shall be issued at a
per share price equal to the average of the closing bid prices, as reported
by. the OTC Electronic. Bulletin Board or NASDAQ, as the case may be, for
the last thirty trading days of the pay period. T~e compensation ~ue
Employee shall be divided by the per share value of Employer's Common
Stock, as determined by the foregoing formula, to determine the number of
shares owed Employee.
B. Insurance and Other Benefits. As further consideration for the covenants
contained herein, Employer will provide Employee with such Insurance,
welfare, sick leave and other benefits as may be established by Employer
from time to time with respect to its employees in accordance with
Employer's established procedures. Employee shall be entitled to Directors'
and Officers' indemnification insurance coverage to the same extent as is
provided to other persons employed as officers of Employer.
C. Other Compensation Plans. Employee shall be entitled to participate, to
the same extent as is provided to other persons employed by Employer, in
any future stock bonus plan, stock option plan or employee stock ownership
plan of Employer.
D. Expenses. It is acknowledged that, during the term of employment,
Employee will be required to incur ordinary and necessary business expenses
on behalf of Employer in connection with the performance of his duties
hereunder. Employer shall reimburse Employee promptly the amount of all
such expenses upon presentation of itemized vouchers or other evidence of
those expenditures. Any single expense item in excess of $250.00 shall be
approved by Employer prior to the incurrence of such expense.
E. Vacations. Employee shall be entitled to three (3) weeks paid vacation
each year for the term of this Agreement. Such vacations shall be taken at
such times as Employer designates as to time-of-year. Vacation time can be
accumulated year-to-year up to three years maximum.
SECTION IV. COMPANY POLICIES
Employee agrees to abide by the policies, rules, regulations or usages
applicable to Employee as established by Employer from time to time and
provided to Employee in writing.
SECTION V. CONFIDENTIALITY AGREEMENT; NON-COMPETITION AGREEMENT
A. In consideration of Employer's executing this Agreement, Employee shall
have executed, prior to the execution of this Agreement, a Confidentiality
Agreement (the "Confidentiality Agreement"), in the form attached hereto as
Exhibit "A".
B. In consideration of Employer's executing this Agreement, Employee
agrees, effective as of the date hereof, to sign and be bound by the
obligations of an Agreement Not to Compete (the "Non-Competition
Agreement"), in the form attached hereto as Exhibit "B".
C. The obligations under the Confidentiality Agreement and the
Non-Competition Agreement shall survive the termination of this Agreement.
SECTION VI. RELEASE
In the event Employee becomes entitled to payment pursuant to Section
VII(B) hereof, Employee shall, as a condition to such payments being made,
execute and deliver to Employer a general release in such form as is
reasonably satisfactory to Employer.
SECTION VII. TERM AND TERMINATION
A. Term. The term of this Agreement shall be a period of one year,
commencing on the date hereof, subject, however, to prior termination as
hereinafter provided. At the expiration date, this Agreement shall be
renewed for regular periods of one year, provided neither party hereto
submits a written notice of termination within ninety (90) days prior to
the termination of either the initial term hereof or any renewal term.
B. Termination. Employer agrees not to terminate this Agreement except for
"just cause", and agrees to give Employee written notice of its belief that
acts or events constituting "just cause" exist. Employee has the right to
cure, within thirty (30) days of Employer's giving of such notice, the
acts, events or conditions which led to Employer's notice. For purposes of
this Agreement, "just cause" shall mean ( 1) the willful failure or refusal
of Employee to implement or follow the written policies or directions of
Employer's Board of Directors, provided that Employee's failure or refusal
is not based upon Employee's belief in good faith, as expressed to Employer
in writing, that the implementation thereof would be unlawful; (2) conduct
which is inconsistent with Employee's position with Employer and which
results in a material adverse effect (financial or otherwise) or
misappropriation of assets of Employer; (3) conduct which violates the
provisions contained in the Confidentiality Agreement or the
Non-Competition Agreement; (4) the intentional causing of material damage
to Employer's physical property; and (5) any act Involving personal
dishonesty or crimInal conduct against Employer.
Although Employer retains the right to terminate Employee for any reason
not specified above, Employer agrees that If It dIscharges Employee for any
reason other than just cause, as is solely defined above, Employee will be
entitled to full compensation, including participation in all benefit
programs, for six (6) months or the remainder of the current term, original
or renewal, as the case may be, of employment, whichever is more.
If Employee should cease his employment hereunder voluntarily for any
reason, or is terminated for just cause, all compensation and benefits
payable to Employee shall thereupon, without any further writing or act,
cease, lapse and be terminated. However, all defined compensation, benefits
and reimbursements which accrued prior to Employee's ceasing employment or
termination, will become immediately due and payable.
Should Employee voluntarily cease his employment, Employee retains the
right to participate for the period of this Agreement in Employee's medical
insurance plan and will be responsible for 100% of the cost of participation.
SECTION VIII. COMPLETE AGREEMENT
This Agreement contains the complete agreement concerning the employment
arrangement between the parties hereto and shall, as of the effective date
hereof, supersede all other agreements between the parties. The parties
hereto stipulate that neither of them has made any representation with
respect to the subject matter of this Agreement or any representations
including the execution and delivery hereof, except such representations as
are specifically set forth herein and each of the parties hereto
acknowledges that he or it has relied on his or its own judgment in
entering into this Agreement. The parties hereto further acknowledge that
any payments or representations that may have heretofore been made by
either of them to the other are of no effect and that neither of them has
relied thereon in connection with his or its dealings with the other.
SECTION IX. WAIVER; MODIFICATION
The waiver by either party of a breach or violation of any provision of
this Agreement shall not operate as, or be construed to be, a waiver of any
subsequent breach hereof. No waiver or modification of this Agreement or of
any covenant, condition or limitation herein contained shall be valid
unless in writing and duly executed by the party to be charged therewith
and no evidence of any waiver or modification shall be offered or received
in evidence of any proceeding or litigation between the parties hereto
arising out of, or affecting, this Agreement, or the rights or obligations
of the parties hereunder, unless such waiver or modification is in writing,
duly executed as aforesaid, and the parties further agree that the
provisions of this Section IX may not be waived except as herein set forth.
SECTION X. SEVERABILITY
All agreements and covenants contained herein are severable, and in the
event anyone of them, with the exception of those contained in Sections I,
III, IV and V hereof, shall be held to be invalid in any proceeding or
litigation between the parties, this Agreement shall be interpreted as if
such invalid agreements or covenants were not contained herein.
SECTION XI. NOTICES
Any and all notices will be sufficient if furnished in writing, sent by
registered mail to his last known residence, in case of Employee, or, in
case of Employer, to its principal office address.
SECTION XII. CORPORATE AUTHORITY OF EMPLOYER
The provisions of this Agreement required to be approved by the Board of
Directors of Employer have been so approved and authorized.
SECTION XIII. REPRESENTATIONS OF EMPLOYEE
A. Employee is under no legal disability with respect to his entering into
this Agreement.
B. Employee represents and warrants to the Company that any shares of the
Company that may be acquired by him pursuant to this Agreement are being
acquired for its own account and for investment and not with a view to the
public resale or distribution of such shares and further acknowledges that
any of the shares that may be issued have not been registered under the
Securities Act or any state securities law and are "restricted securities",
as that term is defined in Rule 144 promulgated by the SEC, and must be
held indefinitely, unless they are subsequently registered or an exemption
from such registration is available.
C. Employee represents and warrants that he has investigated the Company,
its financial condition, business and prospects, and has had the
opportunity to ask questions of, and to receive answers from, the Company
with respect thereto. Employee acknowledges that it is aware that the
Company is substantially illiquid and is dependent upon the receipt of
substantial funds in order to complete its business objectives.
D. Employee acknowledges that any share certificate or certificates of the
Company that may be issued to him pursuant to this Agreement will bear a
legend restricting future transfer in the following, or similar, form:
"THE STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ISSUED IN RELIANCE UPON
THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(6) OF THE SECURITIES
ACT OF 1933, AS AMENDED. THE STOCK MAY NOT BE TRANSFERRED WITHOUT
REGISTRATION, EXCEPT IN A TRANSACTION EXEMPT FROM SUCH REGISTRATION."
SECTION XIV. COUNTERPARTS
This Agreement may be executed in duplicate counterparts, each of which
shall be deemed an original and, together, shall constitute one and the
same agreement, with one counterpart being delivered to each party hereto.
SECTION XV. BENEFIT
The provisions of this Agreement shall extend to the successors, surviving
corporations and assigns of Employer and to any purchaser of substantially
all of the assets and business of Employer. The term "Employer" shall be
deemed to include any joint venture, partnership, limited liability
company, corporation or other juridical entity, in which Employer shall
have an interest, financial or otherwise.
SECTION XVI. ARBITRATION
The parties agree that any dispute arising between them related to this
Agreement or the performance hereof shall be submitted for resolution to
the American Arbitration Association for arbitration in the Dallas, Texas,
office of the Association under the then-current rules of arbitration. The
Arbitrator or Arbitrators shall have the authority to award to the
prevailing party its reasonable costs and attorneys fees. Any award of the
Arbitrators may be entered as a judgment in any court competent jurisdiction.
Notwithstanding the provisions contained in the foregoing paragraph, the
parties hereto agree that Employer may, at its election and without
delivering the notice to Employee required in Section VII(B) hereof, seek
injunctive or other equitable relief from a court of competent jurisdiction
for a violation or violations by Employee of the Confidentiality Agreement
or the Non-Competition Agreement.
SECTION XVII. GOVERNING LAW
It is the intention of the parties hereto that this Agreement and the
performance hereunder and all suits and special proceedings hereunder be
construed in accordance with and under and pursuant to the laws of the
State of Louisiana, and that, in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by
reason of this Agreement, the laws of the State of Louisiana shall be
applicable and shall govern to the exclusion of the law of any other forum,
without regard to the jurisdiction in which any such action or special
proceeding may be instituted.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 19th day of March, 1999.
"EMPLOYER": "EMPLOYEE":
INTERNET MEDIA CORPORATION
/s/ James Kaufman
James Kaufman, individually
By: /s/ David M. Loflin
David M. Loflin President
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EXHIBIT 10.36
- ---------------------
March 19, 1999
Internet Media Corporation
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Re: Confidentiality Agreement
Gentlemen:
In connection with the execution of an employment agreement (the
"Employment Agreement"} between the undersigned and Internet Media
Corporation (together with affiliates, the "Company"}, the Company will
furnish to the undersigned certain information concerning its business,
financial position, operations, business contacts, assets and liabilities,
as well as certain items of equipment useful in the Wireless Internet
access business. As a condition to such information's being furnished to
the undersigned and as a condition to the undersigned's entering into an
employment agreement with the Company, the undersigned agrees to treat any
information concerning the Company (whether prepared by the Company, its
advisors, or otherwise, and irrespective of the form of communication}
which is furnished to the undersigned now or in the future by or on behalf
of the Company (together with the material described below, herein
collectively referred to as the "Confidential Material"} in accordance with
the provisions of this letter agreement, and to take or abstain from taking
certain other actions hereinafter set forth.
The undersigned understands that the term "Confidential Material" also
includes all notes, analysis, compilations, studies, interpretations or
other documents prepared by the Company or its representatives which
contain, reflect or are based upon, in whole or in part, the information
furnished to the undersigned. The term "Confidential Material" does not
include information which (A} is or becomes generally available to the
public other than as a result of a disclosure by the undersigned, or (B}
was lawfully within the undersigned's possession prior to its being
furnished to the undersigned by or on behalf of the Company, provided that
the source of such information was not known by the undersigned to be bound
by a confidentiality agreement with, or other contractual, legal or
fiduciary obligation of confidentiality to, the Company or any other party
with respect to such information, or (C} is disclosed to the undersigned by
a third party, provided that such third party was not known by the
undersigned to be bound by a confidentiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to, the
Company or any other party with respect to such information.
The undersigned hereby agrees that he will use the Confidential Material
solely in connection with the undersigned's performance of his duties under
the employment agreement, that the Confidential Material will be kept
confidential and that the undersigned will not disclose any of the
Confidential Material in any manner whatsoever.
The undersigned hereby agrees that he shall not reverse engineer, reverse
assemble or otherwise attempt to recreate or duplicate any model or working
model capable of performing the functions of any portion or all of the
Company's Wireless Internet access system included in the Confidential
Material.
In addition, the undersigned agrees that, without the prior written consent
of the Company, the undersigned will not disclose to any other person the
fact that the Confidential Material has been made available to the
undersigned, that discussions or negotiations are taking place concerning a
possible transaction involving the Company, or any of the terms, conditions
or other facts with respect thereto (including the status thereof}, unless,
in the opinion of the undersigned's counsel, such disclosure must be made
by the undersigned in order that the undersigned not commit a violation of
law. The term "person" as used in this letter agreement shall be broadly
interpreted to include the media and any corporation, partnership, group,
individual or other entity, but shall not include the Securities and
Exchange Commission or the Federal Trade Commission as to any required
filing with either such agency.
In the event that the undersigned is requested or required (by oral
questions, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process}
to disclose any of the Confidential Material, the undersigned will provide
the Company with prompt written notice of any such request or requirement
so that the Company may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this letter agreement. If,
in the absence of a protective order or other remedy or the receipt of a
waiver by the Company, the undersigned is, nonetheless, in the opinion of
counsel, legally compelled to disclose Confidential Material, the
undersigned may, without liability hereunder, disclose only that portion of
the Confidential Material specifically required by an order of Court.
Additionally, the undersigned shall make every reasonable effort and take
every reasonable action, including, without limitation, by cooperating with
the Company, to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Material.
Upon termination of the Employment Agreement or at any time upon the
request of the Company, the undersigned will promptly deliver to the
Company or certify destruction of, at the Company's direction, all
Confidential Material (and all copies thereof) furnished to the undersigned
by or on behalf of the Company pursuant hereto. All oral Confidential
Material provided to the undersigned shall continue to be held confidential
hereunder. Notwithstanding the return or destruction of the Confidential
Material, the undersigned will continue to be bound by obligations of
confidentiality hereunder.
The undersigned agrees that the Company, without prejudice to any rights to
judicial relief he may otherwise have, shall be entitled to equitable
relief, including injunctive relief and specific performance, in the event
of any breach of the provisions of this letter agreement and that the
undersigned will not oppose the granting of such relief. The undersigned
also agrees that he will not seek and agrees to waive any requirement for
the securing and posting of a bond in connection with the Company's seeking
or obtaining such relief. In the event of litigation relating to this
letter agreement, if a court of competent jurisdiction determines that the
undersigned has breached this letter agreement, then the undersigned will
be liable to pay to the Company the reasonable legal fees incurred in
connection with such litigation, including any appeal therefrom. Also, in
the event a court of competent jurisdiction determines that the undersigned
has not breached this letter agreement, then the Company will be liable to
pay to the undersigned the reasonable legal fees incurred in connection
with such litigation, including any appeal therefrom.
This letter agreement is for the benefit of the Company, and shall be
construed (both as to validity and performance) and enforced in accordance
with, and governed by, the laws of the State of Idaho applicable to
agreements made and to be performed wholly within such jurisdiction. This
letter agreement shall remain in full force and effect until terminated by
the Company.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned whereupon this letter agreement
shall become a binding agreement.
Very truly yours,
/s/ James Kaufman
James Kaufman
AGREED AND ACCEPTED as of the date first written above:
INTERNET MEDIA CORPORATION
By: /s/ David W. Loflin
David W. Loflin
President
- -----------------------
EXHIBIT 10.37
- -----------------------
AGREEMENT NOT TO COMPETE
THIS AGREEMENT NOT TO COMPETE is entered into by and between Internet Media
Corporation, a Nevada corporation ("Employer"), and James Kaufman
("Employee").
WHEREAS, Employee is employed by Employer as Vice President -Corporate
Development, pursuant to an employment agreement (the "Employment
Agreement); and
WHEREAS, as a condition to such Employment Agreement, Employee has agreed
to sign and be bound by this Agreement Not to Compete; and
NOW, THEREFORE, the parties agree as follows:
Section 1. Covenant Not to Compete. Employee acknowledges that, as a key
management employee of Employer, Employee will be involved, on a high
level, in the development, implementation and management of the national
and international business strategies and plans of Employer, which shall
consist of Employer and such other business, units, divisions, subsidiaries
or other entities of Employer, as Employer shall determine in its sole
discretion from time to time. By virtue of Employee's unique and sensitive
position and special background, employment of Employee by a competitor of
Employer represents a serious competitive danger to Employer, and the use
of Employee's talent and knowledge and information about Employer's
business, strategies and plans can and would constitute a valuable
competitive advantage over Employer. In view of the foregoing, Employee
covenants and agrees that, if Employee's employment with Employer is
terminated for any reason at any time, for a period of one year after the
date of such termination, Employee will not in any capacity, directly or
indirectly, including, but not limited to, as employee, agent, consultant,
manager, executive, owner or stockholder ( except as a passive investor
holding less than 1% equity interest in any enterprise the securities of
which are publicly traded) in any business entity engaged in competition
with any business conducted by Employer on the date of termination. This
Agreement Not to Compete shall survive the termination or expiration of the
Employment Agreement. If any court determines that this Agreement Not to
Compete, or any part hereof, is unenforceable because the duration or
geographic scope of such provision, such court shall have the power to
reduce the duration or scope of such provision, as the case may be, and, in
its reduced form, such provision shall then be enforceable.
Section 2. Continuing Obligations. Employee agrees that, for one year
following his termination of employment with Employer, Employee shall keep
Employer informed of the identification of Employee's employer and the
nature of such employment or of Employee's self-employment. Employer agrees
that, within fifteen days after receiving notice pursuant to this Section 2
of the identification of the prospective employer, the nature of the
employment or self-employment or any change therein, Employer will advise
Employee as to whether such employment constitutes a violation of Section 1
hereof.
Section 3. Injunctive Relief. Employee acknowledges that the violation of
the covenants contained in this Agreement would be detrimental and cause
irreparable injury to Employer and its affiliates which could not be
compensated by money damages. Employee agrees that an injunction from a
court of competent jurisdiction is the appropriate remedy for these
provisions, and consents to the entry of an appropriate judgment enjoining
Employee from violating these provisions in the event there is a find of
their breach.
Section 4. Severability of Covenants. Each of the covenants contained in
this Agreement are independent covenants, which may be available to or
relied upon by Employer and its affiliates in any court of competent
jurisdiction. If anyone of the separate and independent covenants shall be
deemed to be unenforceable under the laws of any state of competent
jurisdiction, each of the remaining covenants shall not be affected
thereby. Notwithstanding the provisions of this Section 4, it is understood
that every benefit received by Employee by virtue of this Agreement is
consideration for each separate covenant contained herein.
Section 5. Governing Law. This Agreement shall be governed by the laws of
the State of Louisiana.
Section 6. Other Remedies. The undertakings herein shall not be construed
as any limitation upon the remedies Employer might, in the absence of this
Agreement, have at law or in equity.
INTENDING to be legally bound hereby, Employer and Employee hereby duly
execute this Agreement Not to Compete on the date indicated below.
Date: March 19, 1999
EMPLOYER:
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin President
EMPLOYEE:
/s/ James Kaufman
James Kaufman, individually
- ----------------------
EXHIBIT 10.38
- ----------------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between USURF
America, Inc., a duly organized Nevada corporation ("Employer"), and
Darrell Davis, a resident of the State of Louisiana ("Employee").
W I T N E S S E T H:
WHEREAS, Employer is in need of persons with expertise in computer
hardware and the operations of an Internet Service Provider; and
WHEREAS, Employee has a substantial amount of expertise in computer
hardware and the operations of an Internet Service Provider; and
WHEREAS, Employee is willing to be employed by Employer, and Employer is
willing to employ Employee, on the terms, covenants and conditions
hereinafter set forth; and
WHEREAS, Employer and its affiliates have accumulated valuable and
confidential information, including, without limitation, trade secrets and
know-how relating to technology, equipment, marketing plans, acquisition
plans, sources of supply, business strategies and other business records; and
WHEREAS, the giving of the covenants contained herein is a condition
precedent to the employment of Employee by Employer and Employee
acknowledges that the execution of this Agreement and the entering into of
these covenants is an express condition of his employment by Employer and
that said covenants are given in consideration for such employment and the
other benefits conferred upon him by this Agreement; and
WHEREAS, Employer and Employee desire that this Agreement replace
Employee's current Employment Agreement with Santa Fe Wireless Internet,
Inc., a New Mexico corporation, a wholly-owned subsidiary of Employer; and
NOW, THEREFORE, in consideration of such employment and other valuable
consideration, the receipt and adequacy of which is hereby acknowledged,
Employer and Employee hereby agree as follows:
SECTION I. EMPLOYMENT OF EMPLOYEE
Employer hereby employs, engages and hires Employee as Vice President -
U.S. Internet Operations of Employer, and Employee hereby accepts and
agrees to such hiring, engagement and employment, subject to the general
supervision and pursuant to the orders, advice and direction of the Board
of Directors of Employer. Employee shall perform duties as are customarily
performed by one holding such position in other, same or similar businesses
or enterprises as that engaged in by Employer, and shall also additionally
render such other and unrelated services and duties as may be assigned to
him from time to time by Employer.
Employee shall devote his full-time efforts to the performance of his
duties as Vice President - U.S. Internet Operations of Employer.
SECTION II. EMPLOYEE'S PERFORMANCE
Employee hereby agrees that he will, at all times, faithfully,
industriously and to the best of his ability, experience and talents,
perform all of the duties that may be required of and from him pursuant to
the express and implicit terms hereof, to the reasonable satisfaction of
Employer.
SECTION III. COMPENSATION OF EMPLOYEE
Employer shall pay Employee, and Employee shall accept from Employer, in
full payment for Employee's services hereunder, compensation as follows:
A. Bonus. In consideration of Employee's executing this Employment
Agreement, Employer shall issue to Employee, as a bonus, 10,000 shares of
its $.0001 par value common stock. It is agreed by Employer and Employee
that such bonus shares shall be valued at $3.00 per share, or $30,000, in
the aggregate.
B. Salary. Employee shall be paid as and for a salary the sum of $75,000
per year, which salary shall be payable in equal installments on the 1st
and 15th days of each calendar month, in arrears, subject to deduction of
all lawful and required withholding; provided, however, that Employee shall
receive a cost of living increase as follows:
Commencing on the first annual anniversary of this Agreement and
continuing on the like day of each year thereafter during the term of this
Agreement (hereinafter the "adjustment date"), the annual salary set forth
herein shall be Employee's prior year's salary increased by the percentage
of the All Item Index, Southwest Region VI, All Urban Consumers, U.S. City
Average as published by the United States Department of Labor in its
publication "The Consumer Price Index" (hereinafter the "CPI") representing
the increases during the period from the thirteenth (13th) immediately
preceding the pertinent adjustment date through the second month of
immediately preceding the pertinent adjustment date. For example, if the
CPI had increased by 5% during said 12 month period, Employee's annual
salary would be $78,750 for the next year of employment.
C. Insurance and Other Benefits. As further consideration for the
covenants contained herein, Employer will provide Employee with such
insurance, welfare, sick leave and other benefits as may be established by
Employer from time to time with respect to its employees in accordance with
Employer's established procedures. Employee shall be entitled to
Directors' and Officers' indemnification insurance coverage to the same
extent as is provided to other persons employed as officers of Employer.
D. Other Compensation Plans. Employee shall be entitled to participate,
to the same extent as is provided to other persons employed by Employer, in
any future stock bonus plan, stock option plan or employee stock ownership
plan of Employer.
E. Expenses. It is acknowledged that, during the term of employment,
Employee will be required to incur ordinary and necessary business expenses
on behalf of Employer in connection with the performance of his duties
hereunder. Employer shall reimburse Employee promptly the amount of all
such expenses upon presentation of itemized vouchers or other evidence of
those expenditures. Any single expense item in excess of $100.00 shall be
approved by Employer prior to the incurrence of such expense.
F. Vacations. Employee shall be entitled to three (3) weeks paid vacation
each year for the term of this Agreement. Such vacations shall be taken at
such times as Employer designates as to time-of-year. Vacation time can be
accumulated year-to-year up to three years maximum.
SECTION IV. COMPANY POLICIES
Employee agrees to abide by the policies, rules, regulations or usages
applicable to Employee as established by Employer from time to time and
provided to Employee in writing.
SECTION V. CONFIDENTIALITY AGREEMENT; NON-COMPETITION AGREEMENT
A. In consideration of Employer's executing this Agreement, Employee shall
have executed, prior to the execution of this Agreement, a Confidentiality
Agreement (the "Confidentiality Agreement"), in the form attached hereto as
Exhibit "A".
B. In consideration of Employer's executing this Agreement, Employee
agrees, effective as of the date hereof, to sign and be bound by the
obligations of an Agreement Not to Compete (the "Non-Competition
Agreement"), in the form attached hereto as Exhibit "B".
C. The obligations under the Confidentiality Agreement and the
Non-Competition Agreement shall survive the termination of this Agreement.
SECTION VI. RELEASE
In the event Employee becomes entitled to payment pursuant to Section
VII(B) hereof, Employee shall, as a condition to such payments being made,
execute and deliver to Employer a general release in such form as is
reasonably satisfactory to Employer.
SECTION VII. TERM AND TERMINATION
A. Term. The term of this Agreement shall be a period of three years,
commencing on the date hereof. At the expiration date, this Agreement
shall be renewed for additional one-year periods, provided neither party
hereto submits a written notice of termination within sixty (60) days prior
to the termination of either the initial term hereof or any renewal term.
B. Termination. Employer agrees not to terminate this Agreement except
for "just cause", and agrees to give Employee written notice of its belief
that acts or events constituting "just cause" exist. Employee has the
right to cure, within thirty (30) days of Employer's giving of such notice,
the acts, events or conditions which led to Employer's notice. For
purposes of this Agreement, "just cause" shall mean (1) the willful failure
or refusal of Employee to implement or follow the written policies or
directions of Employer's Board of Directors, provided that Employee's
failure or refusal is not based upon Employee's belief in good faith, as
expressed to Employer in writing, that the implementation thereof would be
unlawful; (2) conduct which is inconsistent with Employee's position with
Employer and which results in a material adverse effect (financial or
otherwise) or misappropriation of assets of Employer; (3) conduct which
violates the provisions contained in the Confidentiality Agreement or the
Non-Competition Agreement; (4) the intentional causing of material damage
to Employer's physical property; and (5) any act involving personal
dishonesty or criminal conduct against Employer.
Although Employer retains the right to terminate Employee for any reason
not specified above, Employer agrees that if it discharges Employee for any
reason other than just cause, as is solely defined above, Employee will be
entitled to full compensation, including participation in all benefit
programs, for six (6) months or the remainder of the current term, original
or renewal, as the case may be, of employment, whichever is more.
If Employee should cease his employment hereunder voluntarily for any
reason, or is terminated for just cause, all compensation and benefits
payable to Employee shall thereupon, without any further writing or act,
cease, lapse and be terminated. However, all defined compensation,
benefits and reimbursements which accrued prior to Employee's ceasing
employment or termination, will become immediately due and payable.
Should Employee voluntarily cease his employment, Employee retains the
right to participate for the period of this Agreement in Employee's medical
insurance plan and will be responsible for 100% of the cost of participation.
SECTION VIII. COMPLETE AGREEMENT
This Agreement contains the complete agreement concerning the employment
arrangement between the parties hereto and shall, as of the effective date
hereof, supersede all other agreements between the parties. The parties
hereto stipulate that neither of them has made any representation with
respect to the subject matter of this Agreement or any representations
including the execution and delivery hereof, except such representations as
are specifically set forth herein and each of the parties hereto
acknowledges that he or it has relied on his or its own judgment in
entering into this Agreement. The parties hereto further acknowledge that
any payments or representations that may have heretofore been made by
either of them to the other are of no effect and that neither of them has
relied thereon in connection with his or its dealings with the other.
Employer and Employer both acknowledge and agree that, upon the mutual
execution of this Agreement, Employee's existing employment agreement with
Santa Fe Wireless Internet, Inc., a New Mexico corporation, Employer's
wholly-owned subsidiary, shall be terminated.
SECTION IX. WAIVER; MODIFICATION
The waiver by either party of a breach or violation of any provision of
this Agreement shall not operate as, or be construed to be, a waiver of any
subsequent breach hereof. No waiver or modification of this Agreement or
of any covenant, condition or limitation herein contained shall be valid
unless in writing and duly executed by the party to be charged therewith
and no evidence of any waiver or modification shall be offered or received
in evidence of any proceeding or litigation between the parties hereto
arising out of, or affecting, this Agreement, or the rights or obligations
of the parties hereunder, unless such waiver or modification is in writing,
duly executed as aforesaid, and the parties further agree that the
provisions of this Section IX may not be waived except as herein set forth.
SECTION X. SEVERABILITY
All agreements and covenants contained herein are severable, and in the
event any one of them, with the exception of those contained in Sections I,
III, IV and V hereof, shall be held to be invalid in any proceeding or
litigation between the parties, this Agreement shall be interpreted as if
such invalid agreements or covenants were not contained herein.
SECTION XI. NOTICES
Any and all notices will be sufficient if furnished in writing, sent by
registered mail to his last known residence, in case of Employee, or, in
case of Employer, to its principal office address.
SECTION XII. CORPORATE AUTHORITY OF EMPLOYER
The execution of this Agreement by Employer has been approved by the
Executive Committee of the Board of Directors of Employer have been so
approved and authorized.
SECTION XIII. REPRESENTATIONS OF EMPLOYEE
Employee hereby represents to Employer:
A. No Legal Disability. Employee is under no legal disability with respect
to his entering into this Agreement.
B. Receipt of Disclosure. Employee hereby represents and warrants that he
has received and reviewed (1) Employer's Annual Report on Form 10-KSB, as
filed with the Securities and Exchange Commission ("SEC"), (2) Employer's
Quarterly Reports on Form 10-QSB, as filed with the SEC, (3) Employer's
Current Reports on Form 8-K, as amended and as filed with the SEC. With
respect to such information, Employee further represents and warrants that
he has had an opportunity to ask questions of, and to receive answers from,
the officers of Employer.
C. Representations Relating to Employer Common Stock. Employee represents
and warrants to Employer that the shares of Employer common stock being
acquired pursuant to this Employment Agreement are being acquired for his
own account and for investment and not with a view to the public resale or
distribution of such shares and further acknowledges that the shares being
issued have not been registered under the Securities Act or any state
securities law and are "restricted securities", as that term is defined in
Rule 144 promulgated by the SEC, and must be held indefinitely, unless they
are subsequently registered or an exemption from such registration is
available.
D. Consent to Legend. Employee consents to the placement of a legend
restricting future transfer on the share certificates representing the
Employer common stock delivered hereunder, which legend shall be in the
following, or similar, form:
"THE STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ISSUED IN RELIANCE
UPON THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2) OF THE
SECURITIES ACT OF 1933, AS AMENDED. THE STOCK MAY NOT BE TRANSFERRED
WITHOUT REGISTRATION EXCEPT IN TRANSACTIONS EXEMPT FROM SUCH REGISTRATION."
SECTION XIV. COUNTERPARTS
This Agreement may be executed in duplicate counterparts, each of which
shall be deemed an original and, together, shall constitute one and the
same agreement, with one counterpart being delivered to each party hereto.
SECTION XV. BENEFIT
The provisions of this Agreement shall extend to the successors, surviving
corporations and assigns of Employer and to any purchaser of substantially
all of the assets and business of Employer. The term "Employer" shall be
deemed to include Employer, any joint venture, partnership, limited
liability company, corporation or other juridical entity, in which Employer
shall have an interest, financial or otherwise.
SECTION XVI. ARBITRATION
The parties agree that any dispute arising between them related to this
Agreement or the performance hereof shall be submitted for resolution to
the American Arbitration Association for arbitration in the Dallas, Texas,
office of the Association under the then-current rules of arbitration. The
Arbitrator or Arbitrators shall have the authority to award to the
prevailing party its reasonable costs and attorneys fees. Any award of the
Arbitrators may be entered as a judgment in any court competent jurisdiction.
Notwithstanding the provisions contained in the foregoing paragraph, the
parties hereto agree that Employer may, at its election and without
delivering the notice to Employee required in Section VII(B) hereof, seek
injunctive or other equitable relief from a court of competent jurisdiction
for a violation or violations by Employee of the Confidentiality Agreement
or the Non-Competition Agreement.
SECTION XVII. LEGAL REPRESENTATION
Employer and Employee both acknowledge that each has utilized separate
legal counsel with respect to this Agreement. Specifically, Employee
acknowledges that the law firm of Newlan & Newlan has drafted this
Agreement on behalf of Employer. EMPLOYEE IS ADMONISHED TO SEEK HIS OWN
LEGAL COUNSEL.
SECTION XVIII. GOVERNING LAW
It is the intention of the parties hereto that this Agreement and the
performance hereunder and all suits and special proceedings hereunder be
construed in accordance with and under and pursuant to the laws of the
State of Louisiana, and that, in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by
reason of this Agreement, the laws of the State of Louisiana shall be
applicable and shall govern to the exclusion of the law of any other forum,
without regard to the jurisdiction in which any such action or special
proceeding may be instituted.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 4th day of October, 1999.
USURF AMERICA , INC.
By: /s/ David M. Loflin
David M. Loflin
President
/s/ Darrell Davis
Darrell Davis
- ---------------------
EXHIBIT 10.39
- ---------------------
October 4, 1999
USURF America, Inc.
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Re: Confidentiality Agreement
Gentlemen:
In connection with the execution of an employment agreement (the
"Employment Agreement") between the undersigned and USURF America, Inc.
(together with affiliates, including, without limitation, Santa Fe Wireless
Internet, Inc. and CyberHighway, Inc., the "Company"), the Company will
furnish to the undersigned certain information concerning its business,
financial position, operations, business contacts, assets and liabilities,
as well as certain items of equipment useful in the Wireless Internet
access business. As a condition to such information's being furnished to
the undersigned and as a condition to the undersigned's entering into an
employment agreement with the Company, the undersigned agrees to treat any
information concerning the Company (whether prepared by the Company, its
advisors, or otherwise, and irrespective of the form of communication)
which is furnished to the undersigned now or in the future by or on behalf
of the Company (together with the material described below, herein
collectively referred to as the "Confidential Material") in accordance with
the provisions of this letter agreement, and to take or abstain from taking
certain other actions hereinafter set forth.
The undersigned understands that the term "Confidential Material" also
includes all notes, analysis, compilations, studies, interpretations or
other documents prepared by the Company or its representatives which
contain, reflect or are based upon, in whole or in part, the information
furnished to the undersigned. The term "Confidential Material" does not
include information which (A) is or becomes generally available to the
public other than as a result of a disclosure by the undersigned, or (B)
was lawfully within the undersigned's possession prior to its being
furnished to the undersigned by or on behalf of the Company, provided that
the source of such information was not known by the undersigned to be bound
by a confidentiality agreement with, or other contractual, legal or
fiduciary obligation of confidentiality to, the Company or any other party
with respect to such information, or (C) is disclosed to the undersigned by
a third party, provided that such third party was not known by the
undersigned to be bound by a confidentiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to, the
Company or any other party with respect to such information.
The undersigned hereby agrees that he will use the Confidential Material
solely in connection with the undersigned's performance of his duties under
the employment agreement, that the Confidential Material will be kept
confidential and that the undersigned will not disclose any of the
Confidential Material in any manner whatsoever.
The undersigned hereby agrees that he shall not reverse engineer, reverse
assemble or otherwise attempt to recreate or duplicate any model or working
model capable of performing the functions of any portion or all of the
Company's Wireless Internet access system included in the Confidential
Material.
In addition, the undersigned agrees that, without the prior written
consent of the Company, the undersigned will not disclose to any other
person the fact that the Confidential Material has been made available to
the undersigned, that discussions or negotiations are taking place
concerning a possible transaction involving the Company, or any of the
terms, conditions or other facts with respect thereto (including the status
thereof), unless, in the opinion of the undersigned's counsel, such
disclosure must be made by the undersigned in order that the undersigned
not commit a violation of law. The term "person" as used in this letter
agreement shall be broadly interpreted to include the media and any
corporation, partnership, group, individual or other entity, but shall not
include the Securities and Exchange Commission or the Federal Trade
Commission as to any required filing with either such agency.
In the event that the undersigned is requested or required (by oral
questions, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process)
to disclose any of the Confidential Material, the undersigned will provide
the Company with prompt written notice of any such request or requirement
so that the Company may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this letter agreement. If,
in the absence of a protective order or other remedy or the receipt of a
waiver by the Company, the undersigned is, nonetheless, in the opinion of
counsel, legally compelled to disclose Confidential Material, the
undersigned may, without liability hereunder, disclose only that portion of
the Confidential Material specifically required by an order of Court.
Additionally, the undersigned shall make every reasonable effort and take
every reasonable action, including, without limitation, by cooperating with
the Company, to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Material.
Upon termination of the Employment Agreement or at any time upon the
request of the Company, the undersigned will promptly deliver to the
Company or certify destruction of, at the Company's direction, all
Confidential Material (and all copies thereof) furnished to the undersigned
by or on behalf of the Company pursuant hereto. All oral Confidential
Material provided to the undersigned shall continue to be held confidential
hereunder. Notwithstanding the return or destruction of the Confidential
Material, the undersigned will continue to be bound by obligations of
confidentiality hereunder.
The undersigned agrees that the Company, without prejudice to any rights
to judicial relief he may otherwise have, shall be entitled to equitable
relief, including injunctive relief and specific performance, in the event
of any breach of the provisions of this letter agreement and that the
undersigned will not oppose the granting of such relief. The undersigned
also agrees that he will not seek and agrees to waive any requirement for
the securing and posting of a bond in connection with the Company's seeking
or obtaining such relief. In the event of litigation relating to this
letter agreement, if a court of competent jurisdiction determines that the
undersigned has breached this letter agreement, then the undersigned will
be liable to pay to the Company the reasonable legal fees incurred in
connection with such litigation, including any appeal therefrom. Also, in
the event a court of competent jurisdiction determines that the undersigned
has not breached this letter agreement, then the Company will be liable to
pay to the undersigned the reasonable legal fees incurred in connection
with such litigation, including any appeal therefrom.
This letter agreement is for the benefit of the Company, and shall be
construed (both as to validity and performance) and enforced in accordance
with, and governed by, the laws of the State of Louisiana applicable to
agreements made and to be performed wholly within such jurisdiction. This
letter agreement shall remain in full force and effect until terminated by
the Company.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned whereupon this letter agreement
shall become a binding agreement.
Very truly yours,
/s/ Darrell Davis
Darrell Davis
AGREED AND ACCEPTED as
of the date first written above:
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin
President
- ----------------------
EXHIBIT 10.40
- ----------------------
AGREEMENT NOT TO COMPETE
THIS AGREEMENT NOT TO COMPETE is entered into by and between USURF
America, Inc., a Nevada corporation ("Employer"), and Darrell Davis
("Employee").
WHEREAS, Employee is employed by Employer as Vice President - U.S.
Internet Operations, pursuant to an employment agreement (the "Employment
Agreement"); and
WHEREAS, as a condition to such employment, Employee has agreed to sign
and be bound by this Agreement Not to Compete; and
NOW, THEREFORE, the parties agree as follows:
Section 1. Covenant Not to Compete. Employee acknowledges that, as a key
management employee of Employer, Employee will be involved, on a high
level, in the development, implementation and management of the national
and international business strategies and plans of Employer, which shall
consist of Employer and such other business units, divisions, subsidiaries
or other entities of Employer as Employer shall determine in its sole
discretion from time to time. By virtue of Employee's unique and sensitive
position and special background, employment of Employee by a competitor of
Employer represents a serious competitive danger to Employer, and the use
of Employee's talent and knowledge and information about Employer's
business, strategies and plans can and would constitute a valuable
competitive advantage over Employer. In view of the foregoing, Employee
covenants and agrees that, if (i) Employee's employment with Employer is
terminated for any reason at any time for just cause or (ii) if Employee
voluntarily resigns from his employment with Employer, then, for a period
of one year after the date of such termination, Employee will not engage or
be engaged as, in any capacity, directly or indirectly, including, but not
limited to, employee, agent, consultant, manager, executive, owner or
stockholder (except as a passive investor holding less than 1% equity
interest in any enterprise the securities of which are publicly traded) in
any business entity engaged in competition with any business conducted by
Employer on the date of termination. This Agreement Not to Compete shall
survive the termination or expiration of the Employment Agreement. If any
court determines that this Agreement Not to Compete, or any part hereof, is
unenforceable because the duration or geographic scope of such provision,
such court shall have the power to reduce the duration or scope of such
provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable.
For purposes of this Agreement, "just cause" shall have the same meaning
as set forth in Section VII(B) of the Employment Agreement of even date
between the parties.
Section 2. Continuing Obligations. Employee agrees that, for one year
following (i) his termination of employment with Employer for just cause or
(ii) his resignation as an employee of Employer, Employee shall keep
Employer informed of the identification of Employee's employer and the
nature of such employment or of Employee's self-employment. Employer
agrees that, within fifteen days after receiving notice pursuant to this
Section 2 of the identification of the prospective employer, the nature of
the employment or self-employment or any change therein, Employer will
advise Employee as to whether such employment constitutes a violation of
Section 1 hereof.
Section 3. Injunctive Relief. Employee acknowledges that the violation
of the covenants contained in this Agreement would be detrimental and cause
irreparable injury to Employer and its affiliates which could not be
compensated by money damages. Employee agrees that an injunction from a
court of competent jurisdiction is the appropriate remedy for these
provisions, and consents to the entry of an appropriate judgment enjoining
Employee from violating these provisions in the event there is a find of
their breach.
Section 4. Severability of Covenants. Each of the covenants contained in
this Agreement are independent covenants, which may be available to or
relied upon by Employer and its affiliates in any court of competent
jurisdiction. If any one of the separate and independent covenants shall
be deemed to be unenforceable under the laws of any state of competent
jurisdiction, each of the remaining covenants shall not be affected
thereby. Notwithstanding the provisions of this Section 4, it is
understood that every benefit received by Employee by virtue of this
Agreement is consideration for each separate covenant contained herein.
Section 5. Governing Law. This Agreement shall be governed by the laws
of the State of Louisiana.
Section 6. Other Remedies. The undertakings herein shall not be
construed as any limitation upon the remedies Employer might, in the
absence of this Agreement, have at law or in equity.
INTENDING to be legally bound hereby, Employer and Employee hereby duly
execute this Agreement Not to Compete on the date indicated below.
USURF AMERICA, INC.
Date: October 4, 1999 By: /s/ David M. Loflin
David M. Loflin
President
Date: October 4, 1999 /s/ Darrell Davis
Darrell Davis
- ---------------------
EXHIBIT 10.41
- ---------------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between Internet
Media Corporation, a duly organized Nevada corporation ("Employer"), and
David M. Loflin, a resident of the State of Louisiana ("Employee").
W I T N E S S E T H:
WHEREAS, Employer is in need of persons with expertise in general business
and expertise in radio frequency engineering; and
WHEREAS, Employee has a substantial amount of expertise in general
business and possesses expertise in radio frequency engineering; and
WHEREAS, Employee is willing to be employed by Employer, and Employer is
willing to employ Employee, on the terms, covenants and conditions
hereinafter set forth; and
WHEREAS, Employer and its affiliates have accumulated valuable and
confidential information, including, without limitation, trade secrets and
know-how relating to technology, equipment, marketing plans, acquisition
plans, sources of supply, business strategies and other business records; and
WHEREAS, the giving of the covenants contained herein is a condition
precedent to the employment of Employee by Employer and Employee
acknowledges that the execution of this Agreement and the entering into of
these covenants is an express condition of his employment by Employer and
that said covenants are given in consideration for such employment and the
other benefits conferred upon him by this Agreement; and
NOW, THEREFORE, in consideration of such employment and other valuable
consideration, the receipt and adequacy of which is hereby acknowledged,
Employer and Employee hereby agree as follows:
SECTION I. EMPLOYMENT OF EMPLOYEE
Employer hereby employs, engages and hires Employee as President of
Employer, and Employee hereby accepts and agrees to such hiring, engagement
and employment, subject to the general supervision and pursuant to the
orders, advice and direction of the Board of Directors of Employer.
Employee shall perform duties as are customarily performed by one holding
such position in other, same or similar businesses or enterprises as that
engaged in by Employer, and shall also additionally render such other and
unrelated services and duties as may be assigned to him from time to time
by Employer.
Employee shall devote his full-time efforts to the performance of his
duties as President of Employer.
SECTION II. EMPLOYEE'S PERFORMANCE
Employee hereby agrees that he will, at all times, faithfully,
industriously and to the best of his ability, experience and talents,
perform all of the duties that may be required of and from him pursuant to
the express and implicit terms hereof, to the reasonable satisfaction of
Employer.
SECTION III. COMPENSATION OF EMPLOYEE
Employer shall pay Employee, and Employee shall accept from Employer, in
full payment for Employee's services hereunder, compensation as follows:
A. Salary. Employee shall be paid as and for a salary the sum of $150,000
per year, which salary shall be payable in equal installments on the 1st
and 15th days of each calendar month, in arrears, subject to deduction of
all lawful and required withholding.
B. Insurance and Other Benefits. As further consideration for the
covenants contained herein, Employer will provide Employee with such
insurance, welfare, sick leave and other benefits as may be established by
Employer from time to time with respect to its employees in accordance with
Employer's established procedures. Employee shall be entitled to
Directors' and Officers' indemnification insurance coverage to the same
extent as is provided to other persons employed as officers of Employer.
C. Other Compensation Plans. Employee shall be entitled to participate,
to the same extent as is provided to other persons employed by Employer, in
any future stock bonus plan, stock option plan or employee stock ownership
plan of Employer.
D. Expenses. It is acknowledged that, during the term of employment,
Employee will be required to incur ordinary and necessary business expenses
on behalf of Employer in connection with the performance of his duties
hereunder. Employer shall reimburse Employee promptly the amount of all
such expenses upon presentation of itemized vouchers or other evidence of
those expenditures.
E. Vacations. Employee shall be entitled to three (3) weeks paid vacation
each year for the term of this Agreement. Such vacations shall be taken at
such times as Employer designates as to time-of-year. Vacation time can be
accumulated year-to-year up to three years maximum.
SECTION IV. COMPANY POLICIES
Employee agrees to abide by the policies, rules, regulations or usages
applicable to Employee as established by Employer from time to time and
provided to Employee in writing.
SECTION V. CONFIDENTIALITY AGREEMENT; NON-COMPETITION AGREEMENT
A. In consideration of Employer's executing this Agreement, Employee shall
have executed, prior to the execution of this Agreement, a Confidentiality
Agreement (the "Confidentiality Agreement"), in the form attached hereto as
Exhibit "A".
B. In consideration of Employer's executing this Agreement, Employee
agrees, effective as of the date hereof, to sign and be bound by the
obligations of an Agreement Not to Compete (the "Non-Competition
Agreement"), in the form attached hereto as Exhibit "B".
C. The obligations under the Confidentiality Agreement and the
Non-Competition Agreement shall survive the termination of this Agreement.
SECTION VI. RELEASE
In the event Employee becomes entitled to payment pursuant to Section
VII(B) hereof, Employee shall, as a condition to such payments being made,
execute and deliver to Employer a general release in such form as is
reasonably satisfactory to Employer.
SECTION VII. TERM AND TERMINATION
A. Term. The term of this Agreement shall be a period of seven years,
commencing on the date hereof. At the expiration date, this Agreement
shall be renewed for additional one-year periods, provided neither party
hereto submits a written notice of termination within sixty (60) days prior
to the termination of either the initial term hereof or any renewal term.
B. Termination. Employer agrees not to terminate this Agreement except
for "just cause", and agrees to give Employee written notice of its belief
that acts or events constituting "just cause" exist. Employee has the
right to cure, within thirty (30) days of Employer's giving of such notice,
the acts, events or conditions which led to Employer's notice. For
purposes of this Agreement, "just cause" shall mean (1) the willful failure
or refusal of Employee to implement or follow the written policies or
directions of Employer's Board of Directors, provided that Employee's
failure or refusal is not based upon Employee's belief in good faith, as
expressed to Employer in writing, that the implementation thereof would be
unlawful; (2) conduct which is inconsistent with Employee's position with
Employer and which results in a material adverse effect (financial or
otherwise) or misappropriation of assets of Employer; (3) conduct which
violates the provisions contained in the Confidentiality Agreement or the
Non-Competition Agreement; (4) the intentional causing of material damage
to Employer's physical property; and (5) any act involving personal
dishonesty or criminal conduct against Employer.
Although Employer retains the right to terminate Employee for any reason
not specified above, Employer agrees that if it discharges Employee for any
reason other than just cause, as is solely defined above, Employee will be
entitled to full compensation, including participation in all benefit
programs, for six (6) months or the remainder of the current term, original
or renewal, as the case may be, of employment, whichever is more.
If Employee should cease his employment hereunder voluntarily for any
reason, or is terminated for just cause, all compensation and benefits
payable to Employee shall thereupon, without any further writing or act,
cease, lapse and be terminated. However, all defined compensation,
benefits and reimbursements which accrued prior to Employee's ceasing
employment or termination, will become immediately due and payable.
Should Employee voluntarily cease his employment, Employee retains the
right to participate for the period of this Agreement in Employee's medical
insurance plan and will be responsible for 100% of the cost of participation.
SECTION VIII. COMPLETE AGREEMENT
This Agreement contains the complete agreement concerning the employment
arrangement between the parties hereto and shall, as of the effective date
hereof, supersede all other agreements between the parties. The parties
hereto stipulate that neither of them has made any representation with
respect to the subject matter of this Agreement or any representations
including the execution and delivery hereof, except such representations as
are specifically set forth herein and each of the parties hereto
acknowledges that he or it has relied on his or its own judgment in
entering into this Agreement. The parties hereto further acknowledge that
any payments or representations that may have heretofore been made by
either of them to the other are of no effect and that neither of them has
relied thereon in connection with his or its dealings with the other.
SECTION IX. WAIVER; MODIFICATION
The waiver by either party of a breach or violation of any provision of
this Agreement shall not operate as, or be construed to be, a waiver of any
subsequent breach hereof. No waiver or modification of this Agreement or
of any covenant, condition or limitation herein contained shall be valid
unless in writing and duly executed by the party to be charged therewith
and no evidence of any waiver or modification shall be offered or received
in evidence of any proceeding or litigation between the parties hereto
arising out of, or affecting, this Agreement, or the rights or obligations
of the parties hereunder, unless such waiver or modification is in writing,
duly executed as aforesaid, and the parties further agree that the
provisions of this Section IX may not be waived except as herein set forth.
SECTION X. SEVERABILITY
All agreements and covenants contained herein are severable, and in the
event any one of them, with the exception of those contained in Sections I,
III, IV and V hereof, shall be held to be invalid in any proceeding or
litigation between the parties, this Agreement shall be interpreted as if
such invalid agreements or covenants were not contained herein.
SECTION XI. NOTICES
Any and all notices will be sufficient if furnished in writing, sent by
registered mail to his last known residence, in case of Employee, or, in
case of Employer, to its principal office address.
SECTION XII. CORPORATE AUTHORITY OF EMPLOYER
The execution of this Agreement by Employer has been approved by the Board
of Directors of Employer and the execution of this Agreement by the
officers of Employer has been so approved and authorized.
SECTION XIII. REPRESENTATIONS OF EMPLOYEE
Employee hereby represents to Employer that he is under no legal
disability with respect to his entering into this Agreement.
SECTION XIV. COUNTERPARTS
This Agreement may be executed in duplicate counterparts, each of which
shall be deemed an original and, together, shall constitute one and the
same agreement, with one counterpart being delivered to each party hereto.
SECTION XV. BENEFIT
The provisions of this Agreement shall extend to the successors, surviving
corporations and assigns of Employer and to any purchaser of substantially
all of the assets and business of Employer. The term "Employer" shall be
deemed to include Employer, any joint venture, partnership, limited
liability company, corporation or other juridical entity, in which Employer
shall have an interest, financial or otherwise.
SECTION XVI. ARBITRATION
The parties agree that any dispute arising between them related to this
Agreement or the performance hereof shall be submitted for resolution to
the American Arbitration Association for arbitration in the Dallas, Texas,
office of the Association under the then-current rules of arbitration. The
Arbitrator or Arbitrators shall have the authority to award to the
prevailing party its reasonable costs and attorneys fees. Any award of the
Arbitrators may be entered as a judgment in any court competent jurisdiction.
Notwithstanding the provisions contained in the foregoing paragraph, the
parties hereto agree that Employer may, at its election and without
delivering the notice to Employee required in Section VII(B) hereof, seek
injunctive or other equitable relief from a court of competent jurisdiction
for a violation or violations by Employee of the Confidentiality Agreement
or the Non-Competition Agreement.
SECTION XVII. GOVERNING LAW
It is the intention of the parties hereto that this Agreement and the
performance hereunder and all suits and special proceedings hereunder be
construed in accordance with and under and pursuant to the laws of the
State of Louisiana, and that, in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by
reason of this Agreement, the laws of the State of Louisiana shall be
applicable and shall govern to the exclusion of the law of any other forum,
without regard to the jurisdiction in which any such action or special
proceeding may be instituted.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 1st day of June, 1999.
INTERNET MEDIA CORPORATION
By: /s/ Waddell D. Loflin
Waddell D. Loflin
Vice President
/s/ David M. Loflin
David M. Loflin
- ----------------------
EXHIBIT 10.42
- ----------------------
June 1, 1999
Internet Media Corporation
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Re: Confidentiality Agreement
Gentlemen:
In connection with the execution of an employment agreement (the
"Employment Agreement") between the undersigned and Internet Media
Corporation (together with affiliates, including, without limitation,
CyberHighway, Inc., the "Company"), the Company will furnish to the
undersigned certain information concerning its business, financial
position, operations, business contacts, assets and liabilities, as well as
certain items of equipment useful in the Wireless Internet access business.
As a condition to such information's being furnished to the undersigned
and as a condition to the undersigned's entering into an employment
agreement with the Company, the undersigned agrees to treat any information
concerning the Company (whether prepared by the Company, its advisors, or
otherwise, and irrespective of the form of communication) which is
furnished to the undersigned now or in the future by or on behalf of the
Company (together with the material described below, herein collectively
referred to as the "Confidential Material") in accordance with the
provisions of this letter agreement, and to take or abstain from taking
certain other actions hereinafter set forth.
The undersigned understands that the term "Confidential Material" also
includes all notes, analysis, compilations, studies, interpretations or
other documents prepared by the Company or its representatives which
contain, reflect or are based upon, in whole or in part, the information
furnished to the undersigned. The term "Confidential Material" does not
include information which (A) is or becomes generally available to the
public other than as a result of a disclosure by the undersigned, or (B)
was lawfully within the undersigned's possession prior to its being
furnished to the undersigned by or on behalf of the Company, provided that
the source of such information was not known by the undersigned to be bound
by a confidentiality agreement with, or other contractual, legal or
fiduciary obligation of confidentiality to, the Company or any other party
with respect to such information, or (C) is disclosed to the undersigned by
a third party, provided that such third party was not known by the
undersigned to be bound by a confidentiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to, the
Company or any other party with respect to such information.
The undersigned hereby agrees that he will use the Confidential Material
solely in connection with the undersigned's performance of his duties under
the employment agreement, that the Confidential Material will be kept
confidential and that the undersigned will not disclose any of the
Confidential Material in any manner whatsoever.
The undersigned hereby agrees that he shall not reverse engineer, reverse
assemble or otherwise attempt to recreate or duplicate any model or working
model capable of performing the functions of any portion or all of the
Company's Wireless Internet access system included in the Confidential
Material.
In addition, the undersigned agrees that, without the prior written
consent of the Company, the undersigned will not disclose to any other
person the fact that the Confidential Material has been made available to
the undersigned, that discussions or negotiations are taking place
concerning a possible transaction involving the Company, or any of the
terms, conditions or other facts with respect thereto (including the status
thereof), unless, in the opinion of the undersigned's counsel, such
disclosure must be made by the undersigned in order that the undersigned
not commit a violation of law. The term "person" as used in this letter
agreement shall be broadly interpreted to include the media and any
corporation, partnership, group, individual or other entity, but shall not
include the Securities and Exchange Commission or the Federal Trade
Commission as to any required filing with either such agency.
In the event that the undersigned is requested or required (by oral
questions, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process)
to disclose any of the Confidential Material, the undersigned will provide
the Company with prompt written notice of any such request or requirement
so that the Company may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this letter agreement. If,
in the absence of a protective order or other remedy or the receipt of a
waiver by the Company, the undersigned is, nonetheless, in the opinion of
counsel, legally compelled to disclose Confidential Material, the
undersigned may, without liability hereunder, disclose only that portion of
the Confidential Material specifically required by an order of Court.
Additionally, the undersigned shall make every reasonable effort and take
every reasonable action, including, without limitation, by cooperating with
the Company, to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Material.
Upon termination of the Employment Agreement or at any time upon the
request of the Company, the undersigned will promptly deliver to the
Company or certify destruction of, at the Company's direction, all
Confidential Material (and all copies thereof) furnished to the undersigned
by or on behalf of the Company pursuant hereto. All oral Confidential
Material provided to the undersigned shall continue to be held confidential
hereunder. Notwithstanding the return or destruction of the Confidential
Material, the undersigned will continue to be bound by obligations of
confidentiality hereunder.
The undersigned agrees that the Company, without prejudice to any rights
to judicial relief he may otherwise have, shall be entitled to equitable
relief, including injunctive relief and specific performance, in the event
of any breach of the provisions of this letter agreement and that the
undersigned will not oppose the granting of such relief. The undersigned
also agrees that he will not seek and agrees to waive any requirement for
the securing and posting of a bond in connection with the Company's seeking
or obtaining such relief. In the event of litigation relating to this
letter agreement, if a court of competent jurisdiction determines that the
undersigned has breached this letter agreement, then the undersigned will
be liable to pay to the Company the reasonable legal fees incurred in
connection with such litigation, including any appeal therefrom. Also, in
the event a court of competent jurisdiction determines that the undersigned
has not breached this letter agreement, then the Company will be liable to
pay to the undersigned the reasonable legal fees incurred in connection
with such litigation, including any appeal therefrom.
This letter agreement is for the benefit of the Company, and shall be
construed (both as to validity and performance) and enforced in accordance
with, and governed by, the laws of the State of Louisiana applicable to
agreements made and to be performed wholly within such jurisdiction. This
letter agreement shall remain in full force and effect until terminated by
the Company.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned whereupon this letter agreement
shall become a binding agreement.
Very truly yours,
/s/ David M. Loflin
David M. Loflin
AGREED AND ACCEPTED as
of the date first written above:
INTERNET MEDIA CORPORATION
By: /s/ Waddell D. Loflin
Waddell D. Loflin
Vice President
- ------------------------
EXHIBIT 10.43
- ------------------------
AGREEMENT NOT TO COMPETE
THIS AGREEMENT NOT TO COMPETE is entered into by and between Internet
Media Corporation, a Nevada corporation ("Employer"), and David M. Loflin
("Employee").
WHEREAS, Employee is employed by Employer as President, pursuant to an
employment agreement (the "Employment Agreement"); and
WHEREAS, as a condition to such employment, Employee has agreed to sign
and be bound by this Agreement Not to Compete; and
NOW, THEREFORE, the parties agree as follows:
Section 1. Covenant Not to Compete. Employee acknowledges that, as a key
management employee of Employer, Employee will be involved, on a high
level, in the development, implementation and management of the national
and international business strategies and plans of Employer, which shall
consist of Employer and such other business units, divisions, subsidiaries
or other entities of Employer as Employer shall determine in its sole
discretion from time to time. By virtue of Employee's unique and sensitive
position and special background, employment of Employee by a competitor of
Employer represents a serious competitive danger to Employer, and the use
of Employee's talent and knowledge and information about Employer's
business, strategies and plans can and would constitute a valuable
competitive advantage over Employer. In view of the foregoing, Employee
covenants and agrees that, if (i) Employee's employment with Employer is
terminated for any reason at any time for just cause or (ii) if Employee
voluntarily resigns from his employment with Employer, then, for a period
of one year after the date of such termination, Employee will not engage or
be engaged as, in any capacity, directly or indirectly, including, but not
limited to, employee, agent, consultant, manager, executive, owner or
stockholder (except as a passive investor holding less than 1% equity
interest in any enterprise the securities of which are publicly traded) in
any business entity engaged in competition with any business conducted by
Employer on the date of termination. This Agreement Not to Compete shall
survive the termination or expiration of the Employment Agreement. If any
court determines that this Agreement Not to Compete, or any part hereof, is
unenforceable because the duration or geographic scope of such provision,
such court shall have the power to reduce the duration or scope of such
provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable.
For purposes of this Agreement, "just cause" shall have the same meaning
as set forth in Section VII(B) of the Employment Agreement of even date
between the parties.
Section 2. Continuing Obligations. Employee agrees that, for one year
following (i) his termination of employment with Employer for just cause or
(ii) his resignation as an employee of Employer, Employee shall keep
Employer informed of the identification of Employee's employer and the
nature of such employment or of Employee's self-employment. Employer
agrees that, within fifteen days after receiving notice pursuant to this
Section 2 of the identification of the prospective employer, the nature of
the employment or self-employment or any change therein, Employer will
advise Employee as to whether such employment constitutes a violation of
Section 1 hereof.
Section 3. Injunctive Relief. Employee acknowledges that the violation
of the covenants contained in this Agreement would be detrimental and cause
irreparable injury to Employer and its affiliates which could not be
compensated by money damages. Employee agrees that an injunction from a
court of competent jurisdiction is the appropriate remedy for these
provisions, and consents to the entry of an appropriate judgment enjoining
Employee from violating these provisions in the event there is a find of
their breach.
Section 4. Severability of Covenants. Each of the covenants contained in
this Agreement are independent covenants, which may be available to or
relied upon by Employer and its affiliates in any court of competent
jurisdiction. If any one of the separate and independent covenants shall
be deemed to be unenforceable under the laws of any state of competent
jurisdiction, each of the remaining covenants shall not be affected
thereby. Notwithstanding the provisions of this Section 4, it is
understood that every benefit received by Employee by virtue of this
Agreement is consideration for each separate covenant contained herein.
Section 5. Governing Law. This Agreement shall be governed by the laws
of the State of Louisiana.
Section 6. Other Remedies. The undertakings herein shall not be
construed as any limitation upon the remedies Employer might, in the
absence of this Agreement, have at law or in equity.
INTENDING to be legally bound hereby, Employer and Employee hereby duly
execute this Agreement Not to Compete on the date indicated below.
INTERNET MEDIA CORPORATION
Date: June 1, 1999 By: /s/ Waddell D. Loflin
Waddell D. Loflin
Vice President
Date: June 1, 1999 /s/ David M. Loflin
David M. Loflin
- -------------------------
EXHIBIT 10.44
- -------------------------
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made by and between Internet
Media Corporation, a duly organized Nevada corporation ("Employer"), and
Waddell D. Loflin, a resident of the State of Louisiana ("Employee").
W I T N E S S E T H:
WHEREAS, Employer is in need of persons with expertise in general business
and extensive managerial experience; and
WHEREAS, Employee has a substantial amount of expertise in general
business and possesses extensive managerial experience; and
WHEREAS, Employee is willing to be employed by Employer, and Employer is
willing to employ Employee, on the terms, covenants and conditions
hereinafter set forth; and
WHEREAS, Employer and its affiliates have accumulated valuable and
confidential information, including, without limitation, trade secrets and
know-how relating to technology, equipment, marketing plans, acquisition
plans, sources of supply, business strategies and other business records; and
WHEREAS, the giving of the covenants contained herein is a condition
precedent to the employment of Employee by Employer and Employee
acknowledges that the execution of this Agreement and the entering into of
these covenants is an express condition of his employment by Employer and
that said covenants are given in consideration for such employment and the
other benefits conferred upon him by this Agreement; and
NOW, THEREFORE, in consideration of such employment and other valuable
consideration, the receipt and adequacy of which is hereby acknowledged,
Employer and Employee hereby agree as follows:
SECTION I. EMPLOYMENT OF EMPLOYEE
Employer hereby employs, engages and hires Employee as Vice President of
Employer, and Employee hereby accepts and agrees to such hiring, engagement
and employment, subject to the general supervision and pursuant to the
orders, advice and direction of the Board of Directors of Employer.
Employee shall perform duties as are customarily performed by one holding
such position in other, same or similar businesses or enterprises as that
engaged in by Employer, and shall also additionally render such other and
unrelated services and duties as may be assigned to him from time to time
by Employer.
Employee shall devote his full-time efforts to the performance of his
duties as Vice President of Employer.
SECTION II. EMPLOYEE'S PERFORMANCE
Employee hereby agrees that he will, at all times, faithfully,
industriously and to the best of his ability, experience and talents,
perform all of the duties that may be required of and from him pursuant to
the express and implicit terms hereof, to the reasonable satisfaction of
Employer.
SECTION III. COMPENSATION OF EMPLOYEE
Employer shall pay Employee, and Employee shall accept from Employer, in
full payment for Employee's services hereunder, compensation as follows:
A. Salary. Employee shall be paid as and for a salary the sum of $100,000
per year, which salary shall be payable in equal installments on the 1st
and 15th days of each calendar month, in arrears, subject to deduction of
all lawful and required withholding.
B. Insurance and Other Benefits. As further consideration for the
covenants contained herein, Employer will provide Employee with such
insurance, welfare, sick leave and other benefits as may be established by
Employer from time to time with respect to its employees in accordance with
Employer's established procedures. Employee shall be entitled to
Directors' and Officers' indemnification insurance coverage to the same
extent as is provided to other persons employed as officers of Employer.
C. Other Compensation Plans. Employee shall be entitled to participate,
to the same extent as is provided to other persons employed by Employer, in
any future stock bonus plan, stock option plan or employee stock ownership
plan of Employer.
D. Expenses. It is acknowledged that, during the term of employment,
Employee will be required to incur ordinary and necessary business expenses
on behalf of Employer in connection with the performance of his duties
hereunder. Employer shall reimburse Employee promptly the amount of all
such expenses upon presentation of itemized vouchers or other evidence of
those expenditures.
E. Vacations. Employee shall be entitled to three (3) weeks paid vacation
each year for the term of this Agreement. Such vacations shall be taken at
such times as Employer designates as to time-of-year. Vacation time can be
accumulated year-to-year up to three years maximum.
SECTION IV. COMPANY POLICIES
Employee agrees to abide by the policies, rules, regulations or usages
applicable to Employee as established by Employer from time to time and
provided to Employee in writing.
SECTION V. CONFIDENTIALITY AGREEMENT; NON-COMPETITION AGREEMENT
A. In consideration of Employer's executing this Agreement, Employee shall
have executed, prior to the execution of this Agreement, a Confidentiality
Agreement (the "Confidentiality Agreement"), in the form attached hereto as
Exhibit "A".
B. In consideration of Employer's executing this Agreement, Employee
agrees, effective as of the date hereof, to sign and be bound by the
obligations of an Agreement Not to Compete (the "Non-Competition
Agreement"), in the form attached hereto as Exhibit "B".
C. The obligations under the Confidentiality Agreement and the
Non-Competition Agreement shall survive the termination of this Agreement.
SECTION VI. RELEASE
In the event Employee becomes entitled to payment pursuant to Section
VII(B) hereof, Employee shall, as a condition to such payments being made,
execute and deliver to Employer a general release in such form as is
reasonably satisfactory to Employer.
SECTION VII. TERM AND TERMINATION
A. Term. The term of this Agreement shall be a period of seven years,
commencing on the date hereof. At the expiration date, this Agreement
shall be renewed for additional one-year periods, provided neither party
hereto submits a written notice of termination within sixty (60) days prior
to the termination of either the initial term hereof or any renewal term.
B. Termination. Employer agrees not to terminate this Agreement except
for "just cause", and agrees to give Employee written notice of its belief
that acts or events constituting "just cause" exist. Employee has the
right to cure, within thirty (30) days of Employer's giving of such notice,
the acts, events or conditions which led to Employer's notice. For
purposes of this Agreement, "just cause" shall mean (1) the willful failure
or refusal of Employee to implement or follow the written policies or
directions of Employer's Board of Directors, provided that Employee's
failure or refusal is not based upon Employee's belief in good faith, as
expressed to Employer in writing, that the implementation thereof would be
unlawful; (2) conduct which is inconsistent with Employee's position with
Employer and which results in a material adverse effect (financial or
otherwise) or misappropriation of assets of Employer; (3) conduct which
violates the provisions contained in the Confidentiality Agreement or the
Non-Competition Agreement; (4) the intentional causing of material damage
to Employer's physical property; and (5) any act involving personal
dishonesty or criminal conduct against Employer.
Although Employer retains the right to terminate Employee for any reason
not specified above, Employer agrees that if it discharges Employee for any
reason other than just cause, as is solely defined above, Employee will be
entitled to full compensation, including participation in all benefit
programs, for six (6) months or the remainder of the current term, original
or renewal, as the case may be, of employment, whichever is more.
If Employee should cease his employment hereunder voluntarily for any
reason, or is terminated for just cause, all compensation and benefits
payable to Employee shall thereupon, without any further writing or act,
cease, lapse and be terminated. However, all defined compensation,
benefits and reimbursements which accrued prior to Employee's ceasing
employment or termination, will become immediately due and payable.
Should Employee voluntarily cease his employment, Employee retains the
right to participate for the period of this Agreement in Employee's medical
insurance plan and will be responsible for 100% of the cost of participation.
SECTION VIII. COMPLETE AGREEMENT
This Agreement contains the complete agreement concerning the employment
arrangement between the parties hereto and shall, as of the effective date
hereof, supersede all other agreements between the parties. The parties
hereto stipulate that neither of them has made any representation with
respect to the subject matter of this Agreement or any representations
including the execution and delivery hereof, except such representations as
are specifically set forth herein and each of the parties hereto
acknowledges that he or it has relied on his or its own judgment in
entering into this Agreement. The parties hereto further acknowledge that
any payments or representations that may have heretofore been made by
either of them to the other are of no effect and that neither of them has
relied thereon in connection with his or its dealings with the other.
SECTION IX. WAIVER; MODIFICATION
The waiver by either party of a breach or violation of any provision of
this Agreement shall not operate as, or be construed to be, a waiver of any
subsequent breach hereof. No waiver or modification of this Agreement or
of any covenant, condition or limitation herein contained shall be valid
unless in writing and duly executed by the party to be charged therewith
and no evidence of any waiver or modification shall be offered or received
in evidence of any proceeding or litigation between the parties hereto
arising out of, or affecting, this Agreement, or the rights or obligations
of the parties hereunder, unless such waiver or modification is in writing,
duly executed as aforesaid, and the parties further agree that the
provisions of this Section IX may not be waived except as herein set forth.
SECTION X. SEVERABILITY
All agreements and covenants contained herein are severable, and in the
event any one of them, with the exception of those contained in Sections I,
III, IV and V hereof, shall be held to be invalid in any proceeding or
litigation between the parties, this Agreement shall be interpreted as if
such invalid agreements or covenants were not contained herein.
SECTION XI. NOTICES
Any and all notices will be sufficient if furnished in writing, sent by
registered mail to his last known residence, in case of Employee, or, in
case of Employer, to its principal office address.
SECTION XII. CORPORATE AUTHORITY OF EMPLOYER
The execution of this Agreement by Employer has been approved by the Board
of Directors of Employer and the execution of this Agreement by the
officers of Employer has been so approved and authorized.
SECTION XIII. REPRESENTATIONS OF EMPLOYEE
Employee hereby represents to Employer that he is under no legal
disability with respect to his entering into this Agreement.
SECTION XIV. COUNTERPARTS
This Agreement may be executed in duplicate counterparts, each of which
shall be deemed an original and, together, shall constitute one and the
same agreement, with one counterpart being delivered to each party hereto.
SECTION XV. BENEFIT
The provisions of this Agreement shall extend to the successors, surviving
corporations and assigns of Employer and to any purchaser of substantially
all of the assets and business of Employer. The term "Employer" shall be
deemed to include Employer, any joint venture, partnership, limited
liability company, corporation or other juridical entity, in which Employer
shall have an interest, financial or otherwise.
SECTION XVI. ARBITRATION
The parties agree that any dispute arising between them related to this
Agreement or the performance hereof shall be submitted for resolution to
the American Arbitration Association for arbitration in the Dallas, Texas,
office of the Association under the then-current rules of arbitration. The
Arbitrator or Arbitrators shall have the authority to award to the
prevailing party its reasonable costs and attorneys fees. Any award of the
Arbitrators may be entered as a judgment in any court competent jurisdiction.
Notwithstanding the provisions contained in the foregoing paragraph, the
parties hereto agree that Employer may, at its election and without
delivering the notice to Employee required in Section VII(B) hereof, seek
injunctive or other equitable relief from a court of competent jurisdiction
for a violation or violations by Employee of the Confidentiality Agreement
or the Non-Competition Agreement.
SECTION XVII. GOVERNING LAW
It is the intention of the parties hereto that this Agreement and the
performance hereunder and all suits and special proceedings hereunder be
construed in accordance with and under and pursuant to the laws of the
State of Louisiana, and that, in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by
reason of this Agreement, the laws of the State of Louisiana shall be
applicable and shall govern to the exclusion of the law of any other forum,
without regard to the jurisdiction in which any such action or special
proceeding may be instituted.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 1st day of June, 1999.
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin
President
/s/ Waddell D. Loflin
Waddell D. Loflin
- ---------------------
EXHIBIT 10.45
- ---------------------
June 1, 1999
Internet Media Corporation
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Re: Confidentiality Agreement
Gentlemen:
In connection with the execution of an employment agreement (the
"Employment Agreement") between the undersigned and Internet Media
Corporation (together with affiliates, including, without limitation,
CyberHighway, Inc., the "Company"), the Company will furnish to the
undersigned certain information concerning its business, financial
position, operations, business contacts, assets and liabilities, as well as
certain items of equipment useful in the Wireless Internet access business.
As a condition to such information's being furnished to the undersigned
and as a condition to the undersigned's entering into an employment
agreement with the Company, the undersigned agrees to treat any information
concerning the Company (whether prepared by the Company, its advisors, or
otherwise, and irrespective of the form of communication) which is
furnished to the undersigned now or in the future by or on behalf of the
Company (together with the material described below, herein collectively
referred to as the "Confidential Material") in accordance with the
provisions of this letter agreement, and to take or abstain from taking
certain other actions hereinafter set forth.
The undersigned understands that the term "Confidential Material" also
includes all notes, analysis, compilations, studies, interpretations or
other documents prepared by the Company or its representatives which
contain, reflect or are based upon, in whole or in part, the information
furnished to the undersigned. The term "Confidential Material" does not
include information which (A) is or becomes generally available to the
public other than as a result of a disclosure by the undersigned, or (B)
was lawfully within the undersigned's possession prior to its being
furnished to the undersigned by or on behalf of the Company, provided that
the source of such information was not known by the undersigned to be bound
by a confidentiality agreement with, or other contractual, legal or
fiduciary obligation of confidentiality to, the Company or any other party
with respect to such information, or (C) is disclosed to the undersigned by
a third party, provided that such third party was not known by the
undersigned to be bound by a confidentiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to, the
Company or any other party with respect to such information.
The undersigned hereby agrees that he will use the Confidential Material
solely in connection with the undersigned's performance of his duties under
the employment agreement, that the Confidential Material will be kept
confidential and that the undersigned will not disclose any of the
Confidential Material in any manner whatsoever.
The undersigned hereby agrees that he shall not reverse engineer, reverse
assemble or otherwise attempt to recreate or duplicate any model or working
model capable of performing the functions of any portion or all of the
Company's Wireless Internet access system included in the Confidential
Material.
In addition, the undersigned agrees that, without the prior written
consent of the Company, the undersigned will not disclose to any other
person the fact that the Confidential Material has been made available to
the undersigned, that discussions or negotiations are taking place
concerning a possible transaction involving the Company, or any of the
terms, conditions or other facts with respect thereto (including the status
thereof), unless, in the opinion of the undersigned's counsel, such
disclosure must be made by the undersigned in order that the undersigned
not commit a violation of law. The term "person" as used in this letter
agreement shall be broadly interpreted to include the media and any
corporation, partnership, group, individual or other entity, but shall not
include the Securities and Exchange Commission or the Federal Trade
Commission as to any required filing with either such agency.
In the event that the undersigned is requested or required (by oral
questions, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process)
to disclose any of the Confidential Material, the undersigned will provide
the Company with prompt written notice of any such request or requirement
so that the Company may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this letter agreement. If,
in the absence of a protective order or other remedy or the receipt of a
waiver by the Company, the undersigned is, nonetheless, in the opinion of
counsel, legally compelled to disclose Confidential Material, the
undersigned may, without liability hereunder, disclose only that portion of
the Confidential Material specifically required by an order of Court.
Additionally, the undersigned shall make every reasonable effort and take
every reasonable action, including, without limitation, by cooperating with
the Company, to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Material.
Upon termination of the Employment Agreement or at any time upon the
request of the Company, the undersigned will promptly deliver to the
Company or certify destruction of, at the Company's direction, all
Confidential Material (and all copies thereof) furnished to the undersigned
by or on behalf of the Company pursuant hereto. All oral Confidential
Material provided to the undersigned shall continue to be held confidential
hereunder. Notwithstanding the return or destruction of the Confidential
Material, the undersigned will continue to be bound by obligations of
confidentiality hereunder.
The undersigned agrees that the Company, without prejudice to any rights
to judicial relief he may otherwise have, shall be entitled to equitable
relief, including injunctive relief and specific performance, in the event
of any breach of the provisions of this letter agreement and that the
undersigned will not oppose the granting of such relief. The undersigned
also agrees that he will not seek and agrees to waive any requirement for
the securing and posting of a bond in connection with the Company's seeking
or obtaining such relief. In the event of litigation relating to this
letter agreement, if a court of competent jurisdiction determines that the
undersigned has breached this letter agreement, then the undersigned will
be liable to pay to the Company the reasonable legal fees incurred in
connection with such litigation, including any appeal therefrom. Also, in
the event a court of competent jurisdiction determines that the undersigned
has not breached this letter agreement, then the Company will be liable to
pay to the undersigned the reasonable legal fees incurred in connection
with such litigation, including any appeal therefrom.
This letter agreement is for the benefit of the Company, and shall be
construed (both as to validity and performance) and enforced in accordance
with, and governed by, the laws of the State of Louisiana applicable to
agreements made and to be performed wholly within such jurisdiction. This
letter agreement shall remain in full force and effect until terminated by
the Company.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned whereupon this letter agreement
shall become a binding agreement.
Very truly yours,
/s/ Waddell D. Loflin
Waddell D. Loflin
AGREED AND ACCEPTED as
of the date first written above:
INTERNET MEDIA CORPORATION
By: /s/ David M. Loflin
David M. Loflin
President
- ----------------------
EXHIBIT 10.46
- ----------------------
AGREEMENT NOT TO COMPETE
THIS AGREEMENT NOT TO COMPETE is entered into by and between Internet
Media Corporation, a Nevada corporation ("Employer"), and Waddell D. Loflin
("Employee").
WHEREAS, Employee is employed by Employer as Vice President, pursuant to
an employment agreement (the "Employment Agreement"); and
WHEREAS, as a condition to such employment, Employee has agreed to sign
and be bound by this Agreement Not to Compete; and
NOW, THEREFORE, the parties agree as follows:
Section 1. Covenant Not to Compete. Employee acknowledges that, as a key
management employee of Employer, Employee will be involved, on a high
level, in the development, implementation and management of the national
and international business strategies and plans of Employer, which shall
consist of Employer and such other business units, divisions, subsidiaries
or other entities of Employer as Employer shall determine in its sole
discretion from time to time. By virtue of Employee's unique and sensitive
position and special background, employment of Employee by a competitor of
Employer represents a serious competitive danger to Employer, and the use
of Employee's talent and knowledge and information about Employer's
business, strategies and plans can and would constitute a valuable
competitive advantage over Employer. In view of the foregoing, Employee
covenants and agrees that, if (i) Employee's employment with Employer is
terminated for any reason at any time for just cause or (ii) if Employee
voluntarily resigns from his employment with Employer, then, for a period
of one year after the date of such termination, Employee will not engage or
be engaged as, in any capacity, directly or indirectly, including, but not
limited to, employee, agent, consultant, manager, executive, owner or
stockholder (except as a passive investor holding less than 1% equity
interest in any enterprise the securities of which are publicly traded) in
any business entity engaged in competition with any business conducted by
Employer on the date of termination. This Agreement Not to Compete shall
survive the termination or expiration of the Employment Agreement. If any
court determines that this Agreement Not to Compete, or any part hereof, is
unenforceable because the duration or geographic scope of such provision,
such court shall have the power to reduce the duration or scope of such
provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable.
For purposes of this Agreement, "just cause" shall have the same meaning
as set forth in Section VII(B) of the Employment Agreement of even date
between the parties.
Section 2. Continuing Obligations. Employee agrees that, for one year
following (i) his termination of employment with Employer for just cause or
(ii) his resignation as an employee of Employer, Employee shall keep
Employer informed of the identification of Employee's employer and the
nature of such employment or of Employee's self-employment. Employer
agrees that, within fifteen days after receiving notice pursuant to this
Section 2 of the identification of the prospective employer, the nature of
the employment or self-employment or any change therein, Employer will
advise Employee as to whether such employment constitutes a violation of
Section 1 hereof.
Section 3. Injunctive Relief. Employee acknowledges that the violation
of the covenants contained in this Agreement would be detrimental and cause
irreparable injury to Employer and its affiliates which could not be
compensated by money damages. Employee agrees that an injunction from a
court of competent jurisdiction is the appropriate remedy for these
provisions, and consents to the entry of an appropriate judgment enjoining
Employee from violating these provisions in the event there is a find of
their breach.
Section 4. Severability of Covenants. Each of the covenants contained in
this Agreement are independent covenants, which may be available to or
relied upon by Employer and its affiliates in any court of competent
jurisdiction. If any one of the separate and independent covenants shall
be deemed to be unenforceable under the laws of any state of competent
jurisdiction, each of the remaining covenants shall not be affected
thereby. Notwithstanding the provisions of this Section 4, it is
understood that every benefit received by Employee by virtue of this
Agreement is consideration for each separate covenant contained herein.
Section 5. Governing Law. This Agreement shall be governed by the laws
of the State of Louisiana.
Section 6. Other Remedies. The undertakings herein shall not be
construed as any limitation upon the remedies Employer might, in the
absence of this Agreement, have at law or in equity.
INTENDING to be legally bound hereby, Employer and Employee hereby duly
execute this Agreement Not to Compete on the date indicated below.
INTERNET MEDIA CORPORATION
Date: June 1, 1999 By: /s/ David M. Loflin
David M. Loflin
President
Date: June 1, 1999 /s/ Waddell D. Loflin
Waddell D. Loflin
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EXHIBIT 10.48
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Note: Certain material, indicated by three asterisks (***), has been
omitted from this document, pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. The omitted
material has been filed separately with the Securities and Exchange
Commission.
WHOLESALE CUSTOMER -DIAL ACCESS AGREEMENT
This Agreement ("Agreement) entered into as of the Effective Date by and
between ioNET Inc., (a division of PSINet) an Oklahoma Corporation
("ioNET"), and USURF America, Inc. a Nevada Corporation ("WHOLESALE
CUSTOMER").
WHEREAS, ioNET is an Internet service provider offering a wide range of
Services for businesses; and
WHEREAS, WHOLESALE CUSTOMER wishes to purchase Dial Access
Services (Service") from ioNET for the purpose of reselling such Service to
its customers (each, an "END-USER" and, collectively, the "END-USERS")
under a private label.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and promises set forth herein, the parties, intending to be
legally bound, hereby agree as follows:
1.
Definitions.
1.1 Agreement
"Agreement" means this agreement and all attachments, schedules and/or
exhibits thereto.
1.2 Dial Access
"Dial Access" means ioNET (and in some cases, PSINet, ioNET s parent)
making available logical ports on access servers in its POPs, pursuant to
its Dial Service and under the terms and conditions of this Agreement, to
receive incoming analog or ISDN calls from an END-USER to establish a
TCP/IP connection between a single Host and the Network and the Internet.
1 .3 Effective Date
"Effective Date" means the date on which this Agreement is signed by both
parties, or by the last party to sign if the parties sign on different dates.
1.4 END-USER
"END-USER" means the purchaser of Dial Access Service directly from the
WHOLESALE CUSTOMER.
1.5 Host
"Host" means a computer with a network (or IP) address.
1.6 Network
"Network" means the combination of ioNET and its parent, PSINet Inc.,
operated equipment, servers, circuits, and other data transmission
facilities comprising its TCP/IP wide-area network and which, together with
other publicly-accessible TCP/IP networks, comprises the global Internet.
1.7 POP
"POP" means a Network 'point-of-presence" where ioNET (and its parent
PSINet Inc.) data communications equipment and servers are located to
provide END-USERS with access to the Network and the Internet by means of
the Services.
1.8 Program Level
"Program Level" means the specific revenue rate (as described in the
Schedule B) which the WHOLESALE CUSTOMER has committed to reach by the end
of the Ramp Period and to maintain thereafter.
1.9 Ramp Period
"Ramp Period" means the length of time from the Effective Date by the end
of which the WHOLESALE CUSTOMER has committed to attain the revenue rate
corresponding to the WHOLESALE CUSTOMER'S selected Program Level.
1.10 Service Agreement
"Service Agreement" means a legally binding agreement between WHOLESALE
CUSTOMER and an END-USER for Dial Access Service, subject to the applicable
terms and conditions of this Agreement.
1.11 Service
"Service" means the Dial Access Internet services and any Option offered by
ioNET for resale to END-USERS by the WHOLESALE CUSTOMER.
2.
Resale of Services.
2.1 General.
WHOLESALE CUSTOMER shall purchase from ioNET, and ioNET shall sell to
WHOLESALE CUSTOMER for resale to its END-USERS, Dial Access Service
("Service"). Specification, at the prices described in Schedule B, attached
hereto and incorporated herein by reference. ioNET shall invoice WHOLESALE
CUSTOMER for Service with recurring charges commencing on the first day
END-USER accesses the Network. WHOLESALE CUSTOMER commits to reach, by the
end of the Ramp Period, the revenue tier corresponding with the Program
Level selected by WHOLESALE CUSTOMER in Schedule B through its total
payments to ioNET for the Service (excluding taxes).
2.2 Dial Access.
ioNET shall provide to WHOLESALE CUSTOMER, for resale to its END-
USERS, Dial Access through either analog or digital (ISDN, using one or two
B channels where available) dial-up telephone service, for the fees set
forth in Schedule B. Each END-USER is solely and exclusively responsible
for obtaining analog or ISDN telephone service to place the data call to
ioNET s POP, and for all charges relating to such service (unless WHOLESALE
CUSTOMER assumes such obligations on behalf of its END-USERS). ioNET
assumes no liability or responsibility to WHOLESALE CUSTOMER, END-USER or
any third party for long distant toll charges incurred by WHOLESALE
CUSTOMER, END-USER or any third party using the Service.
2.3 Limits on Orders.
WHOLESALE CUSTOMER may order Dial Access on behalf of its present or future
END-USERS and there shall b no limit on the number of END-USERS who may use
the Network. WHOLESALE CUSTOMER acknowledges, however, that Network
capacity cannot be guaranteed, therefore, ioNET may limit WHOLESALE
CUSTOMER'S requests to add additional END-USERS because there is
insufficient capacity on the Network or in the POP to provide Dial Access
to the number of END-USERS requested.
2.4 Service Process Modification.
ioNET reserves the right in its sole discretion to modify its Service
delivery process from time to time, and ioNET wi provide a minimum thirty
(30) days written notice (e-mail notice shall constitute notice) to
WHOLESALE CUSTOMER of any material modification,. WHOLESALE CUSTOMER agrees
to implement and communicate an such changes to END-USERS where necessary
to set END-USER S expectations properly.
2.5 Addition of ioNET Services.
The parties may agree to include additional ioNET services under this
Agreement from time to time. If so, such additional ioNET services shall be
added only by a written modification in the form of an Agreement Amendment.
2.6 License for Services.
2.6.1 Grant of License.
Subject to the terms of this Agreement, ioNET hereby grants to WHOLESALE
CUSTOMER a limited, non-exclusive, revocable license to, within the 48
contiguous United States, market, distribute, and resell the Service
directly to END-USERS under WHOLESALE CUSTOMER'S private label.
2.6.2 Limitations on License.
The grant of the foregoing license shall not entitle or in any way be
construed to entitle WHOLESALE CUSTOMER to (a) use ioNET trademarks, trade
names, copyrighted material, service marks and/or logos in connection with
WHOLESALE CUSTOMER'S sales, advertisements and promotion of the Services,
except in materials provided (or approved prior to WHOLESALE CUSTOMER'S use
thereof) by ioNET; (b) distribute any Services in violation any United
States governmental export restriction; (c) sublicense or assign any of its
rights under this Agreement, except as may be expressly permitted by this
Agreement; or (d) make any agreement or incur any liability for or on
behalf of ioNET, except as may be expressly permitted by this Agreement.
2.7
Required Terms in Service Agreements.
WHOLESALE CUSTOMER'S Service Agreements with its END-USERS shall contain,
or be substantially similar to (subject to ioNET s approval), the
provisions and specifications set forth in Schedule A, attached hereto and
incorporated herein by reference, and shall not contain provisions
inconsistent or in conflict therewith. ioNET shall provide WHOLESALE
CUSTOMER with notice of revisions to the provisions and specifications set
forth in Schedule A, and WHOLESALE CUSTOMER shall take steps immediately to
modify its Service Agreements with END-USERS to reflect the revisions.
2.8 Emergency Termination.
Within twenty four (24) hours of written notice from WHOLESALE CUSTOMER, or
of electronic notice by fax or electronic mail ("e-mail") with receipt
confirmed, ioNET will, when directed by WHOLESALE CUSTOMER in an emergency,
suspend, disable, or terminate the Services of any END-USER.
2.9 Second-Level Technical Support.
ioNET, through its staff or through a third party, shall provide directly
to WHOLESALE CUSTOMER'S designated technical contacts only (as identified
by WHOLESALE CUSTOMER on a ioNET -provided form), at no additional charge,
reasonable second-level technical support for the Services provided herein
and for Network problems. However, under no circumstances shall ioNET
provide any type of technical support, customer service, or problem
escalation support directly to END-USERS. WHOLESALE CUSTOMER shall not
disclose to its END-USERS any of the contact information for ioNET s or the
third party's staff provided to WHOLESALE CUSTOMER for its exclusive use.
3.
WHOLESALE CUSTOMER'S Obligations.
3.1 Technical Support, Customer Service, and Problem Escalation Support
WHOLESALE CUSTOMER shall be exclusively responsible for all technical
support, customer service, and problem escalation support for its
END-USERS. Under no circumstances shall WHOLESALE CUSTOMER refer END-USER
phone calls, e-mail, or other communications to any ioNET or third party
staff. All communications by WHOLESALE CUSTOMER relating to END-USER
problems or concerns shall be made directly and exclusively between ioNET
(or its designated third party) and WHOLESALE CUSTOMER'S designated
technical contacts.
3.2 END-USER Billing.
WHOLESALE CUSTOMER shall be responsible for all pricing and service plans,
billing and collections with respect to END-USERS. WHOLESALE CUSTOMER is
solely responsible for establishing and collecting END-USER fees for
Service sold to END-USERS and for preparing and delivering invoices to
END-USERS. WHOLESALE CUSTOMER is responsible for payment of all ioNET
charges, pursuant to Section 6 hereof, regardless of whether WHOLESALE
CUSTOMER
is paid by its END-USERS.
3.3 Limitation on Warranties and Representations.
Neither WHOLESALE CUSTOMER nor its agents shall offer warranties or
representations for the Service which would obligate or otherwise bind
ioNET beyond any warranty or representation expressly set forth in this
Agreement, or make any other warranties, promises or representations with
respect to the
Service or the Network, to any END-USER, prospective END-USER, or any other
person or entity.
3.4 Compliance with Net-Abuse Policy.
WHOLESALE CUSTOMER, END-USERS, and any other users of WHOLESALE
CUSTOMER'S connection to ioNET, are required to comply with PSINet's
Net-Abuse Policy ("Policy") as currently set forth on PSINets Web site
(http://www.psi.net) and as the Policy may be modified by ioNET or PSINet
in its sole discretion from time to time. Any content, material, message,
or data made available or transmitted through the Network, wherever it is
sent from, viewed,
received, or retrieved, that is in violation of (a) any local, state,
federal, foreign, or international law, regulation or treaty, or (b) the
Policy, is prohibited. In the event of violation of the above by any
END-USER or WHOLESALE CUSTOMER, ioNET (acting for or through its parent,
PSINet) may suspend or
terminate Services to any such END USER or to WHOLESALE CUSTOMER or may
terminate this Agreement, as set forth in Section 5.3.2.1. In addition to
any activity of its own in violation of the above, WHOLESALE CUSTOMER shall
also be deemed to have violated this Section if one or more of its
END-USERS exhibit persistent, repeated violations or a pattern of
violations which WHOLESALE CUSTOMER fails to stop after reasonable notice
in light of the
circumstances, or if WHOLESALE CUSTOMER permits the re-enablement of an
END-USER S Service (through the same or a different account) after
suspension or termination by ioNET due to a violation of this Section.
3.5 Forecast.
WHOLESALE CUSTOMER shall provide to ioNET, on a monthly basis in
conjunction with the Monthly Account Review described in the ISP Service
Specifications, a four-month rolling forecast of the number of END-USERS
expected to purchase each type of Service and the POPs to which they are
expected to connect. WHOLESALE CUSTOMER acknowledges that Network capacity
can only be planned with such forecasts, therefore WHOLESALE CUSTOMER
agrees to provide realistic forecasts as provided above.
3.6 Registration
WHOLESALE CUSTOMER shall provide to ioNET a list of registered END
USERS. Only registered END USERS shall have access to the Network. ioNET
will design and maintain a special website through which WHOLESALE CUSTOMER
will register END USERS. ioNET requires read-only access to WHOLESALE
CUSTOMER'S authentication data base, in order to provide the most efficient
means of developing a list of registered END USERS; otherwise, WHOLESALE
CUSTOMER is responsible for registering END USERS in a timely manner. Only
registered END USERS will be allowed to access the Network; violation of
this clause can result in termination of this agreement pursuant to section
5.3.2.2. below.
4.
Payment.
4.1 Payment Terms.
Subject to Section 4.5, below, ioNET shall invoice WHOLESALE CUSTOMER
monthly, either in arrears or in advance, depending on the Service, for all
fees for Service under this Agreement. In every case, WHOLESALE CUSTOMER
agrees to pay for all Service utilized by WHOLESALE CUSTOMER. All invoices
will be payable within fifteen (15) days of date of invoice (the "Due Date").
4.2 Late Payment Charges.
Delinquent payments are subject to a late payment charge accruing from the
Due Date at the rate of prime plus one and one-half percent (1.5%) per
month, or portion thereof, of the amount due (but not to exceed the maximum
lawful rate).
4.3 Consequences of Non-Payment.
In the event WHOLESALE CUSTOMER does not remit payment for Undisputed
Charges (defined as all charges invoiced to WHOLESALE CUSTOMER except for
any specified amounts which WHOLESALE CUSTOMER disputes in good faith, with
reference to specific provisions of this Agreement, and with supporting
factual documentation) within five (5) days after the Due Date, ioNET may,
at its option and with seventy two (72) hours prior written notice,
delivered via fax transmission and overnight courier, suspend Service to
WHOLESALE CUSTOMER and/or END-USERS, and/or charge applicable late-payment
fees pursuant to Section 4.2; or as an alternative to such suspension, and
at its sole option, ioNET may terminate this Agreement for material breach
under the provisions of Section 5.3.2, and, in addition, notwithstanding
any restrictions on
the use of Confidential Information, may directly solicit END USERS to
become customers of ioNET instead of WHOLESALE CUSTOMER In the event ioNET
chooses not to exercise its option to terminate, ioNET shall resume
providing Service as soon a. is reasonably practical upon receipt of such
payment, and in
such event WHOLESALE CUSTOMER shall pay ioNET 15% of previous months
billing, which shall be invoiced and paid in accordance with this Section.
4.4 Taxes.
All charges to WHOLESALE CUSTOMER hereunder are exclusive of federal,
state, local and foreign sales, use, excise, utility, gross receipts and
value added (VAT) taxes and other similar tax-hike charges, including
tax-related surcharges
or applicable tariffs, which WHOLESALE CUSTOMER agrees to pay. In the event
that WHOLESALE CUSTOMER provides ioNET with a duly authorized exemption
certificate, ioNET agrees to exempt WHOLESALE CUSTOMER in accordance with
the law, effective on the date the exemption certificate is received by ioNET.
4.5 Payment History .
WHOLESALE CUSTOMER agrees that ioNET may request at any time that an
appropriate reporting agency furnish information to ioNET to enable it to
assess WHOLESALE CUSTOMER'S payment history. The billing arrangement set
forth above constitute an ordinary trade account and not the extension of
"credit". WHOLESALE CUSTOMER acknowledges that ioNET reserves the right to
alter the billing arrangements to WHOLESALE CUSTOMER either before or after
acceptance of this Agreement based on the resulting information.
5.
Term and Termination.
5.1 Term.
The initial term of this Agreement shall be two (2) years beginning on the
Effective Date of this agreement.
5.2 Renewal.
Following 1he initial term, this Agreement will be automatically renewed
for successive one-year terms unless either party notifies the other party
in writing of its intention not to renew at least thirty (30) days prior to
the date of the next renewal.
5.3
Termination.
5.3.1 By Either Party.
Subject to Section 5.3.2, either party may terminate this Agreement (a) if
the other party has materially breached this Agreement and has failed to
cure such breach within thirty (30) days after the non-breaching party has
given written notice clearly specifying such breach, or (b) without cause
by providing the other party with written notice to terminate at least
ninety (90) days prior to the end of the initial term or any renewal term
of this Agreement.
5.3.2 By ioNET.
ioNET may terminate this agreement, with written notice to WHOLESALE
CUSTOMER but without the cure period specified in Section 5.3.1, upon (a)
breach by WHOLESALE CUSTOMER of its payment obligations, pursuant to the
procedures set forth in Section 4.3, or (b) violation by WHOLESALE CUSTOMER
of Section 3.4, pursuant to the procedures set forth in Section 5.3.2.1,
below, but without the cure period only if, in ioNET s sole good faith
judgment, delaying termination during such cure period will cause
substantial injury to ioNET or to the Network.
5.3.2.1 Net Abuse Termination Procedures.
In the event of any END-USER S violation of Section 3.4, ioNET (acting for
or through its parent, PSINet) reserves the right, in its sole discretion,
to suspend or terminate any or all of such END-USER s Services immediately
with written or e-mail notice to WHOLESALE CUSTOMER. In the event of any
violation of Section 3.4 by WHOLESALE CUSTOMER, ioNET may deem such
violation a material breach of this Agreement and may terminate this
Agreement in accordance with Section 5.3.1 or 5.3.2, above.
5.3.2.2 Unauthorized Access
Upon confirmation of any END USER S unauthorized access to the Network,
ioNET reserves the right to terminate this agreement, with written notice
to WHOLESALE CUSTOMER, but without the cure period only if, in ioNET s sole
good faith judgement, delaying termination during such cure period will
cause substantial injury to ioNET or to the Network.
6. Limitation of Warranties & Liability.
6.1 LIMITATION OF WARRANTIES. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
HEREIN, ioNET DOES NOT WARRANT ANY CONNECTION TO, TRANSMISSION OVER, NOR
RESULTS OF USE OF, ANY NETWORK CONNECTION, SERVICE, EQUIPMENT OR FACILITIES
PROVIDED UNDER THIS AGREEMENT. ioNET FURTHER DISCLAIMS ALL WARRANTIES,
WHETHER EXPRESS, IMPLIED
OR STATUTORY, INCLUDING, WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT
OF THIRD PARTY RIGHTS. EXCEPT AS SPECIFICALLY PROVIDED HEREIN, AND SUBJECT
TO THE LIMITATION SET FORTH IN SECTION 6.2, ioNET SPECIFICALLY DISCLAIMS
ANY RESPONSIBILITY FOR ANY DAMAGES SUFFERED BY WHOLESALE CUSTOMER OR ANY
THIRD PARTY, EXCEPT FOR THOSE CAUSED BY ioNET S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WHOLESALE CUSTOMER ACKNOWLEDGES THAT ITS END-USERS MAY
PERIODICALLY NOT BE ABLE TO ACCESS THE NETWORK. ioNET WILL TAKE
COMMERCIALLY REASONABLE MEASURES TO MINIMIZE SUCH INABILITY TO ACCESS THE
NETWORK IF WITHIN ioNET S REASONABLE CONTROL, HOWEVER, ioNET DOES NOT
WARRANT OR REPRESENT THAT EACH AND EVERY END-USER WILL BE ABLE TO ACCESS
THE NETWORK ON EVERY LOG-IN ATTEMPT.
6.2 LIMITATION OF LIABILITIES.
EXCEPT FOR WHOLESALE CUSTOMER'S PAYMENT OBLIGATIONS, OR
THE PARTIES RESPECTIVE INDEMNIFICATION OBLIGATIONS, NEITHER
PARTY (TO INCLUDE ITS PARENT COMPANY IF ANY), SHALL BE LIABLE
TO THE OTHER FOR ANY LOSS, DAMAGE, LIABILITY, CLAIM OR EXPENSE
("CLAIMS") ARISING OUT OF OR IN RELATION TO THIS AGREEMENT OR THE PROVISION
OF ANY SOFTWARE, HARDWARE OR SERVICE, HOWEVER CAUSED, WHETHER GROUNDED IN
CONTRACT, TORT (INCLUDING NEGLIGENCE) OR THEORY OF STRICT LIABILITY,
GREATER THAN THE LESSER OF (A) $100,000, OR (B) THE SUM TOTAL OF WHOLESALE
CUSTOMER'S PAYMENTS TO ioNET DURING THE SIX (6) MONTHS IMMEDIATELY
PRECEDING THE EVENT FOR WHICH DAMAGES ARE CLAIMED. EXCEPT FOR THE PARTIES
RESPECTIVE INDEMNIFICATION OBLIGATIONS, IN NO EVENT SHALL EITHER PARTY BE
LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR OTHER
CONSEQUENTIAL DAMAGES WHETHER OR NOT FORESEEABLE (INCLUDING, WITHOUT
LIMITATION, DAMAGES FOR THE LOSS OF DATA, GOODWILL OR PROFITS) ARISING OUT
OF OR IN RELATION TO THIS AGREEMENT EVEN IF ADVISED BEFOREHAND OF THE
POSSIBILITY OF SUCH LIABILITY. NO ACTION OR PROCEEDING AGAINST IONET MAY BE
COMMENCED MORE THAN TWO YEARS AFTER THE SERVICES GIVING RISE TO THE CLAIM
ARE RENDERED. SECTIONS 6.1 AND 6.2 SHALL SURVIVE FAILURE OF AN EXCLUSIVE
REMEDY.
7.
Proprietary Rights.
7.1 Ownership of Proprietary Data.
Except for the limited license specifically granted to WHOLESALE CUSTOMER
as set forth in Section 2.4, ioNET shall at all times retain full and
exclusive right, title, and ownership interest in and to the Service, the
Network, all its names, logos, trade names, trademarks, copyrights, service
marks and any and all other
intellectual property or trade secret rights related thereto. Neither Party
may use any patent, copyrightable materials, trademark, trade name, trade
secret or other intellectual property right of the other Party except in
accordance with the terms
of the license provision contained herein.
7.2 Notice Requirement.
WHOLESALE CUSTOMER shall place a notice on all materials using ioNET
copyrighted materials, trademarks or service marks (including without
limitation Service Agreements), as follows:
"(c) 199 by ioNET, Licensed to [WHOLESALE CUSTOMER] along with
applicable trademarks and intellectual property. All Rights Reserved."
7.3 Infringement of Proprietary Rights.
WHOLESALE CUSTOMER shall notify ioNET of any action by any third party
known or suspected by WHOLESALE CUSTOMER to constitute an infringement of
ioNET s proprietary rights. WHOLESALE CUSTOMER shall honor all reasonable
requests by ioNET, other than engaging as a party in litigation, to perfect
and protect at ioNET s expense any rights of ioNET in the Services, the
Network or such intellectual property or trade secret rights.
8.
Indemnity Provisions.
8.1 By ioNET.
ioNET will defend, indemnify and hold WHOLESALE CUSTOMER harmless
from and against any losses arising out of any claim by an END-USER which
is based on any warranty, promise or representation made by WHOLESALE
CUSTOMER as part of a Service Agreement (to the extent permitted by ioNET
under this Agreement), relating to ioNET s obligations to provide the
Service. Failure by the WHOLESALE CUSTOMER to include in its Service
Agreements with END-USERS the provisions required by this Agreement shall
relieve ioNET from the responsibilities set forth in this Section 8.1.
8.2 By WHOLESALE CUSTOMER.
WHOLESALE CUSTOMER will defend, indemnify and hold ioNET harmless
from and against all claims, complaints losses, costs and expenses asserted
by third parties to the extent they arise out of or in connection with (a)
WHOLESALE CUSTOMER'S breach of or default of any covenant or provision of
this Agreement, or (b) any negligent or willful act or omission or
violation of Section 3.4 by WHOLESALE CUSTOMER or any of its ENDUSERS, or
their respective directors, officers, owners, employees or agents.
8.3 Defense Obligations.
The indemnifying party under Section 8.1 or 8.2, above, shall assume the
defense of any claim qualifying for indemnification with counsel reasonably
satisfactory to the other party, and the other party shall cooperate to the
extent reasonably requested by the indemnifying party. The other party may
employ its own counsel in any such case, and shall pay such counsel s fees
and expenses.
The indemnifying party shall have the right to settle any claim for which
indemnification is available; provided, however, that to the extent that
such settlement requires the other party to take or refrain from taking any
action or purports to obligate the other party, then the indemnifying party
shall not settle such claim without the prior written consent of the other
party, which consent shall not be unreasonably withheld, conditioned or
delayed.
9.
Nondisclosure.
9.1 Nondisclosure Agreement.
The Bilateral Nondisclosure Agreement (NDA) signed by the parties and
attached is hereby incorporated hereto. The terms and conditions of the NDA
which are incorporated herein by reference in their entirety! shall govern
the exchange of all confidential information between the parties, including
all such exchanges which have taken place prior to the execution of this
Agreement
(without regard to whether information has been expressly marked or
otherwise designated as confidential or proprietary), and shall continue to
bind ioNET and WHOLESALE CUSTOMER and thus survive termination of this
Agreement.
9.2 Pricing Disclosure.
WHOLESALE CUSTOMER shall not disclose the pricing set forth in Schedule B
to any third party, without ioNET s prior written consent. ioNET reserves
the right to terminate this Agreement or pursue any other available legal
remedies, upon such notice of such disclosure.
9.3 Limitation on Disclosures.
WHOLESALE CUSTOMER shall not use ioNET s name, trademark, service
mark or any other identifying symbols, directly or indirectly, in any
advertising, news release, web page, or any other professional or trade
publication, and, except as may be required by law, WHOLESALE CUSTOMER
shall not make any press release, public announcement, or any other
disclosure concerning this Agreement, without ioNET s prior written consent.
10. Dispute Resolution.
Any disagreement or dispute between the parties shall, if not promptly
resolved by mutual agreement, be reduced to writing and submitted to the
executive officers of each party designated to handle such disputes. Within
30 days of the submittal, the executive officers may, upon mutual
agreement, meet to resolve the dispute and to hear any arguments that a
party wishes to make in connection therewith. If the executive officers
reach agreement on the disposition of the dispute, they shall promptly
issue their joint written decision resolving the dispute. Any dispute so
dealt with shall be considered conclusively and finally decided and shall
not be the subject of any litigation. Any dispute, which such executive
officers are unable to promptly decide, may be taken by the aggrieved party
to litigation in the appropriate forum.
11.
General Terms.
11.1 I ndependent Contractors.
The Parties hereto are acting as independent contractors and under no
circumstances shall any of the employees of one party be deemed the
employees of the other for any purpose. Except as otherwise expressly
provided in this Agreement, this Agreement does not constitute either party
as the agent or legal representative of the other party and does not create
a partnership or joint venture between the parties. Except as otherwise
expressly provided in this Agreement, neither party shall have any
authority to act for the other party in any agency or other capacity, to
make commitments of any kind for the account of, or on behalf of, the other
party or to contract for or bind the other party in any manner whatsoever.
This Agreement confers no rights of any kind upon any third party.
11.2 Force Majeure.
ioNET shall not be liable for failure to fulfill its obligations hereunder
if such failure is due to causes beyond its reasonable control, including,
without limitation, actions or failures to act of WHOLESALE CUSTOMER or any
END-USER, acts of God, fire, catastrophe, governmental prohibitions or
regulations, viruses which did not result from the acts or omissions of
ioNET, its
employees or agents, national emergencies, insurrections, riots or wars, or
strikes, lockouts, work stoppages or other labor difficulties. The time for
any performance required hereunder shall be extended by the delay incurred
as a result of such act of force majeure, and ioNET shall act with
diligence to correct such force majeure.
11.3 Delays or Omissions.
No delay or omission to exercise any right, power or remedy accruing to a
party under this Agreement shall impair any such right, power or remedy of
such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of any similar breach or default
thereafter occurring;
nor shall any waiver of any single breach or default be deemed a waiver of
any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of
either party of any breach or default under this Agreement, o any waiver on
the part of either party of any provisions or conditions of this Agreement
must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law c otherwise afforded to a party, shall be cumulative
and not alternative.
11.4 Binding Agreement.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successor and assigns as permitted
hereunder. No person or entity other than the parties hereto is or shall be
entitled to bring an action to enforce any provision of this Agreement
against either of the parties hereto, and the covenants and agreement set
forth in this Agreement shall be solely for the benefit of, and shall be
enforceable only by, the parties hereto or their respective successors and
assigns as permitted hereunder.
11.5 Notices.
All notices and other communications required or permitted hereunder shall
be in writing and shall be mailed by certified registered mail (return
receipt requested), overnight express air courier, charges prepaid, or
facsimile addressed as follows:
To WHOLESALE CUSTOMER:
USURF America, Inc.
Attn: David M. Loflin
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Telephone: 225-922-7744
Fax: 225-922-9123
To ioNET:
ioNET Inc.
101 N. Robinson, Suite 200
Oklahoma City, Oklahoma 73102
Facsimile: 800-223-9964
Attn: Leonard Conn, CEO
with a copy to:
Newlan & Newlan
Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
Telephone: 972-353-3880
Fax: 972-353-8304
with a copy to:
ioNET Inc. (C/O PSINet)
510 Huntmar Park Drive
Herndon, Virginia 20170
Facsimile: 703.904.4200
Attn: David N. Kunkel, General Counsel
or to such other address as either party shall have furnished to the other
in writing.
If a notice is given by either party by certified or registered mail, it
will be deemed received by the other party on the third business day
following the date on which it is deposited for mailing. If a notice is
given by either party by overnight air express courier, it will be deemed
received by the other party on
the next business day following the date on which it is provided to the air
express courier. If a notice is given by facsimile, it will be deemed
received by the other party after confirmation of receipt. Notwithstanding
the foregoing, any payments made under this Agreement shall be deemed
received only when actually received.
11.6 Compliance with Law.
Both parties are responsible for complying with all applicable rules,
regulations, statutes, codes, ordinances and other requirements, whether
federal, state, local, foreign, or international, in connection with the
matters contemplated by this
Agreement.
11.7 Assignment.
WHOLESALE CUSTOMER s rights under this Agreement are non-transferable, and
may not be assigned or sub-licensed without the prior written authorization
of ioNET. Such authorization may be withheld for any reason. Any act in
derogation of the foregoing shall be null and void; provided, however, that
any such assignment shall not relieve WHOLESALE CUSTOMER of its obligations
hereunder.
11.8 No Third Party Beneficiaries.
No provision to this Agreement is intended, nor shall any be interpreted,
to provide or create any third party beneficiary rights or any other rights
of any kind in any affiliate, shareholder, partner of any party hereto or
any other third party;
including any END-USER, unless specifically provided otherwise herein, and
except as so provided, all provisions hereof, shall be personal solely
between the parties to this Agreement.
11.9
Export Controls.
WHOLESALE CUSTOMER agrees and acknowledges that any export of the
Services and the subsequent use thereof is subject to U.S. export control
laws and regulations. WHOLESALE CUSTOMER shall not directly or indirectly
transfer the Services, or the documentation relating thereto, to any
country or location outside of the United States without obtaining the
prior written consent of ioNET.
11.10 Severability.
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, such provision shall be construed so as to render it
enforceable and effective to the maximum extent possible in order to
effectuate the intention of this Agreement; and the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
11.11 Order of Precedence.
In the event of any conflict or inconsistency between this Agreement and
any attachments, schedules, or exhibits, the provisions of the Agreement
shall control.
11.12 Titles and Subtitles.
The titles of any sections or provisions of this Agreement are for
convenience of reference only and are not to be considered in construing
this Agreement.
11.13 Governing Law.
This Agreement and any issues arising out of or in relation thereto shall
be governed by the law of the State of Oklahoma applicable to contracts to
be performed wholly within that state. WHOLESALE CUSTOMER agrees to the
non-exclusive jurisdiction of the state and federal courts in the State of
Oklahoma for any action or proceeding arising out of or in relation to this
Agreement.
11.14 Entire Agreement; Amendments.
This Agreement and the attachments, schedules and exhibits incorporated
herein by reference constitute the entire understanding and agreement
between the parties with regard to the subjects hereof and supersede all
prior oral and written agreements, commitments and understandings with
respect to such matters. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated, except by a written instrument
signed by the parties hereto.
11.15 Counterparts.
This Agreement may be executed simultaneously in two or more counterparts,
each counterpart shall be deemed to be an original, and all counterparts
individually or together shall constitute one and the same instrument.
EACH PARTY REPRESENTS AND WARRANTS THAT THE PERSON WHOSE
SIGNATURE APPEARS BELOW IS DULY AUTHORIZED TO ENTER INTO THIS AGREEMENT ON
BEHALF OF THE PARTY.
IN WITNESS WHEREOF, THE PARTIES HAVE ENTERED INTO THIS
AGREEMENT AS OF THE DATE SET FORTH:
WHOLESALE CUSTOMER.
By:/s/ David M. Loflin
Name: David M. Loflin
Title: President
Date: , 1999
ioNET INC
By: /s/ Leonard Conn
Name: Leonard Conn
Title: President & CEO
Date: , 1999
Attachments:
Schedule A Certain Terms and Conditions Defining the Services
Schedule B Pricing Schedule
Schedule A
Certain Terms and Conditions Defining the Services,
Including Provisions Required in End-User Service Agreements
1. WHOLESALE CUSTOMER will execute Service Agreements (in whatever form or
mechanism determined by WHOLESALE CUSTOMER), between itself and its
END-USERS, which shall contain, or be substantially similar to (except for
the Net- Abuse Policy to which any change must be submitted to ioNET for
PSINet's approval), all of the terms and conditions contained in this
Schedule A.
2. WHOLESALE CUSTOMER may make appropriate substitutions to the
language of Schedule A to reflect the identity and uniqueness of WHOLESALE
CUSTOMER as the providing party so long as the terms and conditions of
WHOLESALE CUSTOMER'S Service Agreements with its END-USERS comply with
paragraph 1 , above, and do not impose any greater liability, obligation or
commitment on the part of ioNET. As provided below, "Provider" is a
substitute for ioNET, as the network provider.
3. Any waiver, modification, or omission of any of the foregoing
requirements requires the prior written consent of ioNET. ioNET may make
such modifications to the terms and conditions contained in this Schedule A
as are reasonably required in light of industry conditions.
TERMS AND CONDITIONS TO BE FLOWED-DOWN TO END-USERS
A. Compliance with Law and Policy. Every END-USER or other user whose data
enters the Network must comply with the Net-Abuse Policy ("Policy") as
provided at http:/lwww.ionet.net/accountserviceslterms.html and
as the Policy may be modified. In addition, any content, material, message
or data made available or transmitted through the Service, wherever it is
sent from, viewed, received, or retrieved, that is in violation of (i) any
local, state, federal, foreign, or international law, regulation or treaty,
or (b) the Policy, is prohibited. Without limiting the generality of the
foregoing, actions such as misuse of copyrighted materials,
misappropriation of trade or other distinguishing marks, or use of any
Service for defamatory, threatening, obscene or other unlawful purposes are
expressly prohibited. END-USER s access to the Network will be
terminated for any violation of this provision, with no liability to
Provider or any other third-party.
B. Use of the Service. Service is limited to END-USER. Any third party
traffic (transit service) is prohibited, except END-USER may host
world-wide web sites on behalf of third parties, but may not send any
posting (including email) from that third party back to the Network or the
Internet through the Service. END-USERS shall be responsible for its own
user/access security as well as access to the Network. Provider may assist
in network security breach detection or identification, but shall not be
liable for any inability, failure or mistake in doing so. END-USER at all
time has full responsibility for equipment necessary to connect to the
Network and for compliance with Network requirements. END-USER owns and
controls its own domain name.
C. Multiple Logins Prohibited. END-USERS are prohibited from using a single
END- USER account to obtain Dial Access to the Network or the Internet for
more than one Host simultaneously, for example, by logging in from Hosts in
two separate locations at the same time using the same END-USER S username
and password. If multiple logins occur, WHOLESALE CUSTOMER will do one of
the following, at WHOLESALE CUSTOMER'S option, and in cooperation with
ioNET: (i) immediately terminate the offending END-USER S account, or (ii)
arrange for the END-USER immediately to purchase the number of accounts
required to avoid multiple logins.
D. Network Address Translation Prohibited. Neither WHOLESALE CUSTOMER nor
any END-USER may employ any method or technology that would permit Dial
Access from a single END-USER account to be used to provide connectivity to
the Network or the Internet for a Local Area Network ('LAN") (as opposed to
a single Host), whether using network address translation, a proxy server,
or any other means. If an END-USER is using any such method or technology,
WHOLESALE
CUSTOMER will do one of the following, at WHOLESALE CUSTOMER'S
option, and in cooperation with Provider: (i) immediately terminate the
offending END-USER S account, or (ii) arrange for the END-USER immediately
to purchase from Provider one of the Corporate Connectivity Services that
provide for LAN connectivity.
Schedule B
ioNET Dial Access Pricing Schedule
1.
Advance Payment
Wholesale Customer agrees to pay to ioNET a one time, non-refundable fee of
$2,000.00 (US) in advance of the WHOLESALE CUSTOMER'S delivery to ioNET of
the order for Service to its first End-User (or, if its first End-User
subscribe to Dial Service, in advance of the WHOLESALE CUSTOMER'S
activation of the End-User s account).
2.
Dial Service Pricing
Dial Service Pricing (Analog, ISDN, 56K Dial Service as described in the
ISP Services Specification)
Flat Rate Pricing
Total # of End-User Accounts Applicable Base Charge
0-1 ,000 $*** per month, per End-User
1,001-5,000 $*** per month, per End-User
5,001-10,000 $*** per month, per End-User
10,001-75,000 $*** per month, per End-User
75,001 Additional Discounts
Wholesale customer agrees to provide ioNET with a download of all users on
a regular basis. This is the database or which your monthly billing will be
based, so it is imperative that it is to be updated regularly. We do have
measures in place to track the logins, however, unauthorized access by
non-registered users may
terminate this agreement.
Above pricing includes initial B channel lSDN (up to 64Kbps)
Additional B channel (up to 128Kbps) is double the per End-User Base Charge
2.1
Explanation of Base Charge Billing.
Upon the Effective Date, and as of the first day of each month thereafter
throughout the initial or any successive term of this Agreement, the
Wholesale Customer agrees to pay ioNET for each End-User, who is then or
was at any time during the immediately proceeding month authorized to use
the Network, a Base Charge pursuant to the above schedule and subject to
adjustments as provided below.
The applicable Base Charge above is to be applied to all End-Users
irrespective of the rate that previously was applied to that group of
End-Users. For example, if there are a sufficient number of End-Users to
satisfy the second-tier price of $*** per End-User, that price shall apply
to all End-Users for that month. Should the number of End-Users
subsequently fall below the second-tier
threshold, then the first-tier price of $*** per End-User shall apply to
all End Users for that month.
The payment to be made for the initial month of Dial Access for any
End-User shall include (i) an amount equal to the applicable Base Charge
for such initial month, prorated in the case of a partial month, and (ii)
an amount equal to such Base Charge as payment in advance for the next
month of Access. Thereafter payment in advance for the next month of Dial
Access shall continue, but if an End-User cancels service within any month,
the next month s bill will include a prorated charge or credit, depending
upon the time of that End-User s service cancellation within that month.
The Wholesale Customer has read, and agrees to, the terms presented in
Pricing Schedule B.
For ioNET: For WHOLESALE CUSTOMER:
/s/ /s/
- -------------------------
EXHIBIT 10.49
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Note: Certain material, indicated by three asterisks (***), has been
omitted from this document, pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. The omitted
material has been filed separately with the Securities and Exchange
Commission.
This ISP Agreement (together with the Schedules attached hereto, as
modified and supplemented from time to time, the "Agreement") is made and
entered into as of August 2, 1999 by and between NavlNet, Inc., a Delaware
corporation (".NaviNet"), and USURF America, Inc. (the "ISP"). Each of
NaviNet and ISP is a "Party"' and collectively are the "Parties" to this
Agreement.
WHEREAS, NaviNet is in the business of providing, certain data services
described in Section 2,1(a) below; and
WHEREAS, ISP desires to receive such data services from NaviNet and NaviNet
desires to provide such data services to ISP;
NOW, THEREFORE, in consideration of the premises. contained herein and for
other good and valuable consideration, the receipt and sufficiency of
"'hich is hereby acknowledged, the Parties hereby agree as follows:
1 DEFINITIONS
1.1 Definitions. Terms not otherwise defined herein shall be defined and
construed in accordance with the Communications Act of 1934, as amended,
and otherwise as such terms are commonly used in the telecommunications
industry.
2 UNDERTAKING
2.1 Obligations of NaviNet.
(a) Data Services. As of 10 days from the In-Service Date (as defined in
Schedule A), NaviNet shall, subject to the conditions set forth herein, (i)
aggregate all incoming calls from End Users (as defined herein), (ii)
convert data traffic to Transmission Control Protocol/Internet Protocol
("TCP/IP") format and (iii) route data traffic between the End User and ISP
or Internet. "End User" shall mean each subscriber of the ISP who logs on
and whose data traffic is routed through a NaviNet point of presence
("NaviPOP").
(b) Log-in Limitation. In the event that an End User attempts to log in to
the NaviNet network with a user name already in use on the network, NaviNet
shall transmit data traffic to and from multiple log-in locations and treat
each log-in as a unique End User for payment purposes.
(c) Technical Support. NaviNet shall operate a toll-free number tor
technical support and service requests. Such telephone assistance shall be
available to ISP, 24 hours per day, 7 days per week, for each day of the
year and shall be prov1ded by a qualified technician. Such numbers shall
be solely for the use of ISP and not for the use of End User. NaviNet
shall designate a NaviNet Account Manager to respond to general service
inquiries.
(d) Web Page. NaviNet shall provide ISP with access to a customized
NaviNet web page which shall provide information including real-time
network data and customer management reporting.
2.2 Obligations of ISP
(a) Equipment. Prior to the In~Service Date, ISP shall install such
equipment as specified in Schedule A, in accordance with the technical
specifications set forth therein.
(b) Compensation. ISP shall pay all sums arising under this Agreement in
accordance with the requirements set forth herein.
(c) Reporting Requirement. No later than seven (7) days following the
first of every month, ISP shall provide NaviNet in writing a forecast of
the maximum monthly total of anticipated End Users at each NaviPOP for each
of the succeeding three months.
(d) End Users. ISP shall inform each End User in writing of the policy set
forth in Section 2.1(b) and shall require End Users to adhere to the
Acceptable Use Policy (as defined in Section 15.1) as a condition of
receiving service.
3. TERM
3.1 The Agreement shall be effective as of the date first written above.
The initial "Term" of the Agreement shall be for three (3) years from the
In-Service Date. Thereafter, the Agreement will automatically renew for
additional one-year terms, unless either Party notifies the other in
writing of its intention not to renew the Agreement at least ninety (90)
days prior to the expiration of the then current Term.
4. CERTAIN FEES
4.1 Monthly User Fees. Each month, subject to the conditions set forth
herein, ISP shall pay NaviNet a "User Fee". Such fee shall be calculated
by multiplying the total number of End Users counted by the NaviNet
authentication server in each month (such number, the "End User Count" or
"EUC") by the applicable dollar amount set forth in Schedule E (the "Fee
Per End User"). Subject to 2.1(b), the NaviNet authentication server shall
count each End User who logs on with a unique user name during any calendar
month as one End User, regardless of the number of times such End User has
logged on during such month and regardless of the location of such End User.
4.2 Minimum End User Requirement.
(a) Notwithstanding Section 6.3 or any other provision of this Agreement,
for the month beginning March 1, 2000, and for the remainder of the term,
ISP shall pay NaviNet for a minimum EUC of ***, even if the EUC falls below
such number (as relevant, such EUC, "Minimun EUC").
(b) At any time during the term, ISP may give NaviNet notice (the
"Commitment Notice") of its desire to raise the Minimum EUC to a level that
would qualify it for a reduction in the applicable Fee Per End User,
according to Schedule E. In such event, the User Fee shall be adjusted
such that the Fee Per End User charged for the entire actual EUC shall be
the Fee Per End User specified in Schedule E for the Minimum EUC set forth
in the Commitment Notice; provided, however, that in the event that the
actual EUC exceeds the EUC range containing the Minimum EUC in Schedule E,
the User Fee for such excess number of End Users shall be calculated using
the Fee Per End User specified in Schedule E for the actual EUC.
Notwithstanding the foregoing, during the calendar month in which the
Commitment Notice is delivered and for two calendar months thereafter, the
User Fee shall equal the actual EUC multiplied by the Fee Per End User set
forth in Schedule for the Minimum EUC regardless of whether actual EUC is
less than the Minimum EUC; thereafter, the User Fee shall be based on an
EUC of not less than the Minimum EUC set forth in the Commitment Notice, as
set forth in this Section 4.2(b). ISP's rights under this Section 4.2(b )
may be subject to prior approval of the capacity expansion by NaviNet
pursuant to Section 6 of this Agreement.
4.3 Installation Fee. ISP shall pay NaviNet an "Installation Fee." Such
fee shall equal $*** per End User and shall be levied for each new End User
the first time that such End User logs on with a unique user name.
4.4 Late Fees. All charges arising under this Agreement that remain unpaid
by the due date specified in Section 5.1 are subject to interest thereon
from the due date at the maximum rate permitted by law up to 1.5% per
month, calculated pro rata for each day after the due date until the date
of payment.
4.5 Fee Adjustment. During the initial, term, NaviNet shall not increase
fees set forth herein, unless such increase is mandated by changes in laws,
regulations or governmental rulings or necessitated by any such changes
which prevent NaviNet from receiving the material benefit of the contract.
During the Term, NaviNet shall provide at least sixty (60) days advance
written notice to ISP of such fee increase.
5 PAYMENT AND BILLING AND SERVICE ORDERS
5.1 Payment Date. Unless otherwise agreed to in writing by the Parties, ISP
shall pay sums owing under this Agreement by check within forty (40) days
from the date of written invoice from NaviNet.
(a) Invoice Period. NaviNet will send ISP a monthly invoice reflecting the
charges incurred during the prior Month at each NaviPOP. For purposes of
this Agreement, a "Month" shall mean the period beginning at 12:00:00 a.m.,
Local Time, on the first day of each calendar month and ending at 11:59:59
p.m., Local Time, on the last day of each calendar month. "Local Time"
refers to the timie in each time zone where a given NaviPOP is located.
Any calls that begin in one Month and conclude in the following Month shall
be invoiced to the later Month. Failure by NaviNet to send a monthly
invoice shall not constitute a default or waiver by NaviNet of any of its
rights under this Agreement.
5.2 Billing Disputes. If ISP in good faith disputes an invoice rendered by
NaviNet, ISP may withhold payment of the disputed amount provided ISP gives
written notice of the disputed charge within fifteen (15) days prior to the
due date specified in Section 5.1, and pays any undisputed charges as set
forth in this Agreement. No late fees will be assessed on disputed charges
unless and until it is determined that such charges were validly invoiced.
The le Parties shall cooperate with each other to resolve any billing
dispute expeditiously, If the Parties are unable to resolve a billing
dispute within ninety (90) days from the due date, either Party may then
invoke the arbitration provisions of Section 13. The party prevailing in
any such arbitration shall be entitled to reimbursement for reasonable
expenses (as determined by the arbitrator), including reasonable legal
fees, incurred in connection with such arbitration proceedings.
5.3 Service Orders. Prior to receiving service from NaviNet, ISP must
submit NaviNet's Service Order Form describing the initial coverage and
capacity required by ISP. The Service Order Form is subject to the terms
and conditions contained herein.
6 VOLUME AND CAPACITY REQUIREMENTS
6.1 Capacity Expansion Request. NaviNet's obligation to provide service
under this Agreement is contingent on the availability of capacity at each
NaviPOP. Therefore, the Parties have set forth below certain approval
procedures and penalties which are intended to encourage ISP to notify
NaviNet of anticipated variations in the EUC at any NaviPOP from month to
month. THEREFORE, NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IF AT
ANY TIME AFTER MARCH 1, 2000, THE NUMBER OF END USERS AT ANY NAVIPOP AT ANY
TIME EXCEEDS THE PREVIOUS MONTH'S EUC BY MORE THAN *** AND SUCH INCREASE
HAS NOT BEEN PREAPPROVED IN ACCORDANCE WITH THIS SECTION, NAVNET MAY, IN
ITS SOLE DISCRETION, BLOCK SERVICE TO THE ADDITIONAL END USERS IN EXCESS OF
*** OVER THE PREVIOUS MONTH'S EUC, OR CHARGE A PREMIUM FOR SUCH END USERS
AS SET FORTH IN SECTION 6.2, AND IN THE EVENT THAT NAVINET HAS NOT BLOCKED
SERVICE TO SUCH END USERS, ISP AGREES TO PAY FOR SUCH END USERS AS SET
FORTH IN SECTION 6.2.
(a) If lSP seeks to increase the number of End Users at any NavjPOP over
the previous month's EUC at such NaviPOP by less THAN or equal to ***, no
preapproval is required under this Agreement.
(b) If ISP seeks to increase the number of End Users at any NaviPOP over
the previous month's EUC by more than ***, ISP shall request in writing
authorization for increased capacity from NaviNet. Such request shall
state the aggregate capacity requested by ISP (the "Requested End User
Count") and shall set forth the month in which the increased capacity is
required. Upon receipt of such request, NaviNet, in its sole discretion,
shall approve or reject such request in writing. If NaviNet approves such
request, NaviNet shall provide such increased service at the volume level
specified in the month indicated to ISP in writing.
6.2 Capacity Fees. If NaviNet has not specifically authorized an increase
in capacity in accordance with Section 6.1(b) and the number of End Users
at any time exceeds the previous month's EUC by more than ***, and provided
NaviNet does not block service to such additional End Users, ISP shall pay
two times the applicable Fee Per End User for the number of End Users in
excess of the previous month's EUC plus ***. Such fees shall be in
addition to and not in lieu of fees set forth in Section 4.
6.3 Capacity Reduction Notification. Notwithstanding the provisions of
Section 4, in no event shall the Minimum EUC for any month during the Term
be less than eighty-five percent (85%) of the actual EUC for the
immediately preceding month.
7 CONFIDENTIAL AND PROPRIETARY INFORMATION
7.1 (a) For the purposes of this Agreement, "Confidential Information"
shall mean information conveyed to the other Party in any form, including
but not limited to processes, technology, know-how, drawings, reports,
models, patent applications, technical or product specifications, pricing
information, the terms and conditions of this Agreement and computer
hardware and software. In addition, the terms and provisions, but not the
existence, of this Agreement shall be deemed Confidential Information and
may be disclosed only in accordance with the terms of this Section 7. Each
Party agrees to maintain in confidence and not to disclose to any third
party Confidential Information without the prior written consent of the
other party. A Party receiving Confidential Information shall (i) use
Confidential Information only when necessary to perform its obligations
under this Agreement, (ii) maintain adequate procedures to preserve the
integrity of Confidential Information, which are at least equal to the
procedures such Party would use to protect its own Confidential
Information, (iii) disclose Confidential Information only to those of its
respective employees and consultants having a need to know such
Confidential Information in carrying out the duties of each Party under
this Agreement and then only if such employees and consultants have been
expressly advised of the requirements of this Section 7 and (iv) upon
termination of this Agreement immediately return all Confidential
Information without retaining copies thereof. Notwithstanding Section 13 of
this Agreement, either Party may seek injunctive relief to enforce this
Section.
(b) The provisions of this Section 7 shall not apply to the extent that
such Confidential Information was: (i) in the public domain prior to
disclosure, or becomes so known subsequent to such disclosure through no
fault of the receiving Party, (ii) received by the receiving Party from a
third party not under an obligation to the owner of such information not to
disclose it, or (iii) approved for release by prior written consent of the
disclosing Party.
(c) The provisions of this Section 7 shall not prevent the disclosure of
the terms of this Agreement by either Party to investors or investment
bankers who sign a non-disclosure agreement, where notice and a copy of
such agreement is provided to the other Party no later than seven (7) days
following such disclosure.
7.2 Proprietary Information. Each party agrees to refrain from obtaining or
attempting to obtain any industrial or intellectual property rights that
are based in whole or in part on Confidential Information received by it.
8 EVENTS OF DEFAULT
The following shall constitute an "Event of Default" under this Agreement:
8.1 ISP may be deemed to be in default of its obligations under this
Agreement if: ISP fails to perform or fulfill any of its obligations under
this Agreement, including failure to abide by the decision of the
arbitrator in accordance with Section 13, and such failure is not remedied
within thirty (30) days after written notice thereof from NaviNet; provided
however, that NaviNet may in its sole discretion extend such thirty (30)
day period. Any such extension must be in writing.
8.2 NaviNet may be deemed to be in default of its obligations under this
Agreement if: NaviNet fails to perform or fulfill any of its obligations
under this Agreement, including failure to abide by the decision of the
arbitrator in accordance with Section 13, and such failure is not remedied
within thirty (30) days after written notice thereof from ISP; provided
however, that ISP may in its sole discretion extend such thirty (30) day
period. Any such extension must be in writing.
9 TERMINATION
9.1 This Agreement may be terminated prior to the expiration of the Term:
(a) by either party in the Event of Default by the other Party;
(b) by either party in the event of any event set forth in Section 10.1
which remains in effect for more than thirty (30) days;
(c) by either Party if any law, regulation or governental ruling, or
interpretation or implementation thereof by a competent court or regulatory
authority, prevents that Party from receiving a material benefit of the
contract.
9.2 Any termination shall be effective upon written notice by the
terminating Party to the non-terminating Party in accordance with Section
16.9.
9.3 Upon termination of this Agreement, ISP shall remain liable to NaviNet
for (i) all payabIes outstanding, (ii) any uninvoiced User Fees and (iii)
the User Fee for the Minimum EUC for the remainder of the Term.
10 LIMITATION Of LIABILITY
10.1 Force Majeure. Neither NavtNet nor ISP shall be liable in any respect
for any failure of performance hereunder, if such is due to acts of God,
fire, explosion, vandalism, cable cut, storm or other similar occurrence,
any law, order, regulation, direction, action or request of the United
States government or of any other government or of any civil or military
authority, national emergencies, insurrections, riots, wars, strikes,
lockouts or work stoppages or other labor difficulties, supplier failures
(including failure of performance of any carrier), shortages, breaches or
delays, or preemption of existing service in compliance with a final rule
or regulation of the Federal Communications Commission or a court of
competent jurisdiction.
10.2 Disclaimer of Warranties. Except as expressly set forth in this
Agreement, NaviNet makes no warranties, representations or agreements,
written or oral, express or implied, either in fact or by operation of law,
including warranties of merchantability and fitness for a particular purpose.
10.3 Limitation of Liability. Neither NaviNet nor ISP shall be liable to
the other Party nor any other person, firm or entity for any incidental,
indirect, special, consequential, punitive or reliance damages of any
nature whatsoever regardless of the foreseeability thereof (including, but
not limited to, any claim from any client, customer, third party or patron
for loss of services, lost profits or lost revenues) arising under or in
connection with this Agreement, or the performance hereunder, arising from
any breach, or partial breach, or potential breach of the provisions of
this Agreement, or arising out of any act or omission by either NaviNet or
ISP, their respective agents, employees or affiliates whether based on
breach of contract, breach of warranty, negligence or any other theory of
liability. ISP's sole and exclusive remedy for any breach of this
Agreement shall be as set forth in Section 11.
11 PERFORMANCE STANDARDS
11.1 Service Interruption Credits. NaviNet shall grant a credit allowance
(a "Service Credit") for Service Interruption (as defined in Section
11.1(b)) to ISP.
(a) Credit Intervals. Service Credits shall be calculated and credited in
fifteen (15) minute intervals beginning upon notification by ISP to the
toll-free NaviNet number referenced in Section 2.1(c) and ending upon
restoration of service (such interval, "Downtime"), provided however, no
Service Credit shall be granted for Service Interruption lasting less than
sixty (60) minutes in duration. For example, if the Service Interruption
has a duration of 1 hour and 35 minutes, the Downtime is 1.5 hours.
(b) Service Interruption. "Service Interruption" is deemed to occur if
there is a "Total Service Interruption" (ISP is unable to receive or
transmit any traffic from the NaviPOP) or a "Partial Service Interruption"
(ISP is able to receive traffic from one or more, but not all, NaviPOPs)
which is not due to (i) the negligence of or acts or omissions of ISP or
its agents, (ii) failure of power, equipment or circuits provided by ISP or
its agents, (iii) scheduled maintenance or repairs or (iv) any force
majeure event set forth in Section 10.1.
(c) Total Service Interruption. In the event of a Total Service
Interruption, ISP shall receive a Service Credit equal to the previous
month's billable EUC times the Current Month Fee Per End User (as defined
below) times the quotient of the Downtime divided by 720 hours per month.
The "Current Month" is the month during which the Service Interruption
occurs. The "Current Month Fee Per End User" if ISP has delivered a
Commitment Notice, is the Fee Per End User determined pursuant to Section
4.2(b) and, if ISP has not delivered a Commitment Notice, is the weighted
average of the Fee Per End User paid by ISP for the Current Month.
(d) Partial Service Interruption. In the event of a Partial Service
Interruption, ISP shall receive a Service Credit equal to the previous
month's billable EUC at each of the interrupted NaviPOPs times the Current
Month Fee Per End User times the quotient of the Downtime at the respective
NaviPOP divided by 720 hours per month.
11.2 Modem Availability Credits. If NaviNet does not meet the Modem
Availability Minimum (as defined below), NaviNet shall grant a credit
allowance (a "Modem Credit" and, together with the Service Credits, the
"Credits") to ISP as set forth below. ISP's sole remedy in the event that
NaviNet fails to meet the Modem Availability Minimum shall be to receive
Modem Credits.
(a) Modem Availability Claim. If ISP believes that NaviNet has failed to
meet the Modem Availability Minimum, ISP may submit notice or a claim (a
"Claim") to NaviNet, which notice shall specify the date and hour of the
failure, as well as the NaviPOP to which such failure relates (the "Subject
NaviPOP").
(b) Calculation of Modem Credit. If NaviNet determines that its modem
ports at the Subject NaviPOP had available capacity during the hour in
which the Claim arose (the "Claim Hour"), no Modem Credits shall be owing
to ISP with respect to such Claim. If NaviNet determines that its modem
ports at the Subject NaviPOP were at capacity during the Claim Hour, ISP
may be entitled to a Modem Credit, determined as set forth below.
Step 1: If the number of End Users concurrently logged into the NaviNet
network through the Subject NaviPOP during the Claim Hour (the "Claim Hour
End User Maximum") is less than the average number of End Users
concurrently logged into the NaviNet network through the Subject NaviPOP
during the Claim Hour for the seven (7) days immediately preceding the date
on which the Claim arose (the "Average End User Maximum"), then proceed to
Step 2. If not, NaviNet shall not owe any Modem Credits to ISP as a result
of the Claim.
Step 2: If the total number of Unsuccessful Sessions (as defined below)
during the month in which the Claim arose (the "Claim Month") is less than
or equal to the Modem Availability Minimum, NaviNet shall not owe any Modem
Credits to ISP as a result of any Claim asserted during such Claim Month.
If the total number of Unsuccessful Sessions during the Claim Month is
greater than the Modem Availability Minimum, NaviNet shall provide Modem
Credits to ISP equal to the product of multiplying (a) the Current Month
Fee Per End User by (b) the number obtained by subtracting the Modem
Availability Minimum from the total number of Unsuccessful Sessions during
the Claim Month.
"Modem Availability Minimum" is one percent (1%) of the aggregate of (a)
the total Successful Sessions for the Claim Month and (b) the total number
of Unsuccessful Sessions during the Claim Month.
A "Successful Session" occurs whenever an End User logs onto a NaviPOP .
"Unsuccessful Sessions" means the Average End User Maximum minus the Claim
Hour End User Maximum.
11.3 Application of Credits. Any Credits earned by ISP for any calendar
month shall appear on the invoice for the month immediately subsequent
thereto; provided, however, that in no event shall Na\liNet be liable for a
Credit in excess the User Fee invoiced in such month.
11.4 Waiver of Credits. If ISP should fail to comply with the provisions
of Sections 2.2(c) or 6.1 at any time, ISP shall be deemed to have
waived-its right to receive any Credits to which it may have been entitled
for the month during which the failure occurs.
12 INDEMNIFICATION
12.1 ISP shall indemnify, hold harmless and defend NaviNet, its directors,
officers, agents, employees and/or representatives from and against any and
all claims, demands, causes of action, losses, expenses or liabilities,
including reasonable attorney's fees. on account ofin.iury or death of any
person or loss of or damage to any and all property arising, directly or
indirectly, out of the acts or omissions of ISP, any subcontractor,
director, officer, agent, employee and/or representative of each of them,
in the performance of any obligations arising under this Agreement, except
to the extent such cause of action, loss, expense or liability is caused
solely by the gross negligence or willful misconduct of NaviNet.
12.2 NaviNet shall indemnify, hold hannless, and defend ISP, its directors,
officers, agents, employees and/or representatives from and against any and
all claims, demands, causes of action, losses, expenses or liabitities,
including reasonable attorney's fees, on account of injury or death of any
person or loss of or damage to any and all property arising, directly or
indirectly, out of the acts or omissions of NaviNet, any subcontractor,
director, officer, agent, employee and/or representative of each of them,
in the performance of any obligations arising under this Agreement, except
to the extent such cause of action, loss, expense or liability is caused
solely by the gross negligence or willful misconduct of ISP.
13 DISPUTE RESOLUTION
13.1 Any dispute arising out of or relating to this Agreement shall be
settled by arbitration by an arbitrator chosen by NaviNet and approved by
ISP and in accordance with the rules of the American Arbitration
Association. The decision of the arbitrator shall be final and binding.
Judgment upon the award rendered by the arbitrator may be enforced by any
court with jurisdiction. All such arbitration shall be conducted at a
location chosen by NaviNet. Pending resolution of the dispute, the Parties
agree to continue to perform all obligations arising under this Agreement.
14 SERVICE MARKS
14.1 NaviNet grants ISP a non-exclusive, non-transferable license to use
the "NaviNet" name as well as the service marks set forth in Schedule B.
ISP grants NaviNet a non-exclusive, non-transferable license to use the
"USURF America, Inc." name as well as the service marks set forth in
Schedule C. Such license is intended solely for the purpose of advertising
and marketing ISP's alliance with NaviNet without exposing either Party to
claims for service mark or trade mark infringement. Each Party shall retain
exclusive ownership of all service marks and trade marks associated with
its business. Either party may at any time revoke such license granted
hereby to the other Party.
14.2 Each Party agrees to obtain the oral or written approval of the other
Party prior to: (i) the publication, dissemination or transmission of any
promotional material containing the name or service marks of the other
party and (ii) the use of tbe name or service marks of the other Party in
conjunction with any other names or service marks.
15 ACCEPTABLE USE POLICY
15.1 ISP shall maintain a written policy which is consistent with and
includes all of the material terms of the policy attached hereto as
Schedule D, including without limitation, a prohibition against unlawful
use of its network and requirement of cooperation with law enforcement
officials in the pursuit of illegal uses of its network (such policy,
"Acceptable Use Policy"). ISP shall deliver in writing such Acceptable Use
Policy to NaviNet within thirty (30) days following the execution of this
Agreement and shall deliver in writing to NaviNet all material changes made
to such Acceptable Use Policy within thirty (30) days of such changes. ISP
shall require all End Users to adhere to the Acceptable Use Policy as a
condition of receiving ISP service. Failure of an End User to comply with
such Acceptable Use Policy shall be grounds for termination of End User's
contract with ISP at the request of NaviNet. Notwithstanding anything
herein to the contrary, NaviNet may block any data traffic to or from End
Users, which appear to violate such Acceptable Use Policy.
16 MISCELLANEOUS
16.1 Number Portability. Notwithstanding the availability of number
portability in a particular jurisdiction, the Parties agree that any line
numbers assigned to ISP in connection with service provided under this
Agreement are provided solely for the use of NaviNet services. Upon
termination of this Agreement, ISP shall be prohibited from using any line
numbers assigned to it by NaviNet.
16.2 Entire Agreement; Modifications in Writing. This Agreement constitutes
the entire Agreement between ISP and NaviNet and supersedes all prior
agreements and undertakings, whether written or oral, concerning the
subject matter of this Agreement. No amendments or modifications to the
printed terms and provisions of this Agreement will be valid or binding
unless such amendments or modifications are agreed to in writing and signed
by both Parties.
16.3 Assignability. Neither Party may assign this Agreement or any right or
obligation hereunder without the prior written consent of the other Party,
which consent shall not be unreasonably withheld; provided, however, that
NaviNet may assign this Agreement to any entity controlled by or under
common control with NaviNet without seeking ISP's consent and ISP's consent
shall not be required in connection with the sale or other transfer of all
or substantially all of the assets of or equity interests in NaviNet.
16.4 Waiver. The failure of either Party to give notice of default or to
enforce or insist upon compliance with any of the terms or conditions of
this Agreement shall not be construed as a waiver thereof or of any other
term or condition of this Agreement.
16.5 Choice of Law. This Agreement shall be governed by and interrupted in
accordance with the laws of the State of New York, without regard to the
choice of law rules thereof.
16.6 Relationship Between the Parties. Except as expressly stated herein,
neither NaviNet nor ISP is an agent, employer, partner. contractor or joint
venturer of the other.
16.7 Severability. In the event any portion of this Agreement is found to
be invalid or nullified, it shall not affect the validity of any other
provision of this Agreement.
16.8 Survivability. The terms and provisions contained in this Agreement
that by their sense and context are intended to survive the performance or
termination thereof by the Parties hereto shall so survive the completion
of performance or termination of this Agreement, including without
limitation provisions for indemnification and the making of any and all
payments due hereunder .
16.9 Notices. Notices to be given to any Party under this Agreement shall
not be effective unless in writing and hand-delivered or mailed by
registered or certified mail to said party at its address as set forth
below, or to such other address as has been designated by the other party
in accordance with this Section 16.9.
If to NaviNet:
NaviNet, Inc.
600 Federal Street
Andover, MA 01810
Attention: T .C. Browne
If to ISP:
USURF Amenca, Inc.
8748 Quarters Lake Road
Baton Rouge, LA 70809
Attn: David M. Loflin
Notices shall be effective on the date delivered, if by hand, or if by mail
on the third business day after the date mailed.
16.10 Headings. Descriptive headings in this Agreement are for convenience
only and shall not affect the construction of this Agreement.
16.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same document.
16.12 Year 2000 Compliance. The "Year 2000 Problem" refers to the
potential inability of some computer software to appropriately treat
date-related information or functions involving dates of January 1,2000 and
thereafter. The Parties make the following representations and warranties,
to the exclusion of all other representations and warranties made in this
Agreement, with respect to the Year 2000 Problem:
(a) NaviNet represents that is has made and will continue to make
commercially reasonable
efforts to ensure that the computer systems it uses or intends to use in
providing the NaviNet Data Services will not be materially impaired by the
Year 2000 Problem, provided, however, that ISP acknowledges and agrees that
NaviNet is an integrator of systems and services provided by other
entities, and NaviNet can neither modify the products and services of such
entities nor guarantee that they will function without adverse effect from
the Year 2000 Problem. NaviNet will periodically inform ISP of the steps
NaviNet is taking to ensure against adverse effects on the NaviNet Data
Services cause by the Year 2000 Problem. Breach of the foregoing
representations and obligations shall constitute an Event of Default under
Section 8.2, and ISP's sole and exclusive remedy for such Default shall be
termination in accordance with Section 9.1. ISP's sole and exclusive
remedy for any service interruption or impairment caused by the Year 2000
Problem shall be as set forth in Section 11.1.
(b) ISP represents that it has been given ample opportunity to make inquiry
into the programming and operational aspects of any and all computer
systems that it utilizes, or intends to utilize, in its business
operations, and ISP hereby warrants that, as to such systems, ISP will make
reasonable efforts to ensure that the Year 2000 Problem will not materially
adversely affect ISP's business operations or performance under this
Agreement. Breach of the foregoing shall constitute an Event of Default
under Section 8.1, and NaviNet's sole and exclusive remedy for such Default
shall be termination in accordance with Section 9.1.
(c) It is expressly agreed that the indemnification contained in Section
12, including the limitations of liability referenced therein, shall apply
to any third-party claims arising out of a breach of the above Year 2000
Problem representations and warranties.
IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement
as of the day and year first written above.
ISP
/s/ David M. Loflin
By: David M. Loflin
Title: Chief Executive Officer
NAVINET, INC.
/s/ T.C. Browne
By: T.C. Browne
Title: Chief Executive Officer
SCHEDULE A - FACILITIES AND EQUIPMENT
1. EQUIPMENT
1.1 ISP shall install the following equipment in accordance with the
specifications set forth herein.
(a) TBD Back-end TBD circuit(s) (optional); *
(b) Two (2} RADIUS server(s);
(c) TBD CSU/OSU device(s);
(d) TBD router port(s) of TBD type
* NaviNet recommends installation of Back-end circuit(s) in connection with
the use of the NaviNet
Data Services. If ISP elects not to install a Back-end circuit(s), it
shall so indicate below.
Back-end circuit(s) to be installed? Yes No X
2. IN-SERVICE DATE
2.1 Prior to August 15, 1999 (such date, the ''In-Service Date"), ISP
shall install and test in conjunction with NaviNet the equipment set forth
above and shall notify NavlNet that it is prepared to receive service.
SCHEDULE B - NAVINET SERVICE MARKS
(Show "NaviNet", "GeoDial ISP", "GeoDial" in their appropriate fonts)
SCHEDULE C - ISP SERVICE MARKS
(Show ISP Marks in their appropriate fonts)
SCHEDULE D - ACCEPTABLE USE POLICY
SCHEDULE E - FEE SCHEDULE
End User Count Fee Per End User Fee Per End User
Two Year Term Three Year Term
EUC less than or
equal to 5,000 $*** $***
5,000 less than EUC
less than or equal
to 10,000 $*** $***
10,000 less than EUC
less than or equal
to 25,000 $*** $***
25,000 less than EUC
less than or equal
to 50,000 $*** $***
50,000 less than EUC
less than or equal
to 100,000 $*** $***
EUC greater
than 100.000 $*** $***
(d) Example. If the aggregate EUC calculated by the NaviNet authentication
server is 10,100, the User Fee with a three year term is calculated as
follows: 10,100 x $*** = $***
- -------------------------
EXHIBIT 10.50
- -------------------------
WARRANT AGREEMENT
THIS AGREEMENT dated as of November 1, 1999, between USURF America, Inc., a
Nevada corporation (the "Company"), and Securities Transfer Corporation, a
Texas corporation (the "Warrant Agent").
RECITALS:
A. Pursuant to a private offering of 100,000 units of securities (the
"Units") by the Company, the Company proposes to issue to the purchasers of
the Units 100,000 Warrants (individually, a "Warrant", and, collectively,
the "Warrants"), to purchase an aggregate of 100,000 shares of Common Stock
of the Company (the "Warrant Shares").
B. The Company desires to provide for the issuance of warrant certificates
(the "Warrant Certificates") representing the Warrants.
C. The Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer and exchange of Warrant Certificates and
exercise of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrant Certificates and the Warrants, and the respective
rights and obligations thereunder of the Company, the registered holders of
the Warrant Certificates and the Warrant Agent, the parties hereto agree as
follows:
1. Definitions. As used herein:
A. "Common Stock" shall mean shares of common stock of the Company,
$.0001 par value (the "Common Stock"), whether now or hereafter authorized,
which have the right to participate in the distribution of earnings and
assets of the Company without limit as to amount or percentage.
B. "Corporate Office" shall mean the place of business of the Warrant
Agent located in Dallas, Texas, or its successor (for the mailing address
of the Warrant Agent, see paragraph 13 hereof).
C. "Exercise Period" shall mean the period commencing on the date of the
issuance of the Warrants and ending on the Expiration Date.
D. "Exercise Price" shall mean a purchase price of $6.00 per share of
Common Stock (the "Warrant Exercise Price").
E. "Expiration Date" shall mean 5:00 p.m. Central Time, on the date which
is two (2) years from the date of execution hereof, or if such day shall be
a holiday or day on which banks are authorized to close, then 5:00 p.m.
Central Time, whichever is in effect, on the next following day that in the
State of Texas is not a holiday or a day on which banks are authorized to
close.
F. "Registered Holder" shall mean the person in whose name any Warrant
Certificate shall be registered on the books maintained by the Warrant
Agent pursuant to this Agreement.
G. "Subsidiary" shall mean any corporation of which shares having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (regardless of whether the shares of any other class or classes
of such corporation shall have or may have voting power by reason of the
happening of any contingency) are at the time directly or indirectly owned
by the Company or one or more subsidiaries of the Company.
H. "Transfer Agent" shall mean the Company's transfer agent, Securities
Transfer Corporation, or its successor.
I. "Warrant" or "Warrants" shall mean and include up to 100,000 Warrants
to be issued to the purchasers of the Units to purchase a like number of
shares of the authorized and unissued Common Stock of the Company.
J. "Warrant Shares" shall mean and include up to 100,000 shares of
authorized and unissued Common Stock initially reserved for issuance on
exercise of the Warrants and any additional shares of Common Stock or other
property which may hereafter be issuable or deliverable on exercise of the
Warrants pursuant to paragraph 5 of this Agreement.
2. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company in accordance with the instructions
set forth hereafter in this Agreement, and the Warrant Agent hereby accepts
such appointment and agrees to perform the duties and obligations required
of it, as such duties and obligations are set forth herein.
3. Warrants and Issuance of Warrant Certificates. Each Warrant shall
initially entitle the Registered Holder of the Warrant Certificate
representing such Warrant to purchase one shares of Common Stock on
exercise thereof, subject to modification and adjustment as hereinafter
provided in paragraph 10. The Warrant Certificates will be issued and
delivered by the Warrant Agent on written order of the Company signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement.
4. Form and Execution of Warrant Certificates. The Warrant Certificates
representing the Warrants to be issued to the purchasers of the Units shall
be substantially in the form attached as Exhibit "A" and may have such
letters, numbers or other marks of identification and such legends,
summaries or endorsements printed, lithographed or engraved thereon as the
Company may deem appropriate and as are not inconsistent with the
provisions hereof.
The Warrant Certificates shall be dated as of the date of issuance,
whether on initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Warrant Certificates.
Warrant Certificates representing the Warrants to be issued to the
purchasers of the Units shall be numbered serially with the letters "WPOD"
preceding the number of each Warrant Certificate.
Warrant Certificates shall be executed on behalf of the Company by its
President and Secretary, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. In the event any officer of the Company who executed the
Warrant Certificates shall cease to be an officer of the Company before the
date of issuance of the Warrant Certificates or before countersignature and
delivery by the Warrant Agent, such Warrant Certificates may be
countersigned, issued and delivered by the Warrant Agent with the same
force and effect as though the person who signed such Warrant Certificates
had not ceased to be an officer of the Company.
5. Exercise of Warrants. The Warrants shall be exercisable during the
Exercise Period. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of the surrender for
exercise (the "Exercise Date") of the Warrant Certificate. The exercise
form shall be executed by the Registered Holder thereof or his attorney
duly authorized in writing and shall be delivered together with payment to
the Warrant Agent, in cash or by official bank or certified check, of an
amount in lawful money of the United States of America. Such payment shall
be in an amount equal to the Exercise Price per Warrant as hereinabove
defined.
The person entitled to receive the number of Warrant Shares deliverable
on such exercise shall be treated for all purposes as the holder of such
Warrant Shares as of the close of business on the Exercise Date. The
Company shall not be obligated to issue any fractional share interests in
Warrant Shares issuable on exercise of a Warrant. If more than one Warrant
shall be exercised at one time by the same Registered Holder, the number of
full shares which shall be issuable on exercise thereof shall be computed
on the basis of the aggregate number of full shares issuable on such exercise.
As soon as practicable on or after the Exercise Date and in any event
within 30 days after such date, the Warrant Agent shall cause to be issued
and delivered to the person or persons entitled to receive the same, a
certificate or certificates for the number of Warrant Shares deliverable on
such exercise. No adjustment shall be made in respect of cash dividends on
Warrant Shares deliverable on exercise of any Warrant. The Warrant Agent
shall promptly notify the Company in writing of any exercise of any Warrant
and of the number of Warrant Shares delivered and shall cause payment of an
amount in cash equal to the Exercise Price to be made promptly to the order
of the Company. The parties contemplate such payments will be made by the
Warrant Agent to the Company as collected funds are received by the Warrant
Agent. The Warrant Agent shall hold any proceeds collected and not yet
paid to the Company in a Federally-insured escrow account at a commercial
bank selected by the Warrant Agent, at all times relevant hereto.
Following a determination by the Warrant Agent that collected funds have
been received, the Warrant Agent shall cause share certificates to be
issued representing the number of Warrants exercised by the holder.
Expenses incurred by the Warrant Agent hereunder, including
administrative costs, costs of maintaining records and other expenses,
shall be paid by the Company according to the standard fees imposed by the
Warrant Agent for such services.
A detailed accounting statement setting forth the number of Warrants
exercised, the net amount of exercised funds and all expenses incurred by
the Warrant Agent shall be transmitted to the Company on payment of each
exercise amount. Such accounting statement shall serve as an interim
accounting for the Company during the Exercise Period. The Warrant Agent
shall render to the Company a complete accounting setting forth the number
of Warrants exercised, the identity of persons exercising such Warrants,
the number of shares issued, the amounts to be distributed to the Company
and all other expenses incurred by the Warrant Agent, at the completion of
the Exercise Period.
6. Redemption of Warrants. The Warrants are redeemable upon 30-days'
written notice to their holders for $.01 per Warrant at any time that (1)
the bid price of the Company's Common Stock has equalled or exceeded $7.50
per share for a period of 5 consecutive trading days preceding the stated
redemption date and (2) the shares of Common Stock underlying the Warrants
shall have been duly registered under the Securities Act of 1933, as
amended. The Company shall provide Warrant Agent with a copy of any such
notice of redemption.
From and after the redemption date, all rights of the holders of Warrants
(except the right to receive the redemption price) shall terminate, but
only if (a) on or prior to the redemption date the Company shall have
irrevocably deposited with the Warrant Agent as paying agent a sufficient
amount to pay on the redemption the redemption price for all Warrants
called for redemption and (b) the notice of redemption shall have stated
the name and address of the Warrant Agent and the intention of the Company
to deposit such amount with the Warrant Agent on or before the redemption
date.
7. Reservation of Shares and Payment of Taxes. The Company covenants that
it will, at all times, reserve and have available from its authorized
shares of Common Stock such number of shares of Common Stock as shall then
be issuable on exercise of all outstanding Warrants. The Company covenants
that all Warrant Shares, when issued, shall be duly and validly issued,
fully paid and non-assessable, and free from all taxes, liens and charges
with respect to the issue thereof.
If any Warrant Shares require registration with, or approval of, any
government authority under any Federal or state law before such shares may
be validly issued or delivered, the Company covenants it will, in good
faith and as expeditiously as possible, endeavor to secure such
registration or approval, as the case may be.
Warrantholders shall pay all documentary stamp or similar taxes and other
government charges that may be imposed with respect to the issuance of the
Warrants, or the issuance, transfer or delivery of any Warrant Shares on
exercise of the Warrants. In the event the Warrant Shares are to be
delivered in a name other than the name of the Registered Holder of the
Warrant Certificate, no such delivery shall be made unless the person
requesting the same has paid to the Warrant Agent the amount of any such
taxes or charges incident thereto.
The Warrant Agent is hereby irrevocably authorized to requisition
certificates for Warrant Shares from the Transfer Agent as required from
time to time. The Company has, contemporaneously with the execution of
this Agreement, authorized the Transfer Agent to comply with all such
requisitions. The Company will file with the Warrant Agent a statement
setting forth the name and address of its Transfer Agent for the Company's
Common Stock issuable on exercise of the Warrants and of any successor
Transfer Agent.
8. Registration of Transfer of Warrant Certificates. The Warrant
Certificates may not be transferred in whole or in part except as
authorized in this Agreement. Warrant Certificates to be exchanged shall
be surrendered to the Warrant Agent at its Corporate Office. The Company
shall execute, and the Warrant Agent shall countersign, issue and deliver
in exchange therefor, the Warrant Certificate or Certificates which the
holder making the transfer shall be entitled to receive.
The Warrant Agent shall keep transfer books at its Corporate Office in
which it shall register Warrant Certificates and the transfer thereof. On
due presentment for transfer of any Warrant Certificates at such office,
the Company shall execute, and the Warrant Agent shall issue and deliver to
the transferee or transferees, a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants.
The Warrants will not be publicly traded.
9. Loss or Mutilation. On receipt by the Company and the Warrant Agent of
evidence satisfactory as to the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate, the Company shall
execute, and the Warrant Agent shall countersign and deliver in lieu
thereof, a new Warrant Certificate representing an equal aggregate number
of Warrants. In the case of loss, theft or destruction of any Warrant
Certificate, the individual requesting issuance of a new Warrant
Certificate shall be required to indemnify the Company and Warrant Agent in
an amount satisfactory to each of them. In the event a Warrant Certificate
is mutilated, such Certificate shall be surrendered and cancelled by the
Warrant Agent prior to delivery of a new Warrant Certificate. Applicants
for a substitute Warrant Certificate shall also comply with such other
regulations and pay such other reasonable charges as the Company may
prescribe.
10. Adjustment of Exercise Price and Shares.
A. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall issue any of its Common Stock as a stock
dividend or shall subdivide the number of outstanding shares of Common
Stock into a greater number of shares, then, in either of such events, the
Exercise Price in effect at the time of such action shall be reduced
proportionately and the number of shares of Common Stock purchasable
pursuant to the Warrants shall be increased proportionately. Conversely,
in the event the Company shall reduce the number of its outstanding shares
of Common Stock by combining such shares into a smaller number of shares,
then, in such event, the Exercise Price in effect at the time of such
action shall be increased proportionately and the number of shares of
Common Stock at that time purchasable pursuant to the Warrants shall be
decreased proportionately. Such stock dividend paid or distributed on the
Common Stock in shares of any other class of the Company or securities
convertible into shares of Common Stock shall be treated as a dividend paid
or distributed in shares of Common Stock to the extent shares of Common
Stock are issuable on the payment or conversion thereof.
B. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall be recapitalized by reclassifying its
outstanding shares of Common Stock into shares with a different par value,
or by changing its outstanding Common Stock to shares without par value or
in the event of any other material change of the capital structure of the
Company or of any successor corporation by reason of any reclassification,
recapitalization or conveyance, prompt, proportionate, equitable, lawful
and adequate provision shall be made whereby any holder of the Warrants
shall thereafter have the right to purchase, on the basis and the terms and
conditions specified in this Agreement, in lieu of the shares of Common
Stock of the Company theretofore purchasable on the exercise of any
Warrant, such securities or assets as may be issued or payable with respect
to, or in exchange for, the number of shares of Common Stock of the Company
theretofore purchasable on exercise of the Warrants had such
reclassification, recapitalization or conveyance not taken place; and, in
any such event, the rights of any holder of a Warrant to any adjustment in
the number of shares of Common Stock purchasable on exercise of such
Warrant, as set forth above, shall continue and be preserved in respect of
any stock, securities or assets which the holder becomes entitled to
purchase; provided, however, that a merger, acquisition of a going business
or a portion thereof (whether for cash, stock, notes, other securities, or
a combination of cash and securities), exchange of stock for stock,
exchange of stock for assets, or like transaction involving the Company
will not be considered a "material change" for purposes of this paragraph,
and no adjustment shall be made under this paragraph 10 by reason of any
such merger, acquisition, exchange of stock for stock, exchange of stock
for assets, or like transaction.
C. In the event the Company, at any time while the Warrants shall remain
unexpired and unexercised, shall sell all or substantially all of its
property, or dissolves, liquidates or winds up its affairs, prompt,
proportionate, equitable, lawful and adequate provision shall be made as
part of the terms of such sale, dissolution, liquidation or winding up such
that the holder of a Warrant may thereafter receive, on exercise of such
Warrant, in lieu of each share of Common Stock of the Company which such
holder would have been entitled to receive upon exercise of such Warrant,
the same kind and amount of any stock, securities or assets as may be
issuable, distributable or payable on any such sale, dissolution,
liquidation or winding up with respect to each share of Common Stock of the
Company; provided, however, that, in the event of any such sale,
dissolution, liquidation or winding up, the right to exercise the Warrants
shall terminate on a date fixed by the Company, such date to be not earlier
than 5:00 p.m., Central Time, on the 30th day next succeeding the date on
which notice of such termination of the right to exercise the Warrants has
been given by mail to the holders thereof at such addresses as may appear
on the books of the Company.
D. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to purchase shares of its
Common Stock at a price per share more than 10% below the then-current
market price per share (as defined below) of its Common Stock at the date
of taking such record, then (i) the number of shares of Common Stock
purchasable pursuant to the Warrants shall be redetermined as follows: the
number of shares of Common Stock purchasable pursuant to a Warrant
immediately prior to such adjustment (taking into account fractional
interests to the nearest 1,000th of a share) shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common
Stock of the Company then outstanding (excluding the Common Stock then
owned by the Company) immediately prior to the taking of such record, plus
the number of additional shares offered for purchase, and the denominator
of which shall be the number of shares of Common Stock of the Company
outstanding (excluding the Common Stock owned by the Company) immediately
prior to the taking of such record, plus the number of shares which the
aggregate offering price of the total number of additional shares so
offered would purchase at such current market price; and (ii) the Exercise
Price per share of Common Stock purchasable pursuant to a Warrant shall be
redetermined as follows: the Exercise Price in effect immediately prior to
the taking of such record shall be multiplied by a fraction, the numerator
of which is the number of shares of Common Stock purchasable immediately
prior to the taking of such record, and the denominator of which is the
number of shares of Common Stock purchasable immediately after the taking
of such record as determined pursuant to clause (i) above. For the purpose
hereof, the current market price per share of Common Stock of the Company
at any date shall be deemed to be the average of (A) the highest bid and
asked prices as reported by NASDAQ if the Common Stock of the Company is
admitted to listing for trading thereon, or (B) the highest bid and asked
prices reported on the OTC Electronic Bulletin Board of the NASD, for 30
consecutive business days commencing 15 business days prior to the record
date.
E. On exercise of the Warrants by the holders, the Company shall not be
required to deliver fractions of shares of Common Stock; provided, however,
that prompt, proportionate, equitable, lawful and adequate adjustment in
the Exercise Price payable shall be made in respect of any such fraction of
one share of Common Stock on the basis of the Exercise Price per share.
F. In the event, prior to expiration of the Warrants by exercise or by
their terms, the Company shall determine to take a record of the holders of
its Common Stock for the purpose of determining shareholders entitled to
receive any stock dividend, distribution or other right which will cause
any change or adjustment in the number, amount, price or nature of the
Common Stock or other stock, securities or assets deliverable on exercise
of the Warrants pursuant to the foregoing provisions, the Company shall
give to the Registered Holders of the Warrants at the addresses as may
appear on the books of the Company at least 15 days' prior written notice
to the effect that it intends to take such a record. Such notice shall
specify the date as of which such record is to be taken; the purpose for
which such record is to be taken; and the number, amount, price and nature
of the Common Stock or other stock, securities or assets which will be
deliverable on exercise of the Warrants after the action for which such
record will be taken has been completed. Without limiting the obligation
of the Company to provide notice to the Registered Holders of the Warrant
Certificates of any corporate action hereunder, the failure of the Company
to give notice shall not invalidate such corporate action of the Company.
G. The Warrant shall not entitle the holder thereof to any of the rights
of shareholders or to any dividend declared on the Common Stock, unless the
Warrant is exercised and the Warrant Shares purchased prior to the record
date fixed by the Board of Directors of the Company for the determination
of holders of Common Stock entitled to such dividend or other right.
H. No adjustment of the Exercise Price shall be made as a result of, or
in connection with, (i) the establishment of one or more employee stock
option plans for employees of the Company, or the modification, renewal or
extension of any such plan, or the issuance of Common Stock on exercise of
any options pursuant to any such plan, (ii) the issuance of individual
warrants or options to purchase Common Stock, the issuance of Common Stock
upon exercise of such warrants or options, or the issuance of Common Stock
in connection with compensation arrangements for directors, officers,
employees, consultants or agents of the Company or any Subsidiary, and the
like, or (iii) the issuance of Common Stock in connection with a merger,
acquisition of a going business or a portion thereof (whether for cash,
stock, notes, other securities, or a combination of cash and securities),
exchange of stock for stock, exchange of stock for assets, or like
transaction.
11. Duties, Compensation and Termination of Warrant Agent. The Warrant
Agent shall act hereunder as agent and in a ministerial capacity for the
Company, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not, by issuing and delivering Warrant
Certificates or by any other act hereunder, be deemed to make any
representations as to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of the Common Stock or
other property delivered on exercise of any Warrant. The Warrant Agent
shall not be under any duty or responsibility to any holder of the Warrant
Certificates to make or cause to be made any adjustment of the Exercise
Price or to determine whether any fact exists which may require any such
adjustments.
The Warrant Agent shall not (i) be liable for any recital or statement of
fact contained herein or for any action taken or omitted by it in reliance
on any Warrant Certificate or other document or instrument believed by it
in good faith to be genuine and to have been signed or presented by the
proper party or parties, (ii) be responsible for any failure on the part of
the Company to comply with any of its covenants and obligations contained
in this Agreement or in the Warrant Certificates, or (iii) be liable for
any act or omission in connection with this Agreement, except for its own
negligence or willful misconduct.
The Warrant Agent may, at any time, consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken or omitted by it in good faith in
accordance with such notice, statement, instruction, request, direction,
order or demand.
Any notice, statement, instruction, request, direction, order or demand
of the Company shall be sufficiently evidenced by an instrument signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall not be liable for any action taken or omitted by it in
accordance with such notice, statement, instruction, request, direction,
order or demand.
The Company agrees to pay the Warrant Agent compensation for its services
hereunder and to reimburse the Warrant Agent for its reasonable expenses in
accordance with the terms of Exhibit "B" attached hereto and incorporated
herein by this reference. The Company further agrees to indemnify the
Warrant Agent against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for any action taken or
omitted by the Warrant Agent in the execution of its duties and powers
hereunder, excepting losses, expenses and liabilities arising as a result
of the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties or the Company may terminate the
Warrant Agent and the Warrant Agent shall be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of
the Warrant Agent's own negligence or willful misconduct) on 30 days' prior
written notice to the other party. At least 15 days prior to the date such
resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each
Warrant Certificate. On such resignation or termination, the Company shall
appoint a new Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in
writing of the resignation by the Warrant Agent, then the Registered Holder
of any Warrant Certificate may apply to any court of competent jurisdiction
for the appointment of a new Warrant Agent. Any new Warrant Agent, whether
appointed by the Company or by such court, shall be a bank or trust company
having a capital and surplus, as shown by its last published report to its
shareholders, of not less than $1,000,000.
After acceptance in writing of an appointment of a new Warrant Agent is
received by the Company, such new Warrant Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; provided, however, if it shall be
necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed. The Company shall file a
notice of appointment of a new Warrant Agent with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new Warrant Agent may
be converted or merged, or any corporation resulting from any consolidation
to which the Warrant Agent or any new Warrant Agent shall be a party, or
any corporation succeeding to the corporate trust business of the Warrant
Agent shall be a successor Warrant Agent under this Agreement, provided
that such corporation is eligible for appointment as a successor to the
Warrant Agent. Any such successor Warrant Agent shall promptly cause
notice of its succession as Warrant Agent to be mailed to the Company and
to the Registered Holder of each Warrant Certificate. No further action
shall be required for establishment and authorization of such successor
Warrant Agent.
The Warrant Agent, its officers or directors and its subsidiaries or
affiliates may buy, hold or sell Warrants or other securities of the
Company and otherwise deal with the Company in the same manner and to the
same extent and with like effect as though it were not the Warrant Agent.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company.
12. Modification of Agreement. The Warrant Agent and the Company may, by
supplemental agreement, make any changes or corrections in this Agreement
they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or mistake or error herein contained.
Additionally, the parties may make any changes or corrections deemed
necessary which shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, this Agreement shall not otherwise
be modified, supplemented or altered in any respect, except with the
consent in writing of the Registered Holders of Warrant Certificates
representing not less than 66 2/3% of the Warrants outstanding; provided,
however, that no change in the number or nature of the Warrant Shares
purchasable on exercise of a Warrant, or the Exercise Price or the Exercise
Period thereof shall be made without the consent, in writing, of the
Registered Holder of the Warrant Certificate representing such Warrant,
other than such changes as are specifically prescribed by this Agreement.
13. Notices. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder shall
be deemed given sufficiently in writing and sent via a nationally
recognized overnight courier service, by registered or certified mail,
return receipt requested and postage prepaid, or by facsimile to:
in the case of the Company:
USURF America, Inc.
Attention: David M. Loflin
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Facsimile: (225) 922-9123
with a copy to:
Newlan & Newlan
Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
Facsimile: (972) 353-3880
and, in the case of the Warrant Agent:
Securities Transfer Corporation
Attention: Kevin Halter, Jr.
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
Facsimile: (972) 447-9890
and, if to the Registered Holder of a Warrant Certificate, at the address
of such holder as set forth on the books maintained by the Warrant Agent.
14. Persons Benefitting. This Agreement shall be binding upon and inure
to the benefit of the Company, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of the Warrant
Certificates. Nothing in this Agreement is intended to or shall be
construed to confer on any other person any right, remedy or claim or to
impose on any other person any duty, liability or obligation.
15. Further Instruments. The parties shall execute and deliver any and
all such other instruments and shall take any and all such other actions as
may be reasonable or necessary to carry out the intention of this Agreement.
16. Severability. If any provision of this Agreement shall be held,
declared or pronounced void, voidable, invalid, unenforceable or
inoperative for any reason by any court of competent jurisdiction,
government authority or otherwise, such holding, declaration or
pronouncement shall not affect adversely any other provision of this
Agreement, which shall otherwise remain in full force and effect and be
enforced in accordance with its terms, and the effect of such holding,
declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
17. Waiver. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies
as provided by law. No delay or failure on the part of either party in the
exercise of any right or remedy arising from a breach of this Agreement
shall operate as a waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party where
required hereunder to any act or occurrence shall not be deemed to be a
consent to any other act or occurrence.
18. General Provisions. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Texas. Except
as otherwise expressly stated herein, time is of the essence in performing
hereunder. This Agreement embodies the entire agreement and understanding
between the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, and this Agreement may not be
modified or amended or any term or provision hereof waived or discharged
except in writing signed by the party against whom such amendment,
modification, waiver or discharge is sought to be enforced. The headings
of this Agreement are for convenience of reference only and shall not limit
or otherwise affect the meaning thereof. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above-mentioned.
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin, President
SECURITIES TRANSFER CORPORATION
By: /s/ Kevin Halter, Jr.
Kevin Halter, Jr., President
- -------------------------
EXHIBIT 10.50.1
- -------------------------
November 1, 1999
Mr. Michael Cohn
Registration Rights Letter Agreement
Dear Mr. Cohn.
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 50,000 shares of the $.0001 par value common stock
of USURF America, Inc., a Nevada corporation (the "Company"), owned by you,
as well as up to 50,000 additional shares, which shares of Common Stock
underlie certain common stock purchase warrants (the "Warrants") of the
Company owned by you (all such shares being referred to as the "Subject
Shares"). It is our understanding that:
1. Registration Rights. At any time from the date hereof, you may demand
on one occasion, in writing, the registration under the Act for sale the
Subject Shares underlying the Warrants owned by you. Upon receipt of your
written demand for registration, the Company will take steps to register
your Subject Shares in a registration statement (the "Registration
Statement") under the Act. Your right to such registration may be
exercised one time only. Should the Company elect to include the Subject
Shares in a Registration Statement prior to your demand having been made,
the Company will notify you of such fact. This election by the Company to
include the Subject Shares shall be deemed to satisfy your demand right of
registration, whether or not you elect to have the Subject Shares included
in such Registration Statement.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you and all other
selling shareholders, on a pro rata basis, based on the percentage that
your shares bear to all shares being registered for selling shareholders.
In this regard, the Company reserves the right to include additional
selling shareholders in any registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Securities and
Exchange Commission (the "Commission"), a Registration Statement with
respect to the Subject Shares and use its best efforts to cause such
Registration Statement to become effective, such Registration Statement to
comply as to form and content and in all material respects to the
Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act; and
(h) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin, President
AGREED AND ACCEPTED as of the date
and year first above written:
/s/ Michael Cohn
Michael Cohn
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EXHIBIT 10.51
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November 19, 1999
Mr. David Loflin President
USURF America, Inc.
8748 Quarters Lake Road
Baton Rouge, LA 70809
Dear Mr. Loflin:
This letter agreement (the "Agreement") will confirm our understanding
regarding the production by The Research Works, Inc. ("RW') of reports with
respect to the securities of USURF America, Inc. ("Client"), a Nevada
corporation. This Agreement supercedes any prior agreements between our
companies, and any such prior agreements are to be considered null and void.
Whereas RW is an independent research firm that produces reports with
respect to the securities of its clients, and whereas Client has publicly
traded securities and desires RW to produce a report regarding its
securities ("Report"), in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, RW and Client hereby agree as
follows:
1. The term of this Agreement shall commence on the date of your signing of
this Agreement and shall continue through the date of RWs issuance of the
Report.
2. RW shall not distribute the Report without first providing Client with a
reasonable opportunity to review such Report and correct any historical
factual information in such Report that is incorrect.
3. RW shall prepare the Report and print and distribute the report at RWs
own expense to institutional investors whom it believes have an interest in
small-capitalization stocks. RW will also mail to Client 200 copies of the
Report, and Client may duplicate the Report at its own expense or purchase
additional original copies from RW for a nominal fee.
4. In consideration of RWs services with respect to the Report, Client
shall issue to RWwarrants to purchase shares of Client's common stock, the
terms of which warrants shall be set forth in the Warrant Agreement
attached hereto (the "Warrant Agreement"). This Warrant Agreement details
the number of warrants and the various terms and conditions to which the
warrants are subject.
5. Except for a so-called "Shelf' Registration Statement on Form S-1 to be
filed by Client in the near future, with respect to 2,000,000 shares of
Client's common stock for use in as-yet unidentified business acquisitions,
Client represents that (a) it is not presently engaged in a private or
public offering of securities, including any continuing distribution,
whether or not exempt, that will not be concluded prior to issuance of the
Report on Client, and that Client has no intention of making such an
offering within the next 90 days (an "evergreen" prospectus for employee
stock option and other similar plans will not preclude issuance of the
Report); (b) will not use the Report in connection with any offering
without the prior written consent of RW; (c) it and its principals will
keep confidential their knowledge of the pending release of the Report; and
(d) it will cease any distribution of the Report when facts or management's
expectations are materially different from those presented or estimated in
such Report; (e) it will indemnify and hold RWand its officers and
employees harmless from and against any loss, damage, liability, or expense
(including reasonable attorneys' fees and other costs of litigation,
regardless of outcome) arising out of or in connection with (i) any breach
of the representations and covenants made by Client in this Point 5, (ii)
false or misleading information provided to RW by Client, or (iii) claims
relating to the purchase and/or sale of Client's securities arising from
RWs relationship with Client. Such indemnifications shall continue
indefinitely beyond the term of this Agreement.
6. This Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey without regard to the principals of
conflict of laws.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned whereupon this Letter Agreement
shall become a binding agreement.
Very truly yours,
THE RESEARCH WORKS, INC.
By: /s/ William J. Ritger
William J. Ritger
President
AGREED TO AS OF THE DATE FIRST WRITTEN ABOVE:
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin
President
- -----------------------
EXHIBIT 10.51.1
- -----------------------
WARRANT AGREEMENT
THIS AGREEMENT dated as of December 1, 1999, between USURF America, Inc., a
Nevada corporation (the "Company"), and Securities Transfer Corporation, a
Texas corporation (the "Warrant Agent").
RECITALS:
A. Pursuant to a letter agreement between the Company and The Research
Works, Inc. ("RW"), the Company proposes to issue RW 60,000 Warrants
(individually, a "Warrant", and, collectively, the "Warrants"), to purchase
an aggregate of 60,000 shares of Common Stock of the Company (the "Warrant
Shares").
B. The Company desires to provide for the issuance of warrant certificates
(the "Warrant Certificates") representing the Warrants.
C. The Company desires the Warrant Agent to act on behalf of the Company,
and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer and exchange of Warrant Certificates and
exercise of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrant Certificates and the Warrants, and the respective
rights and obligations thereunder of the Company, the registered holders of
the Warrant Certificates and the Warrant Agent, the parties hereto agree as
follows:
1. Definitions. As used herein:
A. "Common Stock" shall mean shares of common stock of the Company,
$.0001 par value (the "Common Stock"), whether now or hereafter authorized,
which have the right to participate in the distribution of earnings and
assets of the Company without limit as to amount or percentage.
B. "Corporate Office" shall mean the place of business of the Warrant
Agent located in Dallas, Texas, or its successor (for the mailing address
of the Warrant Agent, see paragraph 13 hereof).
C. "Exercise Period" shall mean the period commencing on the date of the
issuance of the Warrants and ending on the Expiration Date.
D. "Exercise Price" shall mean a purchase price of $3.50 per share of
Common Stock (the "Warrant Exercise Price").
E. "Expiration Date" shall mean 5:00 p.m. Central Time, on November 30,
2004, or if such day shall be a holiday or day on which banks are
authorized to close, then 5:00 p.m. Central Time, whichever is in effect,
on the next following day that in the State of Texas is not a holiday or a
day on which banks are authorized to close.
F. "Registered Holder" shall mean the person in whose name any Warrant
Certificate shall be registered on the books maintained by the Warrant
Agent pursuant to this Agreement.
G. "Subsidiary" shall mean any corporation of which shares having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (regardless of whether the shares of any other class or classes
of such corporation shall have or may have voting power by reason of the
happening of any contingency) are at the time directly or indirectly owned
by the Company or one or more subsidiaries of the Company.
H. "Transfer Agent" shall mean the Company's transfer agent, Securities
Transfer Corporation, or its successor.
I. "Warrant" or "Warrants" shall mean and include up to 60,000 Warrants
to be issued to the purchasers of the Units to purchase a like number of
shares of the authorized and unissued Common Stock of the Company.
J. "Warrant Shares" shall mean and include up to 60,000 shares of
authorized and unissued Common Stock initially reserved for issuance on
exercise of the Warrants and any additional shares of Common Stock or other
property which may hereafter be issuable or deliverable on exercise of the
Warrants pursuant to paragraph 5 of this Agreement.
2. Appointment of Warrant Agent. The Company hereby appoints the Warrant
Agent to act as agent for the Company in accordance with the instructions
set forth hereafter in this Agreement, and the Warrant Agent hereby accepts
such appointment and agrees to perform the duties and obligations required
of it, as such duties and obligations are set forth herein.
3. Warrants and Issuance of Warrant Certificates. Each Warrant shall
initially entitle the Registered Holder of the Warrant Certificate
representing such Warrant to purchase one shares of Common Stock on
exercise thereof, subject to modification and adjustment as hereinafter
provided in paragraph 10. The Warrant Certificates will be issued and
delivered by the Warrant Agent on written order of the Company signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement.
4. Form and Execution of Warrant Certificates. The Warrant Certificates
representing the Warrants to be issued to the purchasers of the Units shall
be substantially in the form attached as Exhibit "A" and may have such
letters, numbers or other marks of identification and such legends,
summaries or endorsements printed, lithographed or engraved thereon as the
Company may deem appropriate and as are not inconsistent with the
provisions hereof.
The Warrant Certificates shall be dated as of the date of issuance,
whether on initial issuance, transfer, exchange or in lieu of mutilated,
lost, stolen or destroyed Warrant Certificates.
Warrant Certificates representing the Warrants to be issued to the
purchasers of the Units shall be numbered serially with the letters "WRWI"
preceding the number of each Warrant Certificate.
Warrant Certificates shall be executed on behalf of the Company by its
President and Secretary, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. In the event any officer of the Company who executed the
Warrant Certificates shall cease to be an officer of the Company before the
date of issuance of the Warrant Certificates or before countersignature and
delivery by the Warrant Agent, such Warrant Certificates may be
countersigned, issued and delivered by the Warrant Agent with the same
force and effect as though the person who signed such Warrant Certificates
had not ceased to be an officer of the Company.
5. Exercise of Warrants. The Warrants shall be exercisable during the
Exercise Period. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of the surrender for
exercise (the "Exercise Date") of the Warrant Certificate. The exercise
form shall be executed by the Registered Holder thereof or his attorney
duly authorized in writing and shall be delivered together with payment to
the Warrant Agent, in cash or by official bank or certified check, of an
amount in lawful money of the United States of America. Such payment shall
be in an amount equal to the Exercise Price per Warrant as hereinabove
defined.
The person entitled to receive the number of Warrant Shares deliverable
on such exercise shall be treated for all purposes as the holder of such
Warrant Shares as of the close of business on the Exercise Date. The
Company shall not be obligated to issue any fractional share interests in
Warrant Shares issuable on exercise of a Warrant. If more than one Warrant
shall be exercised at one time by the same Registered Holder, the number of
full shares which shall be issuable on exercise thereof shall be computed
on the basis of the aggregate number of full shares issuable on such exercise.
As soon as practicable on or after the Exercise Date and in any event
within 30 days after such date, the Warrant Agent shall cause to be issued
and delivered to the person or persons entitled to receive the same, a
certificate or certificates for the number of Warrant Shares deliverable on
such exercise. No adjustment shall be made in respect of cash dividends on
Warrant Shares deliverable on exercise of any Warrant. The Warrant Agent
shall promptly notify the Company in writing of any exercise of any Warrant
and of the number of Warrant Shares delivered and shall cause payment of an
amount in cash equal to the Exercise Price to be made promptly to the order
of the Company. The parties contemplate such payments will be made by the
Warrant Agent to the Company as collected funds are received by the Warrant
Agent. The Warrant Agent shall hold any proceeds collected and not yet
paid to the Company in a Federally-insured escrow account at a commercial
bank selected by the Warrant Agent, at all times relevant hereto.
Following a determination by the Warrant Agent that collected funds have
been received, the Warrant Agent shall cause share certificates to be
issued representing the number of Warrants exercised by the holder.
Expenses incurred by the Warrant Agent hereunder, including
administrative costs, costs of maintaining records and other expenses,
shall be paid by the Company according to the standard fees imposed by the
Warrant Agent for such services.
A detailed accounting statement setting forth the number of Warrants
exercised, the net amount of exercised funds and all expenses incurred by
the Warrant Agent shall be transmitted to the Company on payment of each
exercise amount. Such accounting statement shall serve as an interim
accounting for the Company during the Exercise Period. The Warrant Agent
shall render to the Company a complete accounting setting forth the number
of Warrants exercised, the identity of persons exercising such Warrants,
the number of shares issued, the amounts to be distributed to the Company
and all other expenses incurred by the Warrant Agent, at the completion of
the Exercise Period.
6. Reservation of Shares and Payment of Taxes. The Company covenants that
it will, at all times, reserve and have available from its authorized
shares of Common Stock such number of shares of Common Stock as shall then
be issuable on exercise of all outstanding Warrants. The Company covenants
that all Warrant Shares, when issued, shall be duly and validly issued,
fully paid and non-assessable, and free from all taxes, liens and charges
with respect to the issue thereof.
If any Warrant Shares require registration with, or approval of, any
government authority under any Federal or state law before such shares may
be validly issued or delivered, the Company covenants it will, in good
faith and as expeditiously as possible, endeavor to secure such
registration or approval, as the case may be.
Warrantholders shall pay all documentary stamp or similar taxes and other
government charges that may be imposed with respect to the issuance of the
Warrants, or the issuance, transfer or delivery of any Warrant Shares on
exercise of the Warrants. In the event the Warrant Shares are to be
delivered in a name other than the name of the Registered Holder of the
Warrant Certificate, no such delivery shall be made unless the person
requesting the same has paid to the Warrant Agent the amount of any such
taxes or charges incident thereto.
The Warrant Agent is hereby irrevocably authorized to requisition
certificates for Warrant Shares from the Transfer Agent as required from
time to time. The Company has, contemporaneously with the execution of
this Agreement, authorized the Transfer Agent to comply with all such
requisitions. The Company will file with the Warrant Agent a statement
setting forth the name and address of its Transfer Agent for the Company's
Common Stock issuable on exercise of the Warrants and of any successor
Transfer Agent.
7. Registration of Transfer of Warrant Certificates. The Warrant
Certificates may not be transferred in whole or in part except as
authorized in this Agreement. Warrant Certificates to be exchanged shall
be surrendered to the Warrant Agent at its Corporate Office. The Company
shall execute, and the Warrant Agent shall countersign, issue and deliver
in exchange therefor, the Warrant Certificate or Certificates which the
holder making the transfer shall be entitled to receive.
The Warrant Agent shall keep transfer books at its Corporate Office in
which it shall register Warrant Certificates and the transfer thereof. On
due presentment for transfer of any Warrant Certificates at such office,
the Company shall execute, and the Warrant Agent shall issue and deliver to
the transferee or transferees, a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants.
The Warrants will not be publicly traded.
8. Loss or Mutilation. On receipt by the Company and the Warrant Agent of
evidence satisfactory as to the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate, the Company shall
execute, and the Warrant Agent shall countersign and deliver in lieu
thereof, a new Warrant Certificate representing an equal aggregate number
of Warrants. In the case of loss, theft or destruction of any Warrant
Certificate, the individual requesting issuance of a new Warrant
Certificate shall be required to indemnify the Company and Warrant Agent in
an amount satisfactory to each of them. In the event a Warrant Certificate
is mutilated, such Certificate shall be surrendered and cancelled by the
Warrant Agent prior to delivery of a new Warrant Certificate. Applicants
for a substitute Warrant Certificate shall also comply with such other
regulations and pay such other reasonable charges as the Company may
prescribe.
9. Adjustment of Exercise Price and Shares.
A. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall issue any of its Common Stock as a stock
dividend or shall subdivide the number of outstanding shares of Common
Stock into a greater number of shares, then, in either of such events, the
Exercise Price in effect at the time of such action shall be reduced
proportionately and the number of shares of Common Stock purchasable
pursuant to the Warrants shall be increased proportionately. Conversely,
in the event the Company shall reduce the number of its outstanding shares
of Common Stock by combining such shares into a smaller number of shares,
then, in such event, the Exercise Price in effect at the time of such
action shall be increased proportionately and the number of shares of
Common Stock at that time purchasable pursuant to the Warrants shall be
decreased proportionately. Such stock dividend paid or distributed on the
Common Stock in shares of any other class of the Company or securities
convertible into shares of Common Stock shall be treated as a dividend paid
or distributed in shares of Common Stock to the extent shares of Common
Stock are issuable on the payment or conversion thereof.
B. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall be recapitalized by reclassifying its
outstanding shares of Common Stock into shares with a different par value,
or by changing its outstanding Common Stock to shares without par value or
in the event of any other material change of the capital structure of the
Company or of any successor corporation by reason of any reclassification,
recapitalization or conveyance, prompt, proportionate, equitable, lawful
and adequate provision shall be made whereby any holder of the Warrants
shall thereafter have the right to purchase, on the basis and the terms and
conditions specified in this Agreement, in lieu of the shares of Common
Stock of the Company theretofore purchasable on the exercise of any
Warrant, such securities or assets as may be issued or payable with respect
to, or in exchange for, the number of shares of Common Stock of the Company
theretofore purchasable on exercise of the Warrants had such
reclassification, recapitalization or conveyance not taken place; and, in
any such event, the rights of any holder of a Warrant to any adjustment in
the number of shares of Common Stock purchasable on exercise of such
Warrant, as set forth above, shall continue and be preserved in respect of
any stock, securities or assets which the holder becomes entitled to
purchase; provided, however, that a merger, acquisition of a going business
or a portion thereof (whether for cash, stock, notes, other securities, or
a combination of cash and securities), exchange of stock for stock,
exchange of stock for assets, or like transaction involving the Company
will not be considered a "material change" for purposes of this paragraph,
and no adjustment shall be made under this paragraph 10 by reason of any
such merger, acquisition, exchange of stock for stock, exchange of stock
for assets, or like transaction.
C. In the event the Company, at any time while the Warrants shall remain
unexpired and unexercised, shall sell all or substantially all of its
property, or dissolves, liquidates or winds up its affairs, prompt,
proportionate, equitable, lawful and adequate provision shall be made as
part of the terms of such sale, dissolution, liquidation or winding up such
that the holder of a Warrant may thereafter receive, on exercise of such
Warrant, in lieu of each share of Common Stock of the Company which such
holder would have been entitled to receive upon exercise of such Warrant,
the same kind and amount of any stock, securities or assets as may be
issuable, distributable or payable on any such sale, dissolution,
liquidation or winding up with respect to each share of Common Stock of the
Company; provided, however, that, in the event of any such sale,
dissolution, liquidation or winding up, the right to exercise the Warrants
shall terminate on a date fixed by the Company, such date to be not earlier
than 5:00 p.m., Central Time, on the 30th day next succeeding the date on
which notice of such termination of the right to exercise the Warrants has
been given by mail to the holders thereof at such addresses as may appear
on the books of the Company.
D. In the event, prior to the expiration of the Warrants by exercise or
by their terms, the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to purchase shares of its
Common Stock at a price per share more than 10% below the then-current
market price per share (as defined below) of its Common Stock at the date
of taking such record, then (i) the number of shares of Common Stock
purchasable pursuant to the Warrants shall be redetermined as follows: the
number of shares of Common Stock purchasable pursuant to a Warrant
immediately prior to such adjustment (taking into account fractional
interests to the nearest 1,000th of a share) shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common
Stock of the Company then outstanding (excluding the Common Stock then
owned by the Company) immediately prior to the taking of such record, plus
the number of additional shares offered for purchase, and the denominator
of which shall be the number of shares of Common Stock of the Company
outstanding (excluding the Common Stock owned by the Company) immediately
prior to the taking of such record, plus the number of shares which the
aggregate offering price of the total number of additional shares so
offered would purchase at such current market price; and (ii) the Exercise
Price per share of Common Stock purchasable pursuant to a Warrant shall be
redetermined as follows: the Exercise Price in effect immediately prior to
the taking of such record shall be multiplied by a fraction, the numerator
of which is the number of shares of Common Stock purchasable immediately
prior to the taking of such record, and the denominator of which is the
number of shares of Common Stock purchasable immediately after the taking
of such record as determined pursuant to clause (i) above. For the purpose
hereof, the current market price per share of Common Stock of the Company
at any date shall be deemed to be the average of the highest bid and asked
prices as reported by The American Stock Exchange for 30 consecutive
business days commencing 15 business days prior to the record date.
E. On exercise of the Warrants by the holders, the Company shall not be
required to deliver fractions of shares of Common Stock; provided, however,
that prompt, proportionate, equitable, lawful and adequate adjustment in
the Exercise Price payable shall be made in respect of any such fraction of
one share of Common Stock on the basis of the Exercise Price per share.
F. In the event, prior to expiration of the Warrants by exercise or by
their terms, the Company shall determine to take a record of the holders of
its Common Stock for the purpose of determining shareholders entitled to
receive any stock dividend, distribution or other right which will cause
any change or adjustment in the number, amount, price or nature of the
Common Stock or other stock, securities or assets deliverable on exercise
of the Warrants pursuant to the foregoing provisions, the Company shall
give to the Registered Holders of the Warrants at the addresses as may
appear on the books of the Company at least 15 days' prior written notice
to the effect that it intends to take such a record. Such notice shall
specify the date as of which such record is to be taken; the purpose for
which such record is to be taken; and the number, amount, price and nature
of the Common Stock or other stock, securities or assets which will be
deliverable on exercise of the Warrants after the action for which such
record will be taken has been completed. Without limiting the obligation
of the Company to provide notice to the Registered Holders of the Warrant
Certificates of any corporate action hereunder, the failure of the Company
to give notice shall not invalidate such corporate action of the Company.
G. The Warrant shall not entitle the holder thereof to any of the rights
of shareholders or to any dividend declared on the Common Stock, unless the
Warrant is exercised and the Warrant Shares purchased prior to the record
date fixed by the Board of Directors of the Company for the determination
of holders of Common Stock entitled to such dividend or other right.
H. No adjustment of the Exercise Price shall be made as a result of, or
in connection with, (i) the establishment of one or more employee stock
option plans for employees of the Company, or the modification, renewal or
extension of any such plan, or the issuance of Common Stock on exercise of
any options pursuant to any such plan, (ii) the issuance of individual
warrants or options to purchase Common Stock, the issuance of Common Stock
upon exercise of such warrants or options, or the issuance of Common Stock
in connection with compensation arrangements for directors, officers,
employees, consultants or agents of the Company or any Subsidiary, and the
like, or (iii) the issuance of Common Stock in connection with a merger,
acquisition of a going business or a portion thereof (whether for cash,
stock, notes, other securities, or a combination of cash and securities),
exchange of stock for stock, exchange of stock for assets, or like
transaction.
10. Duties, Compensation and Termination of Warrant Agent. The Warrant
Agent shall act hereunder as agent and in a ministerial capacity for the
Company, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not, by issuing and delivering Warrant
Certificates or by any other act hereunder, be deemed to make any
representations as to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of the Common Stock or
other property delivered on exercise of any Warrant. The Warrant Agent
shall not be under any duty or responsibility to any holder of the Warrant
Certificates to make or cause to be made any adjustment of the Exercise
Price or to determine whether any fact exists which may require any such
adjustments.
The Warrant Agent shall not (i) be liable for any recital or statement of
fact contained herein or for any action taken or omitted by it in reliance
on any Warrant Certificate or other document or instrument believed by it
in good faith to be genuine and to have been signed or presented by the
proper party or parties, (ii) be responsible for any failure on the part of
the Company to comply with any of its covenants and obligations contained
in this Agreement or in the Warrant Certificates, or (iii) be liable for
any act or omission in connection with this Agreement, except for its own
negligence or willful misconduct.
The Warrant Agent may, at any time, consult with counsel satisfactory to
it (who may be counsel for the Company) and shall incur no liability or
responsibility for any action taken or omitted by it in good faith in
accordance with such notice, statement, instruction, request, direction,
order or demand.
Any notice, statement, instruction, request, direction, order or demand
of the Company shall be sufficiently evidenced by an instrument signed by
its President and attested by its Secretary or Assistant Secretary. The
Warrant Agent shall not be liable for any action taken or omitted by it in
accordance with such notice, statement, instruction, request, direction,
order or demand.
The Company agrees to pay the Warrant Agent compensation for its services
hereunder and to reimburse the Warrant Agent for its reasonable expenses in
accordance with the terms of Exhibit "B" attached hereto and incorporated
herein by this reference. The Company further agrees to indemnify the
Warrant Agent against any and all losses, expenses and liabilities,
including judgments, costs and counsel fees, for any action taken or
omitted by the Warrant Agent in the execution of its duties and powers
hereunder, excepting losses, expenses and liabilities arising as a result
of the Warrant Agent's negligence or willful misconduct.
The Warrant Agent may resign its duties or the Company may terminate the
Warrant Agent and the Warrant Agent shall be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of
the Warrant Agent's own negligence or willful misconduct) on 30 days' prior
written notice to the other party. At least 15 days prior to the date such
resignation is to become effective, the Warrant Agent shall cause a copy of
such notice of resignation to be mailed to the Registered Holder of each
Warrant Certificate. On such resignation or termination, the Company shall
appoint a new Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been notified in
writing of the resignation by the Warrant Agent, then the Registered Holder
of any Warrant Certificate may apply to any court of competent jurisdiction
for the appointment of a new Warrant Agent. Any new Warrant Agent, whether
appointed by the Company or by such court, shall be a bank or trust company
having a capital and surplus, as shown by its last published report to its
shareholders, of not less than $1,000,000.
After acceptance in writing of an appointment of a new Warrant Agent is
received by the Company, such new Warrant Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; provided, however, if it shall be
necessary or expedient to execute and deliver any further assurance,
conveyance, act or deed, the same shall be done at the expense of the
Company and shall be legally and validly executed. The Company shall file a
notice of appointment of a new Warrant Agent with the resigning Warrant
Agent and shall forthwith cause a copy of such notice to be mailed to the
Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new Warrant Agent may
be converted or merged, or any corporation resulting from any consolidation
to which the Warrant Agent or any new Warrant Agent shall be a party, or
any corporation succeeding to the corporate trust business of the Warrant
Agent shall be a successor Warrant Agent under this Agreement, provided
that such corporation is eligible for appointment as a successor to the
Warrant Agent. Any such successor Warrant Agent shall promptly cause
notice of its succession as Warrant Agent to be mailed to the Company and
to the Registered Holder of each Warrant Certificate. No further action
shall be required for establishment and authorization of such successor
Warrant Agent.
The Warrant Agent, its officers or directors and its subsidiaries or
affiliates may buy, hold or sell Warrants or other securities of the
Company and otherwise deal with the Company in the same manner and to the
same extent and with like effect as though it were not the Warrant Agent.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company.
11. Modification of Agreement. The Warrant Agent and the Company may, by
supplemental agreement, make any changes or corrections in this Agreement
they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or mistake or error herein contained.
Additionally, the parties may make any changes or corrections deemed
necessary which shall not adversely affect the interests of the holders of
Warrant Certificates; provided, however, this Agreement shall not otherwise
be modified, supplemented or altered in any respect, except with the
consent in writing of the Registered Holders of Warrant Certificates
representing not less than 66 2/3% of the Warrants outstanding; provided,
however, that no change in the number or nature of the Warrant Shares
purchasable on exercise of a Warrant, or the Exercise Price or the Exercise
Period thereof shall be made without the consent, in writing, of the
Registered Holder of the Warrant Certificate representing such Warrant,
other than such changes as are specifically prescribed by this Agreement.
12. Notices. All notices, demands, elections, opinions or requests
(however characterized or described) required or authorized hereunder shall
be deemed given sufficiently in writing and sent via a nationally
recognized overnight courier service, by registered or certified mail,
return receipt requested and postage prepaid, or by facsimile to:
in the case of the Company: USURF America, Inc.
Attention: David M. Loflin
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Facsimile: (225) 922-9123
with a copy to: Newlan & Newlan
Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
Facsimile: (972) 353-8304
and, in the case of the
Warrant Agent: Securities Transfer Corporation
Attention: Kevin Halter, Jr.
16910 Dallas Parkway, Suite 100
Dallas, Texas 75248
Facsimile: (972) 248-4797
and, if to the Registered Holder of a Warrant Certificate, at the address
of such holder as set forth on the books maintained by the Warrant Agent.
13. Persons Benefitting. This Agreement shall be binding upon and inure
to the benefit of the Company, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of the Warrant
Certificates. Nothing in this Agreement is intended to or shall be
construed to confer on any other person any right, remedy or claim or to
impose on any other person any duty, liability or obligation.
14. Further Instruments. The parties shall execute and deliver any and
all such other instruments and shall take any and all such other actions as
may be reasonable or necessary to carry out the intention of this Agreement.
15. Severability. If any provision of this Agreement shall be held,
declared or pronounced void, voidable, invalid, unenforceable or
inoperative for any reason by any court of competent jurisdiction,
government authority or otherwise, such holding, declaration or
pronouncement shall not affect adversely any other provision of this
Agreement, which shall otherwise remain in full force and effect and be
enforced in accordance with its terms, and the effect of such holding,
declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
16. Waiver. All the rights and remedies of either party under this
Agreement are cumulative and not exclusive of any other rights and remedies
as provided by law. No delay or failure on the part of either party in the
exercise of any right or remedy arising from a breach of this Agreement
shall operate as a waiver of any subsequent right or remedy arising from a
subsequent breach of this Agreement. The consent of any party where
required hereunder to any act or occurrence shall not be deemed to be a
consent to any other act or occurrence.
17. General Provisions. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of Texas. Except
as otherwise expressly stated herein, time is of the essence in performing
hereunder. This Agreement embodies the entire agreement and understanding
between the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, and this Agreement may not be
modified or amended or any term or provision hereof waived or discharged
except in writing signed by the party against whom such amendment,
modification, waiver or discharge is sought to be enforced. The headings
of this Agreement are for convenience of reference only and shall not limit
or otherwise affect the meaning thereof. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original, but
all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above-mentioned.
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin
President
SECURITIES TRANSFER CORPORATION
By: /s/ Kevin Halter, Jr.
Kevin Halter, Jr.
President
- ----------------------
EXHIBIT 10.52
- ----------------------
FINANCIAL PUBLIC RELATIONS AND
INVESTOR RELATIONS SERVICES AGREEMENT
This Financial Public Relations and Investor Relations Services Agreement
is made as of the 27th day of October, 1999, by and between Peter Rochow
("Consultant"), and USURF America, Inc., a Nevada corporation (the "Company").
WHEREAS, Consultant possesses experience in the field of financial public
relations and investor relations; and
WHEREAS, the Company is a publicly-held company and files periodic reports
pursuant to the requirements of the Securities Exchange Act of 1934, with
its common stock listed on the American Stock Exchange under the symbol
"UAX"; and
WHEREAS, the Company desires to hire Consultant and Consultant is willing
to accept the Company as a client.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
it is agreed:
1. The Company hereby engages Consultant, on a non-exclusive basis, to
render consulting services with respect to financial public relations and
investor relations, on behalf of the Company. Consultant hereby accepts
such engagement and agrees to render such consulting services as are listed
on Exhibit "A" attached hereto and incorporated herein by this reference,
throughout the term of this Agreement. Consultant agrees that he shall be
responsible for all expenses incurred in his performance hereunder.
It is further agreed that Consultant shall have no authority to bind the
Company to any contract or obligation or to transact any business in the
Company's name or on behalf of the Company, in any manner. The parties
intend that Consultant shall perform its services required hereunder as an
independent contractor.
2. The initial term of this Agreement shall commence upon the mutual
execution of this Agreement and shall continue through February 29, 2000.
Thereafter, this Agreement shall continue on a month-to-month basis,
provided neither party provides written notice to terminate not less than
20 days prior to the end of the initial term or any renewal term of this
Agreement.
3. In consideration of the services to be performed by Consultant, the
Company agrees to pay to Consultant the compensation set forth on Exhibit
"B" attached hereto and incorporated herein by this reference.
4. The Company represents and warrants to Consultant that:
A. The Company will cooperate fully and timely with Consultant to enable
Consultant to perform his obligations hereunder.
B. The execution and performance of this Agreement by the Company has
been duly authorized by the Board of Directors of the Company.
C. The performance by the Company of this Agreement will not violate any
applicable court decree, law or regulation, nor will it violate any
provisions of the organizational documents of the Company or any
contractual obligation by which the Company may be bound.
5. Until such time as the same may become publicly known, the parties
agree that any information provided to either of them by the other of a
confidential nature will not be revealed or disclosed to any person or
entity, except in the performance of this Agreement, and upon completion of
Consultant's services and upon the written request of the Company, any
original documentation provided by the Company will be returned to it.
Consultant, including each of his affiliates, will not directly or
indirectly buy or sell the securities of the Company at any time when it or
they are privy to non-public information.
Consultant agrees that he will not disseminate any printed matter
relating to the Company, including, without limitation, press releases,
without prior written approval of the Company's legal counsel.
Consultant acknowledges that, in light of the fact that Consultant is in
a special relationship with the Company due to the entrusting by the
Company to Consultant of non-public, material "inside" information
concerning the Company, the relationship between the Company and Consultant
shall be that of a special relationship.
Consultant agrees that he will comply with all applicable securities
laws, in performing on behalf of the Company hereunder.
6. All notices hereunder shall be in writing and addressed to the party at
the address herein set forth, or at such other address as to which notice
pursuant to this section may be given, and shall be given by personal
delivery, by certified mail (return receipt requested), Express Mail or by
national or international overnight courier. Notices will be deemed given
upon the earlier of actual receipt of three (3) business days after being
mailed or delivered to such courier service.
Notices shall be addressed to Consultant at:
Peter Rochow
418 Douglas Park View, S.E.
Calgary, Alberta
Canada T2Z 2R1
and to the Company at:
USURF America, Inc.
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
with a copy to:
Newlan & Newlan, Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
7. Miscellaneous.
A. In the event of a dispute between the parties arising out of this
Agreement, both Consultant and the Company agree to submit such dispute to
arbitration before the American Arbitration Association (the "Association")
at the Association's Dallas, Texas, offices, in accordance with the
then-current rules of the Association; the award given by the arbitrators
shall be binding and a judgment can be obtained on any such award in any
court of competent jurisdiction. It is expressly agreed that the
arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
B. This Agreement is not assignable in whole or in any part, and shall be
binding upon the parties, their heirs, representatives, successors or assigns.
C. This Agreement may be executed in multiple counterparts which shall be
deemed an original. It shall not be necessary that each party execute each
counterpart, or that any one counterpart be executed by more than one
party, if each party executes at least one counterpart.
D. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Texas.
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin
President
/s/ Peter Rochow
Peter Rochow
Exhibit "A"
Financial Public Relations and
Investor Relations Services Agreement
SERVICES TO BE PERFORMED BY CONSULTANT ON BEHALF OF THE COMPANY
The consulting services to be provided by Consultant under the Financial
Public Relations and Investor Relations Services Agreement to which this
Exhibit "A" is attached include, but shall not be limited to:
Increase network of individual brokers and others actually buying the
Common Stock of the Company in Canada and the United States.
Develop a working relationship with the American Stock Exchange specialist
assigned to the Company's Common Stock.
Develop relationships for the Company with regional brokerage firms and
individual stock brokers for additional buying sponsorship of the Common
Stock of the Company.
Contact and keep fully informed stockbrokers that are currently interested
in the Company.
Fax, e-mail or otherwise deliver, on a broad basis, Company information to
stockbrokers and other potential purchasers of the Common Stock of the
Company.
Respond to inquiries from potential investors and others, as requested by
the Company, including Internet inquiries received by the Company at
[email protected] and [email protected].
Exhibit "B"
Financial Public Relations
Consulting Services Agreement
COMPENSATION TO BE PAID BY THE COMPANY TO CONSULTANT
As full payment for Consultant's services during the initial term of the
Financial Public Relations Consulting Services Agreement (the "Agreement")
to which this Exhibit "B" relates, Consultant shall receive, upon execution
of, the following:
30,000 shares of Company Common Stock, which shares shall be valued at a
price of $3.25 per share, or $97,500, in the aggregate. The Company shall
cause all 30,000 of such shares to be registered, at the Company's expense,
pursuant to a Registration Statement on Form S-1 to be filed by the Company
as soon as is practicable following the execution of this Agreement.
Consultant shall be named as a selling shareholder in such Registration
Statement.
As full payment for Consultant's services during each renewal term of the
Agreement to which this Exhibit "B" relates, Consultant shall receive the
following:
7,500 shares of Company Common Stock, which shares shall be valued at a
price equal to the average of the closing bid price, as reported by the
American Stock Exchange, for the Company's Common Stock for the last 5
trading days preceding the first day of each renewal term. The shares of
Company Common Stock issued to Consultant as payment for services during
any renewal term shall possess "piggy-back" rights of registration.
Consultant represents and warrants to the Company that the shares of the
Company being acquired pursuant to the Agreement are being acquired for his
own account and for investment and not with a view to the public resale or
distribution of such shares and further acknowledges that the shares being
issued have not been registered under the Securities Act or any state
securities law and are "restricted securities", as that term is defined in
Rule 144 promulgated by the SEC, and must be held indefinitely, unless they
are subsequently registered or an exemption from such registration is
available.
Consultant represents and warrants that he has investigated the Company,
its financial condition, business and prospects, and has had the
opportunity to ask questions of, and to receive answers from, the Company
with respect thereto. Consultant acknowledges that he is aware that the
Company currently lacks adequate capital to pursue its full plan of
business, specifically, that the Company currently lacks capital with which
to exploit its proprietary Wireless Internet access technology.
Consultant acknowledges that the share certificate or certificates of the
Company issued to him pursuant to this Agreement will bear a legend
restricting future transfer in the following , or similar, form:
"THE STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ISSUED IN RELIANCE UPON
THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(6) OF THE SECURITIES
ACT OF 1933, AS AMENDED. THE STOCK MAY NOT BE TRANSFERRED WITHOUT
REGISTRATION, EXCEPT IN A TRANSACTION EXEMPT FROM SUCH REGISTRATION."
- -----------------------
EXHIBIT 10.53
- -----------------------
October 28, 1999
To: Jim Kaufman
USURF America, Inc.
8748 Quarters Lake Road
Baton Rouge, LA 70809
(225) 922-9123 Fax
Consultation Agreement Investor Relations:
This Consultation Agreement is effective November 1, 1999 through February
1, 2000 between Nostas/Faessel (Consultants) and USURF America, Inc. (UAX).
This Agreement shall be for a period of three (3) months and shall be
automatically renewed unless prior written notice is given by either party
seven (7) days prior the end of each (3) month period.
The Consultants primary responsibility will be:
1. To implement an investor relations program for the purpose of broadening
the company's institutional and shareholder base.
2. To provide public relations information to shareholders and the general
public.
3. To provide introduction to potential investors, analysts, investment
bankers, institutions and investment letters.
4. To provide such other services as may be consistent with the engagement
that the parties may agree upon from time to time.
Compensation:
UAX agrees to give NostaslFaesel1 30,000 restricted common shares to be
registered by January 1, 2000.
15,000 restricted common shares to:
Dr. John Faessel, 1202 Lexington #266, NY, NY 10028
15,000 restricted common shares to:
Mr. Victor Nostas, 3500 Parfet Street Wheat Ridge CO 80033
In the event of a financing completed through the efforts of the
Consultants, the Consultants shall receive 5% in cash and 5%in stock of the
total proceeds raised. This stock shall be registered within 30 days of the
cash received.
USURF America, Inc. NostaslFaessel Group
By: /s/ David M. Loflin
David Loflin President By: /s/ John L. Faessel
By: /s/ Victor Nostas
- -----------------------
EXHIBIT 10.54
- -----------------------
CORPORATE COMMUNICATIONS SERVICES AGREEMENT
This Corporate Communications Services Agreement is made as of the 1st day
of November, 1999, by and between J.F. Mills/Worldwide ("Consultant"), and
USURF America, Inc., a Nevada corporation (the "Company").
WHEREAS, Consultant possesses experience in the field of corporate
communications; and
WHEREAS, the Company is a publicly-held company and files periodic reports
pursuant to the requirements of the Securities Exchange Act of 1934, with
its common stock listed on the American Stock Exchange under the symbol
"UAX"; and
WHEREAS, the Company desires to hire Consultant and Consultant is willing
to accept the Company as a client.
NOW THEREFORE, in consideration of the mutual covenants herein contained,
it is agreed:
1. The Company hereby engages Consultant, on a non-exclusive basis, to
render consulting services with respect to corporate communications, on
behalf of the Company. Consultant hereby accepts such engagement and
agrees to render such consulting services as are listed on Exhibit "A"
attached hereto and incorporated herein by this reference, throughout the
term of this Agreement. The Company shall reimburse Consultant for his
expenses incurred on the Company's behalf hereunder, upon invoice received;
provided, however, that each expense item in excess of $250.00 shall be
pre-approved by the Company, in writing. Without such written
pre-approval, the Company shall not be obligated to reimburse Consultant
for any such item of expense in excess of $250.00.
It is further agreed that Consultant shall have no authority to bind the
Company to any contract or obligation or to transact any business in the
Company's name or on behalf of the Company, in any manner. The parties
intend that Consultant shall perform its services required hereunder as an
independent contractor.
2. The initial term of this Agreement shall commence upon the mutual
execution of this Agreement and shall continue through April 30, 2000.
Thereafter, this Agreement shall continue on a month-to-month basis,
provided neither party provides written notice to terminate not less than
20 days prior to the end of the initial term or any renewal term of this
Agreement.
3. In consideration of the services to be performed by Consultant, the
Company agrees to pay to Consultant the compensation set forth on Exhibit
"B" attached hereto and incorporated herein by this reference.
4. The Company represents and warrants to Consultant that:
A. The Company will cooperate fully and timely with Consultant to enable
Consultant to perform his obligations hereunder.
B. The execution and performance of this Agreement by the Company has
been duly authorized by the Board of Directors of the Company.
C. The performance by the Company of this Agreement will not violate any
applicable court decree, law or regulation, nor will it violate any
provisions of the organizational documents of the Company or any
contractual obligation by which the Company may be bound.
5. Until such time as the same may become publicly known, the parties
agree that any information provided to either of them by the other of a
confidential nature will not be revealed or disclosed to any person or
entity, except in the performance of this Agreement, and upon completion of
Consultant's services and upon the written request of the Company, any
original documentation provided by the Company will be returned to it.
Consultant, including each of his affiliates, will not directly or
indirectly buy or sell the securities of the Company at any time when it or
they are privy to non-public information.
Consultant agrees that he will not disseminate any printed matter
relating to the Company, including, without limitation, press releases,
without prior written approval of the Company's legal counsel.
Consultant acknowledges that, in light of the fact that Consultant is in
a special relationship with the Company due to the entrusting by the
Company to Consultant of non-public, material "inside" information
concerning the Company, the relationship between the Company and Consultant
shall be that of a special relationship.
Consultant agrees that he will comply with all applicable securities
laws, in performing on behalf of the Company hereunder.
6. All notices hereunder shall be in writing and addressed to the party at
the address herein set forth, or at such other address as to which notice
pursuant to this section may be given, and shall be given by personal
delivery, by certified mail (return receipt requested), Express Mail or by
national or international overnight courier. Notices will be deemed given
upon the earlier of actual receipt of three (3) business days after being
mailed or delivered to such courier service.
Notices shall be addressed to Consultant at:
J.F. Mills/Worldwide
6106 East Yale Avenue
Denver, Colorado 80222
and to the Company at:
USURF America, Inc.
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
with a copy to:
Newlan & Newlan, Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
7. Miscellaneous.
A. In the event of a dispute between the parties arising out of this
Agreement, both Consultant and the Company agree to submit such dispute to
arbitration before the American Arbitration Association (the "Association")
at the Association's Dallas, Texas, offices, in accordance with the
then-current rules of the Association; the award given by the arbitrators
shall be binding and a judgment can be obtained on any such award in any
court of competent jurisdiction. It is expressly agreed that the
arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
B. This Agreement is not assignable in whole or in any part, and shall be
binding upon the parties, their heirs, representatives, successors or assigns.
C. This Agreement may be executed in multiple counterparts which shall be
deemed an original. It shall not be necessary that each party execute each
counterpart, or that any one counterpart be executed by more than one
party, if each party executes at least one counterpart.
D. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Texas.
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin
President
J.F. MILLS/WORLDWIDE
By: /s/
Exhibit "A"
Corporate Communications
Services Agreement
SERVICES TO BE PERFORMED BY CONSULTANT ON BEHALF OF THE COMPANY
The consulting services to be provided by Consultant under the Corporate
Communications Services Agreement to which this Exhibit "A" is attached
include, but shall not be limited to:
Develop and implement a plan for maximizing public awareness of Company
news and other developments regarding the Company, as well as awareness of
Company news and other developments regarding the Company to the stock
brokerage community.
Develop a "corporate identity" for the Company, within the stock brokerage
community and the general public, and implement a plan for communicating same.
Assist in preparing Company news releases and other public communications.
Exhibit "B"
Corporate Communications
Services Agreement
COMPENSATION TO BE PAID BY THE COMPANY TO CONSULTANT
As full payment for Consultant's services during the initial term of the
Corporate Communications Services Agreement (the "Agreement") to which this
Exhibit "B" relates, Consultant shall receive, upon execution of, the
following:
6,000 shares of Company Common Stock, which shares shall be valued at a
price of $3.50 per share, or $21,000, in the aggregate. The Company shall
cause all 6,000 of such shares to be registered, at the Company's expense,
pursuant to a Registration Statement on Form S-1 to be filed by the Company
as soon as is practicable following the execution of this Agreement.
Consultant shall be named as a selling shareholder in such Registration
Statement.
As full payment for Consultant's services during each renewal term of the
Agreement to which this Exhibit "B" relates, Consultant shall receive the
following:
1,000 shares of Company Common Stock, which shares shall be valued at a
price equal to the average of the closing bid price, as reported by the
American Stock Exchange, for the Company's Common Stock for the last 5
trading days preceding the first day of each renewal term. The shares of
Company Common Stock issued to Consultant as payment for services during
any renewal term shall possess "piggy-back" rights of registration.
Consultant represents and warrants to the Company that the shares of the
Company being acquired pursuant to the Agreement are being acquired for his
own account and for investment and not with a view to the public resale or
distribution of such shares and further acknowledges that the shares being
issued have not been registered under the Securities Act or any state
securities law and are "restricted securities", as that term is defined in
Rule 144 promulgated by the SEC, and must be held indefinitely, unless they
are subsequently registered or an exemption from such registration is
available.
Consultant represents and warrants that he has investigated the Company,
its financial condition, business and prospects, and has had the
opportunity to ask questions of, and to receive answers from, the Company
with respect thereto. Consultant acknowledges that he is aware that the
Company currently lacks adequate capital to pursue its full plan of
business, specifically, that the Company currently lacks capital with which
to exploit its proprietary Wireless Internet access technology.
Consultant acknowledges that the share certificate or certificates of the
Company issued to him pursuant to this Agreement will bear a legend
restricting future transfer in the following , or similar, form:
"THE STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ISSUED IN RELIANCE UPON
THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(6) OF THE SECURITIES
ACT OF 1933, AS AMENDED. THE STOCK MAY NOT BE TRANSFERRED WITHOUT
REGISTRATION, EXCEPT IN A TRANSACTION EXEMPT FROM SUCH REGISTRATION."
- -------------------------
EXHIBIT 10.55
- -------------------------
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of July 23, 1999 (the
"Agreement"), among USURF America, Inc., a Nevada corporation ("Parent"),
USURF America (Alabama), Inc., an Alabama corporation wholly owned by
Parent ("Acquiror"), Net 1 , Inc., an Alabama corporation ("Target")
(Acquiror and Target being hereinafter collectively referred to as the
"Constituent Corporations"), and Gary Stanley ("Stanley") and Knud Nielsen,
III ("Nielsen"), the shareholders of Net 1, Inc., executing this Agreement
(Stanley and Nielsen being referred to herein collectively as the
"Shareholders").
WHEREAS, the Boards of Directors of Parent, Acquiror and Target have
approved the acquisition of Target by Parent;
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
Parent, Acquiror and Target have each approved the merger of Target into
Acquiror (the "Merger"), pursuant to an Agreement of Merger in the form
attached hereto as Exhibit "A" (the "Merger Agreement"), and the transactions
contemplated hereby, in accordance with the applicable provisions of the
statutes of the States of Nevada and Alabama and upon the terms and subject
to the conditions set forth herein; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization with the meaning of Section 368(a)(1 )(A)
and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, each of the parties to this Agreement desires to make certain
representations, warranties and agreements in connection with the Merger
and also to prescribe various conditions thereto; and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Acquiror, Target and the Shareholders hereby agree as follows:
ARTICLE I. THE MERGER
Section 1.1. The Merger. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement and the
Merger Agreement, Target shall be merged with and into Acquiror, the
separate corporate existence of Target shall cease and Acquiror shall
continue as the surviving corporation, in accordance with the applicable
provisions of the Alabama Business Corporation Act (the "Alabama Law").
Acquiror, as the surviving corporation after the Merger, is hereinafter
sometimes referred to as the "Surviving Corporation".
Section 1.2. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, and
provided that this Agreement has not been terminated or abandoned pursuant
to Article IX, the Constituent Corporations shall cause the Merger to be
consummated by filing a Certificate of Merger (the "Certificate of Merger")
with the office of the Secretary of State of the State of Alabama, in such
form as required by, and executed in accordance
with, the relevant provisions of the Alabama Law. Subject to, and in
accordance with, the Alabama Law, the Merger will become effective at the
date and time the Certificate of Merger is filed with the office of the
Secretary of State of the State of Alabama or such later time or date as
may be specified in the
Certificate of Merger (the "Effective Time"). Each of the parties shall use
its best efforts to cause the Merger to be consummated as soon as
practicable following the fulfillment or waiver of the conditions specified
in Article VII hereof.
Section 1.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the Alabama
Law. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, except as otherwise provided herein, all the
property, rights, privileges, powers and franchises of Target shall vest in
the Surviving Corporation, and
all debts, liabilities and duties of Target shall become the debts,
liabilities and duties of the Surviving Corporation.
Section 1.4. Articles of Incorporation: Bylaws. (a) At the Effective Time,
the Articles of Incorporation of Acquiror, as in effect immediately prior
to the Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Articles of Incorporation.
(b) The Bylaws of Acquiror, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by law, the Articles of Incorporation of the
Surviving Corporation and such Bylaws.
Section 1.5. Directors and Officers. The directors of Acquiror immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
Acquiror immediately prior to
the Effective Time shall be the initial officers of the Surviving
Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
Section 1.6. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Acquiror, the following
shall occur:
(a) each share of common stock of Target (the "Target Common Stock") held
in the treasury of Target and each such share of Target Common Stock owned
by Acquiror, Parent or any direct or indirect wholly-owned subsidiary of
Parent or of Target immediately prior to the Effective Time shall be
cancelled and extinguished without any conversion thereof and no payment
shall be made with respect thereto;
(b) each share of Target Common Stock which is outstanding immediately
prior to the Effective Time, other than those shares of Target Common Stock
cancelled as set forth in subsection (a) hereof, shall be converted into
the right to receive 250 shares of the $.0001 par value per share common
stock of Parent (the "Parent Common Stock"), a total of 250,000 shares of
Parent Common Stock; and
(c) the common stock, par value $.0001 per share, of Acquiror issued and
outstanding immediately prior to the Effective Time shall remain validly
issued, fully paid and non-assessable common stock of the Surviving
Corporation.
Section 1. 7. Surrender of and Exchange of Target Common Stock. (a) As soon
as practicable after the Effective Time, the stock certificates
representing Target Common Stock issued and outstanding at the Effective
Time shall be surrendered for exchange to the Surviving Corporation. Until
so surrendered for exchange, each such stock certificate nominally
representing Target Common Stock shall be deemed for all purposes (except
for payment of dividends thereon or redemption thereof) to evidence the
ownership of the number of shares of Parent Common Stock which the holder
would be entitled to receive upon its surrender to the Surviving Corporation.
(b) No redemption with respect to Parent Common Stock shall be made with
respect to any unsurrendered certificates representing shares of Target
Common Stock with respect to which the shares of Parent Common Stock shall
have been issued in the Merger, until such certificates shall be
surrendered as provided herein.
(c) All rights to receive the Merger Consideration into which shares of
Target Common Stock shall have been converted pursuant to this Article I
shall be deemed to have been paid or issued, as the case may be, in full
satisfaction of all rights pertaining to such shares of Target Common Stock.
1.8. Closing. The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place (a) at the offices of Target at 3:00
p.m., local time, on the earlier of (i) September 30, 1999, and (ii) the
third business day immediately following the date on which the last of the
conditions set forth in Article VII is fulfilled or waived, or (b) at such
other time and place and on such other date as Parent and Target shall
agree (the "Closing Date").
ARTICLE II. FURTHER AGREEMENTS
Section 2.1. Employment Agreement -Stanley. Prior to or at the Closing,
Acquiror and Stanley shall execute an employment agreement (the "Stanley
Employment Agreement"). The Stanley Employment Agreement shall be
substantially in the form attached hereto as Exhibit "B".
Section 2.2. Non-Competition Agreement -Stanley. Prior to or at the
Closing, Acquiror and Stanley shall execute a non-competition agreement
(the "Stanley Agreement Not to Compete") substantially in the form attached
hereto as Exhibit "C".
Section 2.3. Non-Competition Agreement -Nielsen. Prior to or at the
Closing, Acquiror and Nielsen shall execute a non-competition agreement
(the "Nielsen Agreement Not to Compete") substantially in the form attached
hereto as Exhibit "D".
Section 2.4. Confidentiality Agreement -Stanley. Prior to or at the
Closing, Acquiror and Stanley shall execute a confidentiality agreement
(the "Stanley Confidentiality Agreement") substantially in the form
attached hereto as Exhibit "E".
Section 2.5. Continuity of Interest Agreement. Prior to or at the Closing,
Parent, Acquiror and the Shareholders shall execute a continuity of
interest agreement (the "Continuity of Interest Agreement") substantially
in the form attached hereto as Exhibit "F".
Section 2.6. Registration Rights Letter Agreements. Prior to or at the
Closing, Parent shall deliver to the holders of shares of Parent Common
Stock received hereunder a registration rights letter agreement (the
"Registration Agreement") substantially in the form attached hereto as
Exhibit "G".
Section 2. 7. Access to Information: Confidentiality. (a) From the date
hereof to the Effective Time, each of Parent, Acquiror and Target shall,
and shall cause their respective subsidiaries, affiliates, officers,
directors, employees, auditors and agents to, afford the officers,
employees and agents of one another complete access at all reasonable times
to one another's officers, employees, agents, properties, offices, plants
and other facilities and to all books and records, and shall furnish one
another with all financial, operating and other data and information as
each, through its officers, employees or agents, may reasonably request;
provided, however, that no party shall be required to provide access or
furnish information which it is prohibited by law or contract to provide or
furnish.
(b) Each of Parent, Acquiror and Target shall, and shall cause their
respective affiliates and their respective officers, directors, employees
and agents, to hold in strict confidence all data and information obtained
by them from one another or their respective subsidiaries, affiliates,
directors, officers, employees and agents (unless such information is or
becomes readily ascertainable from public or published information or trade
sources or public disclosure or such information is required by law) and
shall insure that such officers, directors, employees and agents do not
disclose such information to others without the prior written consent of
Parent, Acquiror or Target, as the case may be.
(c) In the event of the termination of this Agreement, Parent, Acquiror
and Target shall, and shall cause their respective affiliates, officers,
directors, employees and agents to, (i) return promptly every document
furnished to them by one another or any of their respective subsidiaries,
affiliates, officers,
directors, employees and agents in connection with the transactions
contemplated hereby and any copies thereof, and (ii) shall cause others to
whom such documents may have been furnished promptly to return such
documents and any copies thereof any of them may have made.
(d) No investigation pursuant to this Section II shall affect any
representations or warranties of the parties herein or the conditions to
the obligations of the parties hereto.
Section 2.8. Notification of Certain Matters. Target shall give prompt
notice to Parent, and Parent shall give prompt notice to Target, of (a) the
occurrence or non-occurrence of any event, the occurrence or nonoccurrence
of which would be likely to cause any representation or warranty contained
in this Agreement to be untrue or inaccurate, and (b) any failure of
Target, Parent or Acquiror, as the
case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that
the delivery of any notice pursuant to this Article II shall not limit or
otherwise affect the remedies available hereunder to the party receiving
such notice.
Section 2.9. Further Action. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.
Section 2.10. Public Announcements. Parent shall have the exclusive right
to issue a press release or otherwise make any public statements with
respect to the Merger.
Section 2.11. Registration Rights. The holders of Parent Common Stock
received hereunder shall have the registration rights with respect to their
respective shares of Parent Common Stock as are set forth in the
Registration Agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUIROR
Parent and Acquiror hereby, jointly and severally, represent and warrant to
Target that, except as set forth in the Disclosure Schedule delivered prior
to the date which is three days prior to the Closing Date by Parent and
Acquiror to Target (the "Parent Disclosure Schedule"):
Section 3.1. Organization and Qualification: Subsidiaries. Each of Parent
and Acquiror and each of Parent's other subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders to own, operate or
lease the properties that it purports to own, operate or lease and to carry
on its business as it is now being conducted, and is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, operated or
leased or the nature of its activities makes such qualification necessary ,
except for such failures which, when taken together with all other such
failures, would not have a Material Adverse Effect. Neither Parent nor any
subsidiary has received any notice of proceedings relating to revocation or
modification of any such franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals or orders. The term
"Material Adverse Effect", as used herein, means any change in or effect on
the business of Parent or any of its properties (including intangible
properties), prospects, condition (financial or otherwise), assets or
subsidiaries, taken as a whole. Parent has three wholly-owned subsidiaries:
(a) USURF America (Alabama), Inc., an Alabama corporation (Acquiror); (b)
Santa Fe Wireless Internet, Inc., a New Mexico corporation; and (c)
CyberHighway, Inc., an Idaho corporation.
Section 3.2. Articles of Incorporation and Bylaws. Parent shall, as part of
the Parent Disclosure Schedule, furnish to Target a complete and correct
copy of the Articles of Incorporation and the Bylaws, each as amended to
date, of Parent and Acquiror. Such Articles of Incorporation and Bylaws are
in full force and effect.
Section 3.3. Capitalization. The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock, $.0001 par value per
share. As of the date hereof, (a) 11,700,120 shares of Parent Common Stock
are issued and outstanding, all of which are validly issued, fully paid and
non-assessable, and (b) no shares of Parent Common Stock are held in the
treasury of Parent or by subsidiaries of Parent. Approximately 2,400,000
shares of Parent Common Stock are reserved for future issuance under
certain contracts, all as described in the Parent Disclosure Schedule. Each
of the outstanding shares of capital stock of each of Parent's subsidiaries
is duly authorized, validly issued, fully paid and non-assessable and such
shares owned by Parent are owned free and clear of all security interests,
liens, claims, pledges, agreements, limitations on Parent's voting rights,
charges or other encumbrances of any nature whatsoever.
Section 3.4. Authority Relative to this Agreement. Each of Parent and
Acquiror has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement by Parent and Acquiror and the consummation by
Parent and Acquiror of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and
Acquiror other than filing and recordation of appropriate merger documents
as required by the Alabama Law. This Agreement has been duly executed and
delivered by
Parent and Acquiror and, assuming the due authorization, execution and
delivery by Target, constitutes a legal, valid and binding obligation of
each such corporation.
Section 3.5. No Conflict: Required Filings and Consents. (a) The execution
and delivery of this Agreement by Parent and Acquiror do not, and the
performance of this Agreement by Parent and Acquiror shall not, (i)
conflict with or violate either the Articles of Incorporation or Bylaws of
Parent or the Articles of Incorporation or Bylaws of Acquiror, (ii)
conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent or Acquiror or by which either of them or their
respective properties is bound or affected, or (iii) result in any breach
of or constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of
Parent or Acquiror pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
or obligation to which Parent or Acquiror is a party or by which Parent or
Acquiror or any of their respective properties is bound or affected, except
for any such breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and Acquiror
does not, and the performance of this Agreement by Parent and Acquiror
shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except for applicable requirements of the Securities
Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act
of 1934 (the "Exchange Act") and State securities laws ("Blue Sky Laws").
Section 3.6. Compliance. Neither Parent nor any of its subsidiaries is in
conflict with, or in default or violation of, (a) its Articles of
Incorporation or Bylaws or equivalent organizational documents, (b) any
law, rule, regulation, order, judgment or decree applicable to Parent or
any of its subsidiaries or by which its or any of their respective
properties is bound or affected, including, without limitation, health and
safety, environmental, civil rights laws and regulations and zoning
ordinances and building codes, or (c) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise,
easement, consent, order or other instrument or obligation to which Parent
or any of its subsidiaries is a party or by which Parent or any of its
subsidiaries or its or any of their respective properties is bound or
affected, except for any such
conflicts, defaults or violations which would not, individually or in the
aggregate, have a Material Adverse Effect.
Section 3. 7. SEC Filings; Financial Statements. (a) Parent has filed all
forms, reports and documents required to be filed with the SEC and has
heretofore delivered to Target, in the form filed with the SEC, (i) its
Annual Report on Form 10-KSB for the year ended December 31, 1998; (ii) its
Quarterly Report on Form 10-QSB for the period ended March 31, 1999, (iii)
all other reports or
registration statements filed by Parent with the SEC since March 31, 1999,
and (iv) all amendments and supplements to all such reports and
registration statements filed by Parent with the SEC since March 31, 1999
(collectively, the "Parent SEC Reports"). The Parent SEC Reports (x) were,
and will be, prepared
in accordance with the requirements of the Securities Act or the Exchange
Act, as the case may be, and (y) did not, and will not, at the time they
were, or will be, filed, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(b) Each consolidated financial statement (including, in each case, any
related notes thereto) contained in the Parent SEC Reports has been, and
will be, prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto) and each fairly presents,
and will present, the financial position of Parent and its subsidiaries as
at the respective dates thereof and the results of its operations and
changes in financial position for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount.
(c) Except as and to the extent set forth on the consolidated balance
sheet of Parent and its subsidiaries as at March 31, 1999, including the
notes thereto (the "1999 Balance Sheet"), neither Parent nor any of its
subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which would be required to be
reflected on a balance sheet, or in the notes thereto, prepared in
accordance with generally accepted accounting principles, except for
liabilities or obligations incurred in the ordinary course of business
since March 31, 1999, which would not, individually or in the aggregate,
have a Material Adverse Effect.
(d) Parent has heretofore furnished to Target a complete and correct copy
of any amendments or modifications, which have not yet been filed with the
SEC, to agreements, documents or other instruments which previously had
been filed by Parent with the SEC pursuant to the Securities Act or the
Exchange Act.
Section 3.8. Absence of Litigation. Except as disclosed in the Parent
Disclosure Schedule, there are no claims, actions, proceedings or
investigations pending or, to the best knowledge of Parent, threatened
against Parent or any of its subsidiaries, or any properties or rights of
Parent or any of its subsidiaries, before any court, arbitrator, or
administrative, governmental or regulatory authority or body, domestic or
foreign, that, individually or in the aggregate, would have a Material
Adverse Effect. As of the date hereof, neither Parent nor any of its
subsidiaries nor any of their properties is subject to any order, writ,
judgment, injunction, decree, determination or award having a Material
Adverse Effect.
Section 3.9. Absence of Certain Changes or Events. Since March 31' 1999,
except as contemplated or permitted by this Agreement or disclosed in
Parent SEC Reports filed since that date and through the date hereof,
Parent and its subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since
such date, there has not been
(a) any change in the financial condition, results of operations, business
or prospects of Parent or any of its subsidiaries having a Material Adverse
Effect,
(b) any damage, destruction or loss (whether or not covered by insurance)
with respect to any assets of Parent or any of its subsidiaries having a
Material Adverse Effect, (c) any material change by Parent in its
accounting methods, principles or practices, (d) any revaluation by Parent
of any of its assets,
including, without limitation, writing down the value of inventory or any
notes, accounts receivable or other investments which would, individually
or in the aggregate, exceed five percent of the total assets of Parent and
its subsidiaries as reflected on the consolidated balance sheets in
Parent's Annual Report on
Form 10-KSB for the period ended December 31, 1998, and Quarterly Report on
Form 10-QSB for the period ended March 31, 1999; (e) any declaration,
setting aside or payment of any dividends or distributions in respect of
shares of Parent Common Stock or any redemption, purchase or other
acquisition of any of its securities; (f) any change in the Federal
Communications Commission rules, regulations and orders affecting the
business of Parent or any of its subsidiaries which shall have a Material
Adverse Effect; or (g) any change in the status of any litigation, claims,
actions, proceedings or investigations pending or, to the best knowledge of
Parent, threatened against Parent or any of its subsidiaries, which, as a
result of such change, will have a Material Adverse Effect.
Section 3.1 0. Environmental Matters. To the best of Parent's knowledge,
there are no environmental liabilities (whether accrued, absolute,
contingent or otherwise) of Parent or any subsidiary.
Section 3.11. Labor Matters. Except as set forth in the Parent Disclosure
Schedule, (a) there are no controversies pending or, to the knowledge of
Parent or any of its subsidiaries, threatened, between Parent or any of its
subsidiaries and any of their respective employees, which controversies
have a Material Adverse Effect; (b) neither Parent nor any of its
subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by Parent or its
subsidiaries nor does Parent or any of its subsidiaries know of any
activities or proceedings of any labor union to organize any such
employees; (c) neither Parent nor any of its subsidiaries has breached or
otherwise failed to comply with any provision of any such agreement or
contract and there are no grievances outstanding against any such parties
under any such agreement or contract; (d) there are no unfair labor
practice complaints pending against Parent or any of its subsidiaries
before the National Labor Relations Board or any current union
representation questions involving employees of Parent or any of its
subsidiaries; and (e) neither Parent nor any of its subsidiaries has any
knowledge of any strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of Parent or any of its
subsidiaries.
Section 3.12. Contracts. The Parent Disclosure Schedule lists or describes
all material contracts or arrangements to which Parent or any subsidiary is
a party, or by which it is bound, as of the date hereof. All such contracts
and arrangements are in full force and effect and there has been no notice
of termination or threatened termination with respect to any such contracts
and arrangements, whether or not termination is permitted by the terms
thereof, and no event has occurred which, with the giving of notice or the
lapse of time, or both, would constitute a breach or default under any such
contract or arrangement, except for such breaches, defaults and events as
to which requisite waivers or consents have been obtained.
Section 3.13. Title to Properties. Parent has, and at the Effective Time
will have, good and marketable title to the equipment and other property
shown as assets on its records and books of account as of March 31, 1999,
free and clear of all liens, encumbrances and charges, except as reflected
in the such records and books of account and in the 1999 Balance Sheet.
Section 3.14. Patents. To the best knowledge of Parent, Parent or its
subsidiaries own or possess adequate licenses or other valid rights to use
all patents, patent rights, inventions, designs, processes, formulae and
other proprietary information used or held for use in connection with the
business of Parent or any of its subsidiaries as currently being, or
proposed to be, conducted and is unaware of any assertions or claims
challenging the validity of any of the foregoing which would have a
Material Adverse Effect. The conduct of the business of Parent and its
subsidiaries as now conducted or proposed to be conducted does not and will
not conflict with any patents, patent rights, licenses, trademarks,
trademark rights, trade names, trade name rights or copyrights of others in
any way which would have a Material Adverse Effect. No material
infringement of any proprietary right owned by or licensed by or to Parent
or any of its subsidiaries is known to Parent which would have a Material
Adverse Effect.
Section 3.15. Parent and its subsidiaries have filed all federal and state
tax returns and reports and, to the best of Parent's knowledge, all state,
local and foreign tax returns and reports required to be filed by them and
have paid and discharged all taxes, including sales and use tax, shown as
due thereon
and have paid all applicable state and local ad valorem taxes as are due,
except such as are being contested in good faith by appropriate proceedings
and except for such filings, payments or other occurrences which would not
have a Material Adverse Effect. Neither the IRS nor any other taxing
authority or agency is now asserting or, to the best of Parent's knowledge,
threatening to assert against parent or any of its subsidiaries any
deficiency or
claim for additional taxes or interest thereon or penalties in connection
therewith. Neither Parent nor any of its subsidiaries has granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the assessment of, any federal, state, county, municipal or
foreign income tax.
Section 3.16. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of Parent or Acquiror.
Section 3.17 .Full Disclosure. No statement contained in any document,
certificate or other writing furnished or to be furnished by Parent or
Acquiror to Target pursuant to the provisions of this Agreement contains or
shall contain any untrue statement of a material fact or omits or shall
omit to state any material fact necessary, in light of the circumstances
under which it was or may be made, in order to make the statements herein
or therein not misleading.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF TARGET
Target and Stanley, and each of them, hereby, jointly and severally,
represent and warrant to Parent and Acquiror that, except as set forth in
the Disclosure Schedule delivered prior to the date which is three days
prior to the Closing Date by Target to Parent (the "Target Disclosure
Schedule"):
Section 4.1. Organization and Qualification: Subsidiaries. Target is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Alabama and has the requisite corporate power and
authority and is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders
to own, operate or lease the properties that it purports to own, operate or
lease and to carry on its business as it is now being conducted, and is
duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where
the character of its properties owned, operated or leased or the nature of
its activities makes such qualification necessary, except for such failures
which, when taken together with all other such failures, would not have a
Material Adverse Effect. Target has not received any notice of proceedings
relating to
the revocation or modification of any such franchises, grants,
authorizations, licenses, permits, easements, consents, certificates,
approvals or orders. The term "Material Adverse Effect" as used in this
Article IV, means any change in or effect on the business of Target that is
or is reasonably likely to be materially adverse to the business,
operations, properties (including intangible properties), prospects,
condition (financial or otherwise), assets or liabilities of Target taken
as a whole. Target has no subsidiaries.
Section 4.2. Articles of Incorporation and Bylaws. Target shall, as part of
the Target Disclosure Schedule, furnish to Parent a complete and correct
copy of the Articles of Incorporation and the Bylaws, each as amended to
date, of Target. Such Articles of Incorporation and Bylaws are in full
force and
effect.
Section 4.3. Capitalization. The authorized capital stock of Target
consists of 1,000 shares of Target Common Stock, $1.00 par value per share.
As of the date hereof, (a) 1 ,000 shares of Target Common Stock are issued
and outstanding, all of which are validly issued, fully paid and
non-assessable, and (b) no shares of Target Common Stock are held in the
treasury of Target or by any subsidiary of Target. Except as set forth in
the Target Disclosure Schedule, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital
stock of Target or obligating Target to issue or sell any shares of capital
stock of, or other equity interests in, Target. All shares of Target Common
Stock subject to issuance shall be duly authorized, validly issued, fully
paid and non-assessable. There are no outstanding contractual obligations
of Target to
repurchase, redeem or otherwise acquire any shares of Target Common Stock.
Section 4.4. Authority Relative to this Agreement. Target has all necessary
corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder. The execution and delivery of this Agreement by
Target and the consummation by Target of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of Target subject to the approval of the Merger and adoption of this
Agreement by Shareholders in accordance with the Alabama Law. This
Agreement has been duly executed and delivered by Target and, assuming the
due authorization, execution and delivery by Parent and Acquiror,
constitutes a legal, valid and binding obligation of Target.
Section 4.5. No Conflict: Required Filings and Consents. (a) The execution
and delivery of this Agreement by Target does not, and the performance of
this Agreement by Target shall not, (i) conflict with or violate the
Articles of Incorporation or Bylaws of Target, (ii) conflict with or
violate any law, rule,
regulation, order, judgment or decree applicable to Target or by which its
properties are bound or affected, or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Target pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Target is a
party or by which Target
or its properties are bound or affected, except for such breaches, defaults
or other occurrences which would not, individually or in the aggregate have
a Material Adverse Effect.
(b) The execution and delivery of this Agreement by Target does not, and
the performance of this Agreement shall not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign.
Section 4.6. Compliance. Target is not in conflict with, or in default or
violation of, (a) its Articles of Incorporation or Bylaws or equivalent
organizational documents, (b) any law, rule, regulation, order, judgment or
decree applicable to Target or by which its properties are bound or
affected, including,
without limitation, health and safety, environmental and civil rights laws
and regulations and zoning ordinances and building codes, or (c) any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, easement, consent, order or other instrument or obligation to
which Target is a
party or by which Target or its properties are bound or affected, except
for any such conflicts, defaults or violations which would not,
individually or in the aggregate, have a Material Adverse Effect.
Section 4.7. Financial Statements. Target has delivered to Parent and
Acquiror copies of the its unaudited financial statements for the years
ended December 31, 1998, 1997 and 1996, and a statement of operations and
balance sheet as at June 30, 1999. All of such statements are true and
complete and have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods
indicated, except as indicated in the notes thereto. Each of such balance
sheets presents a true and complete statement, as of its date, of the
financial condition and assets and liabilities
of Target. Except to the extent reflected or reserved against therein
(including the notes thereto), Target did not have, as of the date thereof,
any liabilities or obligations (whether accrued, absolute, contingent or
otherwise) of a nature customarily reflected in a corporate balance sheet
or notes thereto, prepared in
accordance with generally accepted accounting principles. Each of such
statements of operations presents a true and complete statement of the
results of operations of Target.
Section 4.8. Bank Account Statements. Target has delivered to Parent and
Acquiror copies of its bank account statements for the months of January ,
February, March, April, May and June 1999. All of such statements are true
and complete.
Section 4.9. Absence of Certain Changes or Events. Since June 30, 1999,
except as contemplated by this Agreement or disclosed in the Target
Disclosure Schedule, Target has conducted its business only in the ordinary
course and in a manner consistent with past practice and, since such date,
there has not been (a) any change in the financial condition, results of
operations, business or
prospects of Target having a Material Adverse Effect, (b) any damage,
destruction or loss (whether or not covered by insurance) with respect to
any assets of Target having a Material Adverse Effect, (c) any material
change by Target in its accounting methods, principles or practices, (d)
any revaluation by
Target of any of its assets, including, without limitation, writing down
the value of inventory or any notes, accounts receivable or other
investments which would, individually or in the aggregate, exceed five
percent of the total assets of Target as reflected on the financial
statements for the period ended June 30, 1999, or (e) any declaration,
setting aside or payment of any dividends or distributions in respect of
shares of Target Common Stock or any redemption, purchase or other
acquisition of any of its securities, except in the ordinary course of
business consistent with past practice.
Section 4.10. Absence of Litigation. Except as disclosed in Target
Disclosure Schedule, there are no claims, actions, proceedings or
investigations pending or, to the best knowledge of Target, threatened
against Target, or any properties or rights of Target, before any court,
arbitrator, or administrative,
governmental or regulatory authority or body, that, individually or in the
aggregate, would have a Material Adverse Effect. As of the date hereof,
neither Target nor its properties is subject to any order, writ, judgment,
injunction,
decree, determination or award having a Material Adverse Effect.
Section 4.11. Labor Matters. Except as set forth in the Target Disclosure
Schedule, (a) there are no controversies pending or, to the knowledge of
Target, threatened, between Target and any of its employees, which
controversies have a Material Adverse Effect; and (b) Target is not a party
to any collective bargaining agreement or other labor union contract.
Section 4.12. Contracts. The Target Disclosure Schedule lists or describes
all contracts, authorizations, approvals or arrangements to which Target is
a party, or by which it is bound, as of the date hereof, and which (a)
obligates or may obligate Target to pay more than $500; or (b) are
financing documents, loan agreements or agreements providing for the
guarantee of the obligations of any party in each case involving an
obligation in excess of $1,000.
Section 4.13. Title to Property and Leases. (a) Each asset owned or leased
by Target is owned or leased free and clear of any mortgages, pledges,
liens, security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any kind.
(b) All leases of real property leased for the use or benefit of Target to
which Target is a party, and all amendments and modifications thereof are
in full force and effect and have not been modified or amended and there
exists no material default under the leases by Target, nor any event which,
with the giving of notice or lapse of time, or both, would constitute a
material default thereunder by Target.
(c) A statement describing all assets of Target is included in the Target
Disclosure Schedule.
Section 4.14. Insurance. All material properties and risks of Target are
covered by valid and currently effective insurance policies issued in favor
of Target, in such amounts and against such risks and losses as are
customary in their locales of operation for companies operating similar
businesses and
operations, and Target is included as an insured party under such policies,
with full rights as a loss payee. Copies of all such insurance policies
shall be included in the Target Disclosure Schedule.
Section 4.15. Target has filed all federal and state tax returns and
reports and, to the best of Target's knowledge, all state, local and
foreign tax returns and reports required to be filed have been filed and
Target has paid and discharged all taxes, including sales and use taxes,
shown as due thereon and has
paid all applicable state and local ad valorem taxes as are due, except
such as are being contested in good faith by appropriate proceedings and
except for such filings, payments or other occurrences which would not have
a Material Adverse Effect. Neither the IRS nor any other taxing authority
or agency is
now asserting or, to the best of Target's knowledge, threatening to assert
against Target any deficiency or claim for additional taxes or interest
thereon or penalties in connection therewith. Target has not granted any
waiver of any statute of limitations with respect to, or any extension of a
period for the
assessment of, any federal, state, county, municipal or foreign income tax.
Section 4.16. Full Disclosure. No statement contained in any document,
certificate or other writing furnished or to be furnished by Target or the
Shareholders to Parent and Acquiror pursuant to the provisions of this
Agreement contains or shall contain any untrue statement of a material fact
or omits or shall omit to state any material fact necessary, in light of
the circumstances under which it was or may be made, in order to make the
statements herein or therein not misleading.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Stanley and Nielsen, individually and each for himself, hereby represent
and warrant to Parent and Acquiror that:
Section 5.1. No Legal Disability. Stanley and Nielsen, individually, are
under no legal disability with respect to entering into this Agreement.
Section 5.2. Receipt of Disclosure. Stanley and Nielsen, individually and
each for himself, hereby represent and warrant that they have received and
reviewed all of the information concerning Parent required to be delivered
by Parent hereunder. With respect to such information, Stanley and Nielsen,
individually and each for himself, further represent and warrant that they
have had an opportunity to ask questions of, and to receive answers from,
the officers of Parent.
Section 5.3. Representations Relating to Parent Common Stock. Stanley and
Nielsen, individually and each for himself, represent and warrant to Parent
that the shares of Parent Common Stock being acquired pursuant to this
Agreement are being acquired for their own accounts and for investment and
not with a view to the public resale or distribution of such shares and
further
acknowledge that the shares being issued have not been registered under the
Securities Act or any state securities law and are "restricted securities",
as that term is defined in Rule 144 promulgated by the SEC, and must be
held indefinitely, unless they are subsequently registered or an exemption
from such registration is available.
Section 5.4. Consent to Legend. Stanley and Nielsen, individually and each
for himself, consent to the placement of a legend restricting future
transfer on the share certificates representing the Parent Common Stock
delivered hereunder, which legend shall be in the following, or similar, form:
"THE STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ISSUED IN RELIANCE UPON
THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2) OF THE SECURITIES
ACT OF 1933, AS AMENDED. THE STOCK MAY NOT BE TRANSFERRED WITHOUT
REGISTRATION EXCEPT IN TRANSACTIONS EXEMPT FROM SUCH REGISTRATION."
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. Conduct of Business by Target Pending the Merger. Target
covenants and agrees that, between the date of this Agreement and the
Effective Time, unless Parent shall otherwise agree in writing, the
business of Target shall be conducted only in, and Target shall not take
any action except in,
the ordinary course of business and in a manner consistent with past
practice; and Target shall use its best efforts to preserve substantially
intact the business organization of Target, to keep available the services
of the present officers, employees and consultants of Target and to
preserve the present relationships of Target with customers, suppliers and
other persons with which Target has significant business relations. By way
of amplification and not limitation, except as contemplated by this
Agreement, Target shall not, directly or indirectly, do, or propose to do,
any of the following without the prior written consent of Parent, which
consent shall not be unreasonably withheld:
(a) amend or otherwise change its Articles of Incorporation or Bylaws or
equivalent organizational documents;
(b) issue, sell, pledge, dispose of, encumber or authorize the issuance,
sale, pledge, disposition or encumbrance of (i) any shares of capital stock
of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest, of Target or (ii) any assets of Target or any other
material assets of Target other than in the ordinary course of business
consistent with past practices;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guaranty or endorse or otherwise as an
accommodation
become responsible for, the obligations of any person, or make any loans or
advances, except in the ordinary course of business and consistent with
past practice; (iii) authorize any single capital expenditure which is in
excess of $1 ,000 or capital expenditures which are, in the aggregate, in
excess
of $3,000 for Target; or (iv) enter into or amend any contract, agreement,
commitment or arrangement to any of the effects set forth in this paragraph
(e) of Section 6.1 ;
(f) increase the compensation payable or to become payable to its officers
or employees, except for increases in salary or wages of employees of
Target who are not officers of Target in accordance with past practices, or
grant any severance or termination pay to, or enter into any employment or
severance
agreement with, any director or officer of Target, or establish, adopt,
enter into or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any directors, officers or employees;
(g) take any action other than in the ordinary course of business and in a
manner consistent with past practice with respect to accounting policies or
procedures (including, without limitation, procedures with respect to the
payments of accounts payable and collection of accounts receivable);
(h) settle or compromise any material federal, state, local or foreign
income tax liability; or
(i) pay, discharge, compromise or consent to any arrangements concerning
or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge, compromise, settlement, arrangement or satisfaction in the
ordinary course of
business and consistent with past practice of liabilities reflected or
reserved against in the financial statements of Target or incurred in the
ordinary course of business and consistent with past practice.
Section 6.2. Conduct of Business by Parent and Acquiror Pending the Merger.
Parent and Acquiror covenant and agree that, between the date of this
Agreement and the Effective Time, Parent shall not sell or otherwise
dispose of all or substantially all of its assets.
Section 6.3. Approval of Shareholders. Target shall secure the written
consent of all of the shareholders of Target to this Agreement, the Merger
Agreement and the Merger.
Section 6.4. Securities Law Compliance. Parent shall take any action
required to be taken under applicable Federal and/or state securities laws
applicable to (a) the Merger and (b) the issuance of Parent Common Stock
pursuant to the Merger. Parent shall promptly deliver to Target copies of
any filings made by Parent and/or Acquiror pursuant to this Section 6.4.
Section 6.5. Third Party Consents. Each party to this Agreement shall use
its best efforts to obtain, as soon as reasonably practicable, all permits,
authorizations, consents, waivers and approvals from third parties or
governmental authorities necessary to consummate this Agreement and the
Merger Agreement and the transactions contemplated hereby and thereby,
including, without limitation, any permits, authorizations, consents,
waivers and approvals required in connection with the Merger.
ARTICLE VII. CONDITIONS OF MERGER
Section 7 .1. Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment of all of the following conditions precedent at
or prior to the Effective Time:
(a) Shareholder Approval. This Agreement shall have been approved and
adopted by all of the shareholders of Target.
(b) No Order. No United States or state governmental authority or other
agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or
permanent) which is in effect and has the effect of making the conversion
of Target Common Stock into the Merger Consideration illegal or otherwise
prohibiting consummation of the transactions contemplated by this Agreement.
(c) No Challenge. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency by
any government agency or any other person challenging, or seeking material
damages in connection with the conversion of Target Common Stock into the
Merger Consideration pursuant to the Merger or otherwise materially
adversely affecting the business, assets, prospects, financial condition or
results of operations of Target, Acquiror, Parent or any of their
respective subsidiaries or affiliates.
(d) Tax Opinions. Target and the Shareholders shall receive an opinion of
James Halford, Esquire, to the effect that under the provisions of United
States federal income tax laws, rules and regulations, provided that the
Merger qualifies as a statutory merger under the applicable laws of the
State of New
Mexico, it will be a reorganization within the meaning of Sections 368(a)(1
)(A) and 368(a)(2)(D) of the Code and that, with respect to the Parent
Common Stock to be issued to the shareholders in the Merger, the exchange
provided for in Section 1.7 will not result in current income to Target or
the Shareholders.
Such opinions will be based upon certain assumptions and representations of
the respective managements of Parent and Target.
Section 7 .2. Additional Conditions to Obligations of Parent and Acquiror.
The obligations of Parent and Acquiror to effect the Merger are also
subject to the fulfillment of all of the following conditions precedent at
or prior to the Effective Time:
(a) Customers of Target. The actual number of (i) dial-up customers of
Target who shall be current in their accounts as of the last billing date
immediately preceding the Closing Date shall equal or exceed 1 ,350
customers; (ii) dedicated access customers of Target who shall be current
in their accounts as of the last billing date immediately preceding the
Closing Date shall equal or exceed 14 customers; and (iii) wireless-access
customers of Target who shall be current in their accounts as of the last
billing date immediately preceding the Closing Date shall equal or exceed 2
customers. For purposes of this Section
7.2(a), "customers" shall mean actually subscribed and paying customers and
shall exclude, without limitation, customers obtained through free
promotions, free bases or any other manner not requiring payment for services.
(b) Representations and Warranties. The representations and warranties of
Target and Stanley contained in this Agreement shall be true and correct in
all material respects on and as of the Effective Time, except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as
if made on and as of the Effective Time, and Parent and Acquiror shall have
received a Certificate of the President of Target which is to that effect,
which certificate shall be in the form attached hereto as Exhibit "H".
(c) Agreements and Covenants. Target and the Shareholders shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, and Parent and Acquiror shall have
received a
Certificate of the President of Target to that effect, which certificate
shall be in the form attached hereto as Exhibit "H".
(d) Consents Obtained. All consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made, by
Target for the authorization, execution and delivery of this Agreement and
the consummation by it of the transactions contemplated hereby shall have been
obtained and made by Target.
(e) Employment Agreement -Stanley. Acquiror and Stanley shall have
executed the Stanley Employment Agreement.
(f) Non-Competition Agreement -Stanley. Acquiror and Stanley shall have
executed the Stanley Agreement Not to Compete.
(g) Non-Competition Agreement -Nielsen. Acquiror and Nielsen shall have
executed the Nielsen Agreement Not to Compete.
(h) Confidentiality Agreement -Stanley. Acquiror and Stanley shall have
executed the Stanley Confidentiality Agreement.
(i) Continuity of Interest Agreement. Parent, Acquiror and the
Shareholders shall have executed the Continuity of Interest Agreement.
(j) Registration Agreements. Parent shall have delivered a Registration
Agreement to each of the persons receiving shares of Parent Common Stock
hereunder.
(k) Opinion of Counsel. Parent and Acquiror shall have received, from
counsel for Target, an opinion substantially in the form attached hereto as
Exhibit "I", dated as of the Closing Date.
(I) No Material Adverse Change. There shall have been no material adverse
change in the condition, financial or otherwise, of Target.
Section 7.3. Additional Conditions to Obligation of Target. The obligation
of Target to effect the Merger is also subject to fulfillment of all of the
following conditions precedent, at or prior to the Effective Time:
(a) Representations and Warranties. The representations and warranties of
Parent and Acquiror contained in the Agreement shall be true and correct in
all material respects on and as of the Effective Time, except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as
if made on and as of the Effective Time, and Target shall have received a
Certificate of the President of Parent which is to that effect, which
certificate shall be in the form attached hereto as Exhibit "J".
(b) Agreements and Covenants. Parent and Acquiror shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Effective Time, and Target shall have received a Certificate
of the President of Parent which is to that effect, which certificate shall
be in the form attached hereto as Exhibit "J".
(c) Consents Obtained. All consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made, by
Parent and Acquiror for the authorization, execution and delivery of this
Agreement and the consummation by them of the transactions contemplated
hereby shall have been obtained and made by Parent and Acquiror.
(d) Employment Agreement -Stanley. Acquiror and Stanley shall have
executed the Stanley Employment Agreement.
(e) Non-Competition Agreement -Stanley. Acquiror and Stanley shall have
executed the Stanley Agreement Not to Compete.
(f) Non-Competition Agreement -Nielsen. Acquiror and Nielsen shall have
executed the Nielsen Agreement Not to Compete.
(g) Confidentiality Agreement -Stanley. Acquiror and Stanley shall have
executed the Stanley Confidentiality Agreement.
(h) Continuity of Interest Agreement. Parent, Acquiror and the
Shareholders shall have executed the Continuity of Interest Agreement.
(i) Registration Agreements. Parent shall have delivered a Registration
Agreement to each of the persons receiving shares of Parent Common Stock
hereunder.
(j) Opinion of Counsel. Target shall have received from Newlan & Newlan,
counsel for Parent and Acquiror, an opinion in substantially the form
attached hereto as Exhibit "K", dated as of the Closing Date.
(k) No Material Adverse Change. There shall have been no material adverse
change in the condition, financial or otherwise, of Parent.
ARTICLE VIII. INDEMNIFICATION
Section 8.1. General Indemnification Covenants. Stanley shall indemnify,
save and keep Parent and its affiliates, agents, attorneys, successors and
permitted assigns (including the Surviving Corporation) (the "Parent
Indemnitees"), harmless against and from all liability, demands, claims,
actions or causes of action, assessments, losses, fines, penalties, costs,
damages and expenses, including reasonable attorneys' fees, disbursements
and expenses (collectively, the "Damages"), sustained or incurred by any of
the Parent Indemnitees as a result of, arising out of or by virtue of any
misrepresentation, breach of any
warranty or representation or non-fulfillment of any agreement or covenant
on the part of Target or the Shareholders, and each of them, whether
contained in this Agreement or the Merger Agreement or any exhibit or
schedule hereto or thereto or any written statement or certificate
furnished or to be furnished
to Parent or Acquiror pursuant hereto or in any closing document delivered
by Target or the Shareholders, and each of them, to Parent or Acquiror in
connection herewith.
Section 8.2. Tax Indemnity. (a) Stanley hereby agrees to pay, indemnify,
defend and hold Parent and Acquiror harmless from and against any and all
taxes of Target with respect to any period (or any portion thereof) up to
and including the Effective Time, except for taxes of Target which are
reflected as current liabilities for taxes that exist as of the Effective
Time ("Current Tax Liabilities") on the financial statements delivered to
Parent and Acquiror hereunder, together with all reasonable legal fees,
disbursements and expenses incurred by Parent and Acquiror in connection
therewith.
(b) Stanley shall prepare and file any tax return of Target required to be
filed after the Effective Time and which relates to any period or portion
thereof up to and including the Effective Time.
(c) The indemnity provided for in this Section 8.2 shall be independent of
any other indemnity provision hereof and, anything in this Agreement to the
contrary notwithstanding, shall survive until the expiration of the
applicable statutes of limitation for the taxes referred to herein, and any
taxes subject to the indemnification for taxes set forth in this Section
8.2 shall not be subject to the provisions of Sections 9.1 or 9.4 hereof.
Notwithstanding anything in this Agreement to the contrary, Stanley will
not be obligated to indemnify
Parent and Acquiror under any provision of this Agreement, with respect to
taxes or other liabilities that arise as a direct result of a failure of
the Merger to qualify as a reorganization within the meaning of Section
368(a)(1 )(A) and 368(a)(2)(D) of the Code, provided that the Shareholders,
and each of them, are not in breach of any of his representations,
covenants or agreements contained in the Continuity of Interest Agreement.
Section 8.3. Release by the Shareholders. The Shareholders, severally, and
each of them, hereby release and discharge Parent and Acquiror and each of
its officers, directors, agents and attorneys from, and agree and covenant
that, in no event, will the Shareholders commence any litigation or other
legal or administrative proceeding against Parent, Acquiror or any of their
officers, directors, agents or attorneys, whether in law or equity,
relating to any and all claims and demands, known and unknown, suspected
and unsuspected, disclosed and undisclosed, for damages, actual or
consequential,
past, present and future, arising out of or in any way connected with their
respective ownership or alleged ownership of Target Common Stock prior to
the Effective Time, other than claims or demands arising out of the
transactions contemplated by this Agreement and the Merger Agreement.
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of Target:
(a) By mutual consent of the Boards of Directors of Parent and Target.
(b) By either Parent or Target, if (i) the Merger shall not have been
consummated by September 30, 1999 (the "Termination Date"); (ii) the
requisite consent of the shareholders of Target to approve this Agreement,
the Merger Agreement and the transactions contemplated hereby and thereby
shall not be
obtained; (iii) any governmental or regulatory body, the consent of which
is a condition to the obligations of Parent, Acquiror and Target to
consummate the transactions contemplated hereby or by the Merger Agreement,
shall have been unsuccessful, or (iv) any court of competent jurisdiction
in the United States or any state shall have issued an order, judgment or
decree (other than a temporary restraining order) restraining, enjoining or
otherwise prohibiting the Merger and such order, judgment or decree shall
have become final and non-appealable; provided, however, that the right to
terminate this
Agreement under this Section 9.1 (b) shall not be available to any party
whose willful failure to fulfill any material obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date.
Section 9.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become
void and there shall be no liability on the part of either Parent, Acquiror
or Target or their respective officers or directors, except that nothing in
this Section 9.2 shall relieve any party from liability for any breach of
this Agreement.
Section 9.3. Expenses. Unless otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
Section 9.4. Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at
any time prior to the Effective Time. This Agreement may not be amended
except by an instrument in writing signed by each of the parties hereto.
Section 9.5. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if
set forth in an instrument in writing signed by the party or parties to be
bound thereby.
ARTICLE X. GENERAL PROVISIONS
Section 10. 1. Survival of Representations. Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall survive
the Merger indefinitely.
Section 10.2. Publicity. There shall be no public announcements with
respect to the Merger made by Target. The right to publicize the execution
of this Agreement and the Merger Agreement, as well as the consummation of
the Merger, shall be that of Parent.
Section 10.3. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or mailed if delivered personally or
mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice, except that
notices of changes of address shall be effective upon receipt):
(a) If to Parent or Acquiror:
USURF America, Inc.
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
with copies to:
Newlan & Newlan, Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
(b) if to Target or the Shareholders:
Net 1, Inc.
100 St. Joseph Street
Brewton, Alabama 36426
with copies to:
James Halford, Esquire
400 Evergreen Avenue
Brewton, Alabama 36426
W. David Johnson, Jr., Esquire
Lyons, Pipes & Cook
2 North Royal Street
Mobile, Alabama 38652
Section 10.4. Non-Waiver. The failure in anyone or more instances of a
party to insist upon performance of any of the terms, covenants or
conditions of this Agreement, to exercise any right or privilege conferred
in this Agreement, or the waiver by said party of any breach of any of the
terms, covenants or conditions of this Agreement, shall not be construed as
a subsequent waiver of any such
terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or
waiver had occurred. No waiver shall be effective unless it is in writing
and signed by an authorized representative of the waiving party.
Section 1 0.5. Arbitration. Any dispute arising under this Agreement and/or
the Merger Agreement, as well as any of the transactions contemplated
hereby and thereby, shall be resolved by arbitration in Dallas, Texas,
under the Rules of the American Arbitration Association, as then in effect.
The determination and award of the arbitrator, which aware may include
punitive damages, shall be final and binding on the parties and may be
entered as a judgment in any court of competent jurisdiction. It is
expressly agreed that the arbitrators, as part of their award, can award
attorneys' fees to the prevailing party.
Section 1 0.6. Binding Effect: Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their successors and
permitted assigns. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, including,
without limitation, third party beneficiary rights.
Section 10.7 .Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
Section 1 0.8. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings, both oral
and written, among the parties, or any of them, with respect to the subject
matter hereof and, except as otherwise expressly provided herein, are not
intended to confer upon any other person any rights or remedies hereunder.
Section 10.9. Assignabilitv. This Agreement shall not be assignable by
either party or by operation of law, except with the express written
consent of each other party.
Section 10.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas applicable to
contracts executed in and to be performed in such State.
Section 10.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 10.12. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Parent, Acquiror and Target, by their respective
officers thereunto duly authorized, and the Shareholders have caused this
Agreement to be executed as of the date first written above.
USURF AMERICA, INC.
ATTEST:
/s/ Waddell D. Loflin
Waddell D. Loflin
Secretary By: /s/ David M. Loflin
David M. Loflin President
USURF AMERICA (ALABAMA), INC.
ATTEST:
/s/ David M. Loflin
David M. Loflin
Secretary By: /s/ Waddell D. Loflin
Waddell D. Loflin
Chief Executive Officer
NET 1, INC.
ATTEST:
/s/ Secretary By: /s/ Gary Stanley
Gary Stanley
President
/s/ Gary Stanley
Gary Stanley, individually
/s/ Knud Nielsen, III
Knud Nielsen, Ill, individually
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EXHIBIT 10.56
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AGREEMENT OF MERGER
AGREEMENT OF MERGER, dated as of August 23, 1999 (the "Merger Agreement"),
by and among USURF America, Inc., a Nevada corporation ("Parent"), USURF
America (Alabama), Inc., an Alabama corporation ("Acquiror"), and Net 1,
Inc., an Alabama corporation ("Target") (Acquiror and Target being
hereinafter collectively referred to as the "Constituent Corporations").
WHEREAS, prior to the execution of this Merger Agreement, Parent, Acquiror
and Target have entered into an Agreement and Plan of Reorganization dated
as of July 23, 1999 (the "Plan of Reorganization"), providing for certain
representations, warranties and agreements in connection with the
transaction contemplated; and
WHEREAS, the Board of Directors of Parent, Acquiror and Target have
approved the acquisition of Target by Acquiror; and
WHEREAS, the Boards of Directors of Parent, Acquiror and Target have
approved the merger of Target into Acquiror (the "Merger") upon the terms
and subject to the conditions set forth herein and in the Plan of
Reorganization; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization with the meaning of Section 368(a)(1)(A)
and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Acquiror and Target agree as follows:
ARTICLE I. THE MERGER
Section 1.1. The Merger. (a) At the Effective Time (as defined in
Section 1.2) and subject to the terms and conditions of this Merger
Agreement and the Plan of Reorganization, Target shall be merged into
Acquiror and the separate existence of Target shall thereupon cease, in
accordance with the applicable provisions of the Alabama Business
Corporation Act (the "Alabama Law").
(b) Acquiror will be the surviving corporation in the Merger (sometimes
referred to herein as the "Surviving Corporation") and will continue to be
governed by the laws of the State of Alabama, and the separate corporate
existence of Acquiror and all of its rights, privileges, immunities and
franchises, public or private, and all its duties and liabilities as a
corporation organized under the laws of the State of Alabama will continue
unaffected by the Merger.
(c) The Merger will have the effects specified by the Alabama Law.
Section 1.2. Effective Time. As soon as practicable following
fulfillment or waiver of the conditions specified in Article 1.2 of the
Plan of Reorganization and provided that this Merger Agreement has not been
terminated or abandoned pursuant to Article IV hereof, the Constituent
Corporations will cause a Certificate of Merger (the "Certificate of
Merger") to be filed with the office of the Secretary of State of Alabama,
as provided in the Alabama Law. Subject to and in accordance with the
Alabama Law, the Merger will become effective at the date and time the
Certificate of Merger is filed with the office of the Secretary of State of
Alabama, or such later time or date as may be specified in the Certificate
of Merger (the "Effective Time").
ARTICLE II. THE SURVIVING CORPORATION
Section 2.1. Articles of Incorporation. The Articles of Incorporation of
Acquiror as in effect immediately prior to the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation after the Effective
Time.
Section 2.2. Bylaws. The Bylaws of Acquiror as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving
Corporation after the Effective Time.
Section 2.3. Board of Directors. From and after the Effective Time, the
Board of Directors of Acquiror shall be the Board of Directors of the
Surviving Corporation.
ARTICLE III. CONVERSION OF SHARES
Section 3.1. Conversion of Target Shares in the Merger. Pursuant to this
Merger Agreement, at the Effective Time, by virtue of the Merger and
without any action on the part of any holder of any capital stock of Target:
(a) all shares of Common Stock of Target (the "Target Common Stock") owned
by Parent or any subsidiary of Parent or Target shall be cancelled and
shall cease to exist from and after the Effective Time; and
(b) each remaining issued and outstanding share of Target Common Stock
shall be converted into, and become exchangeable for 250 shares of the
$.0001 par value per share common stock of Parent (the "Parent Common
Stock"), a total of 250,000 shares of Parent Common Stock. The
consideration referred to in this Section 3.1(b) is hereinafter referred to
as the "Merger Consideration".
Section 3.2. Status of Acquiror Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of any holder of any
capital stock of Acquiror, each issued and outstanding share of common
stock of Acquiror shall continue unchanged and remain outstanding as a
share of common stock of the Surviving Corporation.
Section 3.3. Exchange of Target Common Stock Certificates. As soon as
practicable after the Effective Time, Parent shall cause the exchange of
Target Common Stock for Parent Common Stock (as required in Section 3.1(b)
herein and Section 1.6 of the Plan of Reorganization) to occur. Shares of
Parent Common Stock into which shares of Target Common Stock shall be
converted in the Merger shall be deemed to have been issued at the
Effective Time.
ARTICLE IV. TERMINATION AND AMENDMENT
Section 4.1. Termination. This Merger Agreement shall terminate in the
event of, and upon termination of, the Plan of Reorganization.
Section 4.2. Amendments. This Merger Agreement may be amended by the
parties hereto, at any time before or after approval hereof by the
shareholders of Target, but, after any such approval, no amendment shall be
made which (a) changes the ratio at which Target Common Stock is to be
converted into Parent Common Stock pursuant to Section 3.1, (b) in any way
materially adversely affects the rights of holders of Target Common Stock
or (c) changes in any of the principal terms of this Merger Agreement, in
each case, without the further approval of such shareholder. This Merger
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 4.3. Waiver. At any time prior to the Effective Time, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid if set
foth in an instrument in writing signed on behalf of such party.
Section 4.4. Notices. All notices required to be given hereunder shall
be in writing and shall be deemed given when delivered in person or sent by
confirmed facsimile, or when received if given by Federal Express or other
nationally recognized overnight courier service, or five (5) business days
after being deposited in the United States mail, postage prepaid,
registered or certified mail, addressed to the applicable parties as follows:
(a) If to Parent or Acquiror:
USURF America, Inc.
USURF America (Alabama), Inc.
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
with copies to:
Newlan & Newlan
Attorneys at Law
819 Office Park Circle
Lewisville, Texas 75057
(b) if to Target:
Net 1, Inc.
100 St. Joseph Street
Brewton, Alabama 36426
with copies to:
James Halford, Esquire
400 Evergreen Avenue
Brewton, Alabama 36426
W. David Johnson, Jr., Esquire
Lyons, Pipes & Cook
2 North Royal Street
Mobile, Alabama 38652
Section 4.5. Arbitration. Any dispute arising under this Merger
Agreement shall be resolved by arbitration in Dallas, Texas, under the
Rules of the American Arbitration Association, as then in effect. The
determination and award of the arbitrator, which aware may include punitive
damages, shall be final and binding on the parties and may be entered as a
judgment in any court of competent jurisdiction. It is expressly agreed
that the arbitrators, as part of their award, can award attorneys' fees to
the prevailing party.
Section 4.6. Entire Agreement. This Merger Agreement and the Plan of
Reorganization constitute the entire agreement between the parties and
shall be binding upon and inure to the benefit of the parties hereto and
their respective legal representatives, successors and permitted assigns.
The parties and their respective affiliates make no representations or
warranties to each other, except as contained in the Plan of
Reorganization, and any and all prior representations and statements made
by any party or its representatives, whether verbally or in writing, are
deemed to have been merged into this Merger Agreement and the Plan of
Reorganization, it being intended that no such representations or
statements shall survive the execution and delivery of this Merger
Agreement and the Plan of Reorganization.
Section 4.7. Non-Waiver. The failure in any one or more instances of a
party to insist upon performance of any of the terms, covenants or
conditions of this Merger Agreement, to exercise any right or privilege
conferred in this Merger Agreement, or the waiver by said party of any
breach of any of the terms, covenants or conditions of this Merger
Agreement, shall not be construed as a subsequent waiver of any such terms,
covenants, conditions, rights or privileges, but the same shall continue
and remain in full force and effect as if no such forbearance or waiver had
occurred. No waiver shall be effective unless it is in writing and signed
by an authorized representative of the waiving party.
Section 4.8. Counterparts. This Merger Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
Section 4.9. Severability. The invalidity of any provision of this
Merger Agreement or portion of a provision shall not affect the validity of
any other provision of this Merger Agreement or the remaining portion of
the applicable provision.
Section 4.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Alabama applicable
to contracts executed in and to be performed in such State.
Section 4.11. Binding Effect; Benefit. This Merger Agreement shall inure
to the benefit of and be binding upon the parties hereto and their
successors and permitted assigns. Nothing in this Merger Agreement,
express or implied, is intended to confer on any person other than the
parties hereto and their respective successors and permitted assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Merger Agreement, including, without limitation, third party beneficiary
rights.
Section 4.12. Assignability. This Merger Agreement shall not be
assignable by either party or by operation of law, except with the express
written consent of each other party.
Section 4.13. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, Parent, Acquiror and Target have executed this
Agreement of Merger on the date first above written.
PARENT: TARGET:
USURF AMERICA, INC. NET 1, INC.
By: /s/ David M. Loflin By: /s/ Gary Stanley
David M. Wloflin Gary Stanley
President President
ACQUIROR:
USURF AMERICA (ALABAMA), INC.
By: /s/ Waddell D. Loflin
Waddell D. Loflin
Chief Executive Officer
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EXHIBIT 10.57
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August 23, 1999
Mr. Knud Nielsen, III
100 St. Joseph Street
Brewton, Alabama 36426
Registration Rights Letter Agreement
Dear Mr. Nielsen:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 40,000 of the shares of the $.0001 par value common
stock (the "Subject Shares") of USURF America, Inc., a Nevada corporation
(the "Company"), received, and currently owned, by you under that certain
Agreement and Plan of Reorganization (the "Reorganization Agreement") among
the Company, USURF America (Alabama), Inc., Net 1, Inc., Gary Stanley and
Knud Nielsen, III. It is our understanding that:
1. Registration Rights. At any time subsequent to the effectiveness of the
merger of Net 1, Inc. with and into USURF America (Alabama), Inc. pursuant
to the Reorganization Agreement, you may demand of the Company, on one
occasion, that up to thirty percent (30%) of the shares received by you
pursuant to the Reorganization Agreement be registered for public sale with
the Securities and Exchange Commission (the "Commission") on the
appropriate form of Registration Statement. Registration of such shares,
or any of them, by the Company in a Registration Statement filed without
regard to a demand received from you, shall constitute a satisfaction of a
demand for such registration. In the event of the filing of a Registration
Statement by the Company to register shares of the Company for public
resale, you will be notified of such proposed registration and given the
opportunity to register the registrable portion of your shares at that
time. Your failure or refusal to so register your registrable shares at
that time will constitute a waiver of your demand registration rights.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you, on a pro rata
basis, based on the percentage that your shares bear to all shares being
registered under the Registration Statement. In this regard, the Company
reserves the right to include additional selling shareholders in any
registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Commission, a
Registration Statement with respect to the Subject Shares and use its best
efforts to cause such Registration Statement to become effective, such
Registration Statement to comply as to form and content and in all material
respects to the Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act;
(h) cause all Subject Shares registered pursuant hereto to be listed on
each securities exchange on which similar securities issued by the Company
are then listed; and
(i) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin
President
AGREED AND ACCEPTED as of the
date and year first above written:
/s/ Knud Nielsen, III
Knud Nielsen, III, individually
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EXHIBIT 10.58
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August 23, 1999
Mr. Gary Stanley
100 St. Joseph Street
Brewton, Alabama 36426
Registration Rights Letter Agreement
Dear Mr. Stanley:
This letter will confirm our agreement and understanding with respect to
certain rights to register, under the Securities Act of 1933, as amended
(the "Act"), and applicable state securities laws ("Blue Sky Laws"), the
offer and sale of up to 35,000 of the shares of the $.0001 par value common
stock (the "Subject Shares") of USURF America, Inc., a Nevada corporation
(the "Company"), received, and currently owned, by you under that certain
Agreement and Plan of Reorganization (the "Reorganization Agreement") among
the Company, USURF America (Alabama), Inc., Net 1, Inc., Gary Stanley and
Knud Nielsen, III. It is our understanding that:
1. Registration Rights. At any time subsequent to the effectiveness of the
merger of Net 1, Inc. with and into USURF America (Alabama), Inc. pursuant
to the Reorganization Agreement, you may demand of the Company, on one
occasion, that up to thirty percent (30%) of the shares received by you
pursuant to the Reorganization Agreement be registered for public sale with
the Securities and Exchange Commission (the "Commission") on the
appropriate form of Registration Statement. Registration of such shares,
or any of them, by the Company in a Registration Statement filed without
regard to a demand received from you, shall constitute a satisfaction of a
demand for such registration. In the event of the filing of a Registration
Statement by the Company to register shares of the Company for public
resale, you will be notified of such proposed registration and given the
opportunity to register the registrable portion of your shares at that
time. Your failure or refusal to so register your registrable shares at
that time will constitute a waiver of your demand registration rights.
2. Expenses. All expenses incurred in connection with the registration of
the Subject Shares requested pursuant to Section 1, including, without
limitation, all accounting and printing costs and fees, filing fees and
reasonable attorney fees incurred, shall be paid by you, on a pro rata
basis, based on the percentage that your shares bear to all shares being
registered under the Registration Statement. In this regard, the Company
reserves the right to include additional selling shareholders in any
registration proceeding contemplated hereby.
3. Registration Procedures. At such time as the Company is required to
register any of the Subject Shares hereunder, the Company will promptly:
(a) prepare and file, in a timely manner, with the Commission, a
Registration Statement with respect to the Subject Shares and use its best
efforts to cause such Registration Statement to become effective, such
Registration Statement to comply as to form and content and in all material
respects to the Commission's forms, rules and regulations;
(b) prepare and file with the Commission such amendments and supplements
to the Registration Statement, the prospectus and any summary or
preliminary prospectus forming a part of, and used in connection therewith,
as may be necessary to keep such Registration Statement and prospectus
effective and current and to comply with the provisions of the Act with
respect to the disposition of all of the Subject Shares and other
securities, if any, covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such Registration Statement or the expiration
of 120 days after such Registration Statement becomes effective; and will
furnish to you prior to the filing thereof a copy of any amendment or
supplement to such Registration Statement or prospectus and shall not file
any such amendment or supplement to which you shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Act or the rules or
regulations thereunder;
(c) furnish to you such number of conformed copies of such Registration
Statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included
in such Registration Statement (including each preliminary prospectus and
any summary prospectus), all in conformity as to form and substance with
the requirements of the Act, such number of copies of documents, if any,
incorporated by reference in such Registration Statement or prospectus, and
such other documents, as you may reasonably request;
(d) use its best efforts to register or qualify all the Subject Shares
covered by such Registration Statement under such other securities or blue
sky laws of such U.S. jurisdictions, as reasonably requested by you, that
permit "registration by coordination" of securities offerings (the Company
shall not be required to register or qualify the Subject Shares in any
state invoking merit review authority), to keep such registration or
qualification in effect for a minimum of 120 days after its initial
effective date, and do any and all other acts and things which may be
necessary or advisable to enable you to consummate the disposition in such
jurisdictions of your Subject Shares covered by such Registration
Statement, except that the Company shall not, for any such purpose, be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not, but for the requirements of this
subdivision (d), be obligated to be so qualified, or to subject itself to
taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;
(e) furnish to you a signed counterpart, addressed to you, of (i) an
opinion of counsel for the Company, dated the effective date of such
Registration Statement, and (ii) a "comfort" letter, dated the effective
date of such Registration Statement, signed by the independent public
accountants who have certified the Company's financial statements included
in such Registration Statement, covering substantially the same matters
with respect to such Registration Statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other legal and financial matters, as you may
reasonably request;
(f) immediately notify you, at any time, when a prospectus relating
thereto is required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such Registration Statement, as then in effect, includes an
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 then existing, and, at your
request, prepare and furnish to you a reasonable number of copies of a
supplement to, or an amendment of, such prospectus as may be necessary so
that, as thereafter delivered to the purchasers of the Subject Shares, such
prospectus shall not 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 in the light of the
circumstances then existing;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its securities
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first month of the
first fiscal quarter after the effective date of such Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Act;
(h) cause all Subject Shares registered pursuant hereto to be listed on
each securities exchange on which similar securities issued by the Company
are then listed; and
(i) provide and cause to be maintained a transfer agent and registrar for
the Subject Shares covered by such Registration Statement from and after a
date not later than the effective date of such Registration Statement.
The Company may require you to furnish the Company such information
regarding your sales of the Subject Shares as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the Commission in connection therewith. Such information shall be
furnished in writing by you stating that it is for use in the preparation
of such Registration Statement and all prospectuses and supplements or
amendments thereto.
4. Preparation; Reasonable Investigation. In connection with the
preparation and filing of the Registration Statement registering your
Subject Shares under the Act, the Company will give you and your
underwriters, if any, and your counsel and accountants at your own expense,
the opportunity to participate in the preparation of such Registration
Statement, each prospectus included therein and filed with the Commission
and each amendment thereof or supplement thereto, and will give each of
them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be
necessary in the opinion of you and such underwriter or your respective
counsel, to conduct a reasonable investigation within the meaning of the Act.
5. Indemnification.
(a) Indemnification by the Company. In the event of registration of your
Subject Shares under the Act, the Company will, and hereby does, indemnify
and hold you harmless, against any and all losses, claims, damages,
liabilities or expenses, joint or several (including, without limitation,
the costs and expenses of investigating, preparing for and defending any
legal proceeding, including reasonable attorneys' fees) to which you may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect
thereof) arise out of, or are based upon, (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement under which your Subject Shares were registered under the Act,
any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse you for any legal or any other expenses reasonably incurred by
you in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration
Statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon, and in conformity
with, written information furnished to the Company through an instrument
duly executed by you stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of you and shall survive the transfer of
the Subject Shares by you.
(b) Indemnification by You. In the event of registration of your Subject
Shares under the Act, pursuant to which you offer or sell Subject Shares
covered by such Registration Statement, you will, and hereby do, indemnify
and hold harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company, each director of the
Company, each officer of the Company who shall sign such Registration
Statement and each other person, if any, who controls the Company within
the meaning of the Act, with respect to any statement in, or omission from,
such Registration Statement, any preliminary prospectus, final prospectus
or summary prospectus included therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by you specifically stating that it is for use in
the preparation of such Registration Statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of Subject
Shares by you.
(c) Notice of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 5. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying party may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in, and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or
enter into any settlement of such proceedings which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a complete and unconditional release from all
liability in respect to such claim or litigation.
(d) Indemnification Payments. The indemnification required by this
Section 5 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(e) Contribution. If the indemnification provided for in this Section 5
is held by a court of competent jurisdiction to be unavailable with respect
to any loss, liability, claim, damage or expense referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, damage or expense,
in such manner as the underwriter(s) shall require in the underwriting
agreement and, to the extent not specified therein with respect to any
indemnified party contemplated by this Section 5 as entitled to
indemnification, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of such
indemnified party on the other in connection with the actual or alleged
statements or omissions which resulted in such loss, liability, damage or
expense, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of such indemnified party
shall be determined by reference to, among other things, whether the untrue
or allegedly untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by such indemnified party and the parties' relative
intent, knowledge, access to information and opportunities to correct or
prevent such statement or omission. The indemnity and contribution
provided herein shall be in addition to, and not in lieu of, any other
liability that one party may have to another.
6. Arbitration. In the event of any dispute between the parties arising
out of this Agreement, relating to any question of contract or tort,
including any claims allegedly based on a violation of any securities laws
or regulations, state or federal, both the Company and you agree to submit
such dispute through the American Arbitration Association (the
"Association") at the Association's Dallas, Texas, offices, in accordance
with the then-current rules of the Association; the award given by the
arbitrators shall be binding and a judgment can be obtained on any such
award in any court of competent jurisdiction. It is expressly agreed that
the arbitrators, as part of their award, can award attorneys fees to the
prevailing party.
7. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained
your written consent to such amendment, action or omissions to act.
8. Notices. Notices and other communications under this Agreement shall
be in writing and shall be sent by registered mail, postage prepaid,
addressed:
(a) if to you, at the address shown above, unless you have advised the
Company in writing of a different address as to which notices shall be sent
under this Agreement; and
(b) if to the Company, at 8748 Quarters Lake Road, Baton Rouge, Louisiana
70809, to the attention of Mr. David M. Loflin, President, or to such other
address as the Company shall have furnished to you.
9. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto, whether so expressed or not. This Agreement embodies
the entire agreement and understanding between the Company and you with
respect to the subject matter hereof and supersedes all prior agreements
and understandings relating to the subject matter hereof. This Agreement
shall be construed and enforced in accordance with, and governed by, the
law of the State of Louisiana. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
If the foregoing correctly sets forth our agreement, please so indicate by
executing a counterpart of this letter in the space provided below and
returning it to us.
Yours very truly,
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin
President
AGREED AND ACCEPTED as of the
date and year first above written:
/s/ Gary Stanley
Gary Stanley, individually
- -------------------------
EXHIBIT 10.59
- -------------------------
August 23, 1999
USURF America, Inc.
8748 Quarters Lake Road
Baton Rouge, Louisiana 70809
Re: Confidentiality Agreement
Gentlemen:
In connection with the execution of an Agreement and Plan of
Reorganization (the "Reorganization Agreement") among the undersigned, Gary
Stanley, Net 1, Inc., USURF America (Alabama), Inc., and USURF America,
Inc. (together with affiliates, including USURF America (Alabama), Inc.,
Santa Fe Wireless Internet, Inc. and CyberHighway, Inc., the "Company"),
the Company has furnished, and will furnish, to the undersigned certain
information concerning its business, financial position, operations,
business contacts, assets and liabilities, as well as certain items of
equipment useful in the Wireless Internet access business. As a condition
to such information's being furnished to the undersigned and as a condition
to the undersigned's entering into the Reorganization Agreement with the
Company, the undersigned agrees to treat any information concerning the
Company (whether prepared by the Company, its advisors, or otherwise, and
irrespective of the form of communication) which is furnished to the
undersigned, or, in the future, will be furnished, by or on behalf of the
Company (together with the material described below, herein collectively
referred to as the "Confidential Material") in accordance with the
provisions of this letter agreement, and to take or abstain from taking
certain other actions hereinafter set forth.
The undersigned understands that the term "Confidential Material" also
includes all notes, analysis, compilations, studies, interpretations or
other documents prepared by the Company or its representatives which
contain, reflect or are based upon, in whole or in part, the information
furnished to the undersigned. The term "Confidential Material" does not
include information which (A) is or becomes generally available to the
public other than as a result of a disclosure by the undersigned, or (B)
was lawfully within the undersigned's possession prior to its being
furnished to the undersigned by or on behalf of the Company, provided that
the source of such information was not known by the undersigned to be bound
by a confidentiality agreement with, or other contractual, legal or
fiduciary obligation of confidentiality to, the Company or any other party
with respect to such information, or (C) is disclosed to the undersigned by
a third party, provided that such third party was not known by the
undersigned to be bound by a confidentiality agreement with, or other
contractual, legal or fiduciary obligation of confidentiality to, the
Company or any other party with respect to such information.
The undersigned hereby agrees that he will use the Confidential Material
solely in connection with the undersigned's entering into the
Reorganization Agreement, that the Confidential Material will be kept
confidential and that the undersigned will not disclose any of the
Confidential Material in any manner whatsoever.
The undersigned hereby agrees that he shall not reverse engineer, reverse
assemble or otherwise attempt to recreate or duplicate any model or working
model capable of performing the functions of any portion or all of the
Company's Wireless Internet access system included in the Confidential
Material.
In addition, the undersigned agrees that, without the prior written
consent of the Company, the undersigned will not disclose to any other
person the fact that the Confidential Material has been made available to
the undersigned, that discussions or negotiations are taking place
concerning a possible transaction involving the Company, or any of the
terms, conditions or other facts with respect thereto (including the status
thereof), unless, in the opinion of the undersigned's counsel, such
disclosure must be made by the undersigned in order that the undersigned
not commit a violation of law. The term "person" as used in this letter
agreement shall be broadly interpreted to include the media and any
corporation, partnership, group, individual or other entity, but shall not
include the Securities and Exchange Commission or the Federal Trade
Commission as to any required filing with either such agency.
In the event that the undersigned is requested or required (by oral
questions, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process)
to disclose any of the Confidential Material, the undersigned will provide
the Company with prompt written notice of any such request or requirement
so that the Company may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this letter agreement. If,
in the absence of a protective order or other remedy or the receipt of a
waiver by the Company, the undersigned is, nonetheless, in the opinion of
counsel, legally compelled to disclose Confidential Material, the
undersigned may, without liability hereunder, disclose only that portion of
the Confidential Material specifically required by an order of Court.
Additionally, the undersigned shall make every reasonable effort and take
every reasonable action, including, without limitation, by cooperating with
the Company, to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Material.
At any time upon the request of the Company, the undersigned will promptly
deliver to the Company or certify destruction of, at the Company's
direction, all Confidential Material (and all copies thereof) furnished to
the undersigned by or on behalf of the Company pursuant hereto. All oral
Confidential Material provided to the undersigned shall continue to be held
confidential hereunder. Notwithstanding the return or destruction of the
Confidential Material, the undersigned will continue to be bound by
obligations of confidentiality hereunder.
The undersigned agrees that the Company, without prejudice to any rights
to judicial relief he may otherwise have, shall be entitled to equitable
relief, including injunctive relief and specific performance, in the event
of any breach of the provisions of this letter agreement and that the
undersigned will not oppose the granting of such relief. The undersigned
also agrees that he will not seek and agrees to waive any requirement for
the securing and posting of a bond in connection with the Company's seeking
or obtaining such relief. In the event of litigation relating to this
letter agreement, if a court of competent jurisdiction determines that the
undersigned has breached this letter agreement, then the undersigned will
be liable to pay to the Company the reasonable legal fees incurred in
connection with such litigation, including any appeal therefrom. Also, in
the event a court of competent jurisdiction determines that the undersigned
has not breached this letter agreement, then the Company will be liable to
pay to the undersigned the reasonable legal fees incurred in connection
with such litigation, including any appeal therefrom.
This letter agreement is for the benefit of the Company, and shall be
construed (both as to validity and performance) and enforced in accordance
with, and governed by, the laws of the State of Texas applicable to
agreements made and to be performed wholly within such jurisdiction. This
letter agreement shall remain in full force and effect until terminated by
the Company.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned whereupon this letter agreement
shall become a binding agreement.
Very truly yours,
/s/ Knud Nielsen, III
Knud Nielsen, III
AGREED AND ACCEPTED as
of the date first written above:
USURF AMERICA, INC.
By: /s/ David M. Loflin
David M. Loflin
President
- -----------------------
EXHIBIT 10.60
- -----------------------
AGREEMENT NOT TO COMPETE
THIS AGREEMENT NOT TO COMPETE is entered into by and among USURF America,
Inc., a Nevada corporation ("Parent"), USURF America (Alabama), Inc., an
Alabama corporation ("Acquiror"), and Knud Nielsen, III ("Shareholder").
WHEREAS, Parent, Acquiror, Net 1, Inc., an Alabama corporation ("Target"),
Gary Stanley and Shareholder are parties to an Agreement and Plan of
Reorganization (the "Reorganization Agreement"); and
WHEREAS, as a condition to the Reorganization Agreement, Shareholder has
agreed to sign and be bound by this Agreement Not to Compete; and
NOW, THEREFORE, for and in consideration of the covenants and agreements
of Parent and Acquiror contained in the Reorganization Agreement and the
agreements executed pursuant thereto, the parties agree as follows:
Section 1. Covenant Not to Compete. Shareholder acknowledges that, as an
owner of Target, Shareholder has been involved, on a high level, in the
development, implementation and management of the business strategies and
plans of Target, and has received information relating to the national and
international business strategies of Parent, Acquiror and the sister
corporation of Acquiror, CyberHighway, Inc., and such other business,
units, divisions, subsidiaries or other entities of Parent and Acquiror.
By virtue of Shareholder's unique and sensitive position and special
background, employment of Shareholder by a competitor of Parent, Acquiror
and/or Target represents a serious competitive danger to Parent and
Acquiror, and the use of Shareholder's talent and knowledge and information
about the business, strategies and plans of Parent can and would constitute
a valuable competitive advantage over Parent, Acquiror and/or Target. In
view of the foregoing, Shareholder covenants and agrees that, for a period
of one year after the closing date under the Reorganization Agreement,
Shareholder will not engage or be engaged, in any capacity, directly or
indirectly, including, but not limited to, as employee, agent, consultant,
manager, executive, owner or stockholder (except as a passive investor
holding less than 1% equity interest in any enterprise the securities of
which are publicly traded) in any business entity engaged in competition
with any business conducted by Parent, Acquiror and/or Target as of the
closing date under the Reorganization Agreement. If any court determines
that this Agreement Not to Compete, or any part hereof, is unenforceable
because the duration or geographic scope of such provision, such court
shall have the power to reduce the duration or scope of such provision, as
the case may be, and, in its reduced form, such provision shall then be
enforceable.
Section 2. Continuing Obligations. Shareholder agrees that, during the
term of this Agreement, Shareholder shall keep Parent informed of the
identification of Shareholder's employer and the nature of such employment
or of Shareholder's self-employment. Parent agrees that, within fifteen
days after receiving notice pursuant to this Section 2 of the
identification of the prospective employer, the nature of the employment or
self-employment or any change therein, Parent will advise Shareholder as to
whether, in the opinion of Parent, such employment constitutes a violation
of Section 1 hereof.
Section 3. Injunctive Relief. Shareholder acknowledges that the
violation of the covenants contained in this Agreement would be detrimental
and cause irreparable injury to Parent, Acquiror and/or Target and their
affiliates which could not be compensated by money damages. Shareholder
agrees that an injunction from a court of competent jurisdiction is the
appropriate remedy for these provisions, and consents to the entry of an
appropriate judgment enjoining Shareholder from violating these provisions
in the event there is a find of their breach.
Section 4. Severability of Covenants. Each of the covenants contained in
this Agreement are independent covenants, which may be available to or
relied upon by Parent, Acquiror and/or Target and their affiliates in any
court of competent jurisdiction. If any one of the separate and
independent covenants shall be deemed to be unenforceable under the laws of
any state of competent jurisdiction, each of the remaining covenants shall
not be affected thereby. Notwithstanding the provisions of this Section 4,
it is understood that every benefit received by Shareholder by virtue of
this Agreement and the Reorganization Agreement is consideration for each
separate covenant contained herein.
Section 5. Governing Law. This Agreement shall be governed by the laws
of the State of Alabama.
Section 6. Other Remedies. The undertakings herein shall not be
construed as any limitation upon the remedies Employer might, in the
absence of this Agreement, have at law or in equity.
INTENDING to be legally bound hereby, Parent, Acquiror and Shareholder
hereby duly execute this Agreement Not to Compete on the date indicated below.
USURF AMERICA, INC.
Date: August 23, 1999 By: /s/ David M. Loflin
David M. Loflin
President
USURF AMERICA (ALABAMA), INC.
Date: August 23, 1999 By: /s/ Waddell D. Loflin
Waddell D. Loflin
Chief Executive Officer
Date: August 23, 1999 /s/ Knud Nielsen, III
Knud Nielsen, individually
- -------------------
EXHIBIT 11
- -------------------
EXHIBIT 11
STATEMENT REGARDING COMPUTATION
OF PER SHARE EARNINGS
Cumulative
Number Days Days Cumulative
of Out- Since Out- Since
Shares standing Inception standing Inception
------ -------- --------- -------- ---------
Period from
inception
(December
28, 1995)
to Decem-
ber 31,
1996
Decem-
ber 28 227,336 3/3 227,336 731/731 227,336
------- -------
Decem-
ber 31 227,336 227,336
======= =======
Year ended
December
31, 1996
Janu-
ary 1 227,336 364/364 227,336
Novem-
ber 1 1,800,000 61/364 301,648 425/731 1,046,512
Novem-
ber 15 360,000 47/364 46,484 411/731 26,135
Decem-
ber 20 1,578,512 11/364 47,702 375/731 24,471
Decem-
ber 20 104,249 11/364 3,150 375/731 1,616
Decem-
ber 31 1,929,903 1/364 5,302 365/731 2,647
--------- -------
Decem-
ber 31 6,000,000 631,622
========= =======
Year ended
December
31, 1997
Janu-
ary 1 6,000,000 364/364 6,000,000
Febru-
ary 150,000 333/364 137,225 333/731 62,512
March 7 20,000 298/364 18,667 298/731 7,610
Septem-
ber 22 10,000 101/364 2,775 101/731 383
Octo-
ber 1 60,000 94/364 15,495 94/731 1,992
Octo-
ber 17 40,000 76/364 8,352 76/731 868
Novem-
ber 6 44,000 56/364 6,769 56/731 519
Decem-
ber 16 100,000 16/364 4,396 16/731 96
------- ------
Decem-
ber 31 6,424,000 6,193,678 1,402,697
========= ========= =========
Year ended
December
31, 1998
6,424,000 364/364 6,424,000
400,000 333/364 85,934 333/1,095 121,644
36,082 316/364 31,333 316/1,095 10,416
22,667 285/364 17,748 285/1,095 5,900
80,000 284/364 62,418 284/1,095 207,749
37,000 229/364 23,277 229/1,095 7,738
300,000 181/364 149,176 181/1,095 49,589
10,000 138/364 3,791 138/1,095 1,260
10,000 72/364 1,978 72/1,095 658
400,000 120/364 131,868 120/1,095 43,836
300,000 118/364 97,253 118/1,095 32,329
100,000 77/364 21,154 77/1,095 7,032
150,000 57/364 23,489 57/1,095 7,808
17,500 16/364 769 16/1,095 256
60,000 13/364 2,143 13/1,095 712
150,000 12/364 4,945 12/1,095 1,644
--------- --------- --------
December
31, 1998 8,497,259 7,361,275 4,715,763
========= ========= =========
- --------------------
EXHIBIT 22.1
- --------------------
SUBSIDIARIES OF REGISTRANT
1. CyberHighway, Inc., an Idaho corporation.
2. Santa Fe Wireless Internet, Inc., a New Mexico corporation.
3. USURF America (Alabama), Inc., an Alabama corporation.
- ----------------------
EXHIBIT 23.1
- ----------------------
CONSENT OF INDEPENDENT AUDITOR
As independent auditors, we hereby consent to the incorporation by
reference in this Form S-1 Registration Statement of our report dated April
9, 1999, relating to the consolidated financial statements of USURF
America, Inc. and subsidiaries (formerly Internet Media Corporation) as of
December 31, 1998 and 1997, and the related consolidated statement of
operations, changes in stockholders' equity and cash flows for the years
ended December 31, 1998, 1997 and the period from inception (December 28,
1995) to December 31, 1996, included in the Annual Report on Form 10-KSB of
USURF America, Inc. (formerly Internet Media Corporation), filed with the
Securities and Exchange Commission on April 19, 1999. We also consent to
the reference to this firm under the heading "Experts" in this Registration
Statement.
/s/
WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
January 20, 2000
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EXHIBIT 23.2
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Consent of Newlan & Newlan is included in the Opinion filed as Exhibit 5.1
hereto.
