3m Financing for Appeal Bond
The company entered into an agreement with its chairman, William O. Hunt,under which Mr. Hunt will collateralize a letter of credit in the amount ofthe appeal bond and the company will pay Mr. Hunt a commitment fee of 8% perannum, paid quarterly.If the company reduces the collateral amount by substituting an alternativecollateral for the letter of credit, Mr. Hunt would have a ninety day optionto convert all or a portion of the amount of the reduction, based on when itoccurs, into shares of common stock. The minimum conversion price per sharewould be yesterday closing price of $0.35.The conversion price could increase depending on the closing price of thecommon stock over the next ten trading days, but would not be greater than$0.65 per share. If a reduction occurs within the next six months, Mr. Huntcould convert one half of the amount of the reduction, and if a reductionoccurs after this six month period, Mr. Hunt could convert the full amountof the reduction.The note could be converted into common stock within two years of issuanceat the conversion price discussed above. If the note was not convertedwithin two years of issuance, the conversion option would terminate and allprincipal and unpaid accrued interest would be payable in four quarterlypayments over the third year. If the amount of the note is less than thefull amount of the letter of credit, the balance would be treated as areduction and Mr. Hunt would also have the conversion rights discussedabove.Subscribe to WHIR Newsletters Get Our Exclusive Report on "The Hosting Infrastructure Ecosystem".Jack T. Smith, president and CEO of Internet America said, Hunt isshowing tremendous confidence in our company by completing this financing inthe current capital market environment. Completing this financing iscritical to the company for many reasons. First, it allows us to move intothe future consistent with our primary objectives; growth in profitabilityand reasonable revenue growth. We can now focus on these objectivesnotwithstanding the outcome of this litigation. Lastly, the financinggives us many options to lessen any possible dilutive effects of aconversion, while giving us many options to force a conversion option.