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EXHIBIT 10.2
DEFINITIVE AGREEMENT
by and between
PRODIGY SERVICES CORPORATION
as the "Company,"
and
SPLITROCK SERVICES, INC.
as "Provider"
Dated: June 24, 1997
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TABLE OF CONTENTS
[TABLE OF CONTENTS PAGE NUMBERING TO BE UPDATED]
ARTICLE I DEFINITIONS ........................................................................................-1-
1.1 Defined Terms ....................................................................................-1-
ARTICLE II TRANSFER OF ASSETS.................................................................................-2-
ARTICLE III CLOSING...........................................................................................-3-
3.1 Closing...........................................................................................-3-
3.2 Documents to be Delivered.........................................................................-3-
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
COMPANY.......................................................................................................-3-
4.1 Organization of Company and Authority.............................................................-3-
4.2 Absence of Certain Changes or Events .............................................................-3-
4.3 Title to Assets and Value of Assets...............................................................-4-
4.4 No Conflict or Violation .........................................................................-4-
4.5 Financial Statements .............................................................................-4-
4.6 Litigation........................................................................................-5-
4.7 Liabilities ......................................................................................-5-
4.8 Compliance with Law ..............................................................................-5-
4.9 Proprietary Rights ...............................................................................-5-
4.10 Employee Matters..................................................................................-5-
4.11 Employee Benefit Plans............................................................................-7-
4.12 Consents and Approvals............................................................................-7-
4.13 No Brokers .......................................................................................-7-
4.14 No Other Agreements to Sell the Assets Of Company.................................................-7-
4.15 Environmental and Safety Matters..................................................................-7-
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PROVIDER..........................................................-7-
5.1 Organization of Provider .........................................................................-8-
5.2 Authorization ....................................................................................-8-
5.3 Consents and Approvals ...........................................................................-8-
5.4 No Brokers .......................................................................................-8-
5.5 No Conflict or Violation..........................................................................-8-
5.6 Litigation .......................................................................................-8-
ARTICLE VI ACTIONS BY COMPANY AND PROVIDER PRIOR TO THE CLOSING...............................................-8-
6.1 Investigation by Provider.........................................................................-8-
6.2 Consents and Reasonable Commercial Efforts........................................................-9-
6.3 Notification of Certain Matters...................................................................-9-
6.4 No Mergers, Consolidations, Sale of Assets, Etc...................................................-9-
6.5 Hiring Employees .................................................................................-9-
6.6 Employee Matters .................................................................................-9-
6.7 Business Operations .............................................................................-10-
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ARTICLE VII CONDITIONS TO COMPANY'S OBLIGATIONS..............................................................-10-
7.1 Representations, Warranties and Covenants........................................................-10-
7.2 Consents.........................................................................................-10-
7.3 No Governmental Proceedings or Litigation .......................................................-10-
7.4 Due Diligence Review ............................................................................-11-
7.5 Certificates ....................................................................................-11-
7.6 Full Service Agreement and Transition Services Agreement.........................................-11-
ARTICLE VIII CONDITIONS TO PROVIDER'S OBLIGATIONS............................................................-11-
8.1 Representations, Warranties and Covenants .......................................................-11-
8.2 Consents ........................................................................................-11-
8.3 Opinion .........................................................................................-11-
8.4 No Material Adverse Change.......................................................................-11-
8.5 Due Diligence Review ............................................................................-11-
8.6 No Governmental Proceeding or Litigation ........................................................-11-
8.7 Employee Compensation and Benefits ..............................................................-12-
8.8 System Verification .............................................................................-12-
8.9 Supplier Verification ...........................................................................-12-
8.10 Full Service Agreement and Transition Services Agreement.........................................-12-
8.11 Certificates.....................................................................................-12-
8.12 ▇▇▇▇ of Sale.....................................................................................-12-
ARTICLE IX ACTIONS BY COMPANY AND PROVIDER AFTER THE CLOSING.................................................-12-
9.1 Books and Records ...............................................................................-12-
9.2 Further Assurances ..............................................................................-12-
9.3 Solicitation of Employees .......................................................................-12-
ARTICLE X INDEMNIFICATION....................................................................................-13-
10.1 Survival of Representations, Etc.................................................................-13-
10.2 Indemnification .................................................................................-13-
10.3 Indemnification Procedures ......................................................................-13-
ARTICLE XI MISCELLANEOUS.....................................................................................-14-
11.1 Termination .....................................................................................-14-
11.2 Assignment ......................................................................................-14-
11.3 Notices .........................................................................................-14-
11.4 Choice of Law ...................................................................................-15-
11.5 Entire Agreement: Amendments and Waivers.........................................................-15-
11.6 Counterparts.....................................................................................-15-
11.7 Invalidity.......................................................................................-15-
11.8 Headings.........................................................................................-15-
11.9 Expenses ........................................................................................-16-
11.10 LIMITATION OF REMEDIES...........................................................................-16-
11.11 Publicity........................................................................................-16-
11.12 Confidential Information.........................................................................-16-
Exhibit A Form of Full Service Agreement
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Exhibit B Form of Transition Services Agreement
Exhibit C Form of Sublease
Exhibit D Form of Conveyance and Assignment Agreement
Schedules
1.1(a) Fixtures, Equipment and Facilities
1.1(b) Network Assets
2 Leases
3 Transfer of Possession of Assets
4.2(a) Absence of Certain Changes or Events
4.3 Title to Assets
4.4 No Conflict or Violation
4.5 Financial Statement
4.6 Litigation
4.7 Liabilities
4.10 (a)Cash Compensation
4.10 (b)Compensation Plans
4.10 (c)Employment and Independent Contractor Agreements
4.10 (d)Employee Policies and Procedures
4.10 (e)Unwritten Amendments
4.10 (f)Labor Compliance
4.11 (a)Employee Benefit Plans
4.11 (c)Retirees
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DEFINITIVE AGREEMENT
This Definitive Agreement ("Agreement"), effective as of June 24, 1997, is
by and between PRODIGY SERVICES CORPORATION, a Delaware corporation (the
"Company"), and SPLITROCK SERVICES, INC., a Texas corporation ("Provider").
RECITALS
WHEREAS, Company wishes to enter into arrangements with providers of
network services, and Provider can provide the services required by Company;
WHEREAS, Company and Provider intend to enter into a full services
agreement pursuant to which Provider will provide certain network services to
Company ("Full Service Agreement");
WHEREAS, Company owns certain assets which are necessary to the
implementation and operation of the services to be provided by Provider under
the Full Service Agreement and which will no longer be required by Company upon
its execution of the Full Service Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the term below shall have the
following meanings:
"Assets" shall mean the Network Assets and the Fixtures,
Equipment and Facilities (as hereinafter defined).
"Closing" and "Closing Date" shall mean July 1, 1997.
"Effective Date" shall mean June 24, 1997.
"Encumbrances" shall mean any claim, lien, pledge, option,
charge, easement, security interest, right-of-way, encumbrance or other rights
of third parties.
"Financial Statements" shall mean the draft of audited
consolidated balance sheet as of December 31, 1996 and the audited consolidated
statements of income, cash flows and stockholders' (deficit) equity for the year
ended December 31, 1996 of Prodigy, Inc. together with the notes thereto
prepared by Coopers & ▇▇▇▇▇▇▇ L.L.P. attached hereto as Schedule 4.5.
"Fixtures, Equipment and Facilities" shall mean all of the
furniture, fixtures, furnishings, accessories, computer hardware and software,
machinery and equipment owned by Company (regardless
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of location) which is being used by the Personnel (as hereinafter defined) to
perform their duties, which assets are listed on Schedule 1.1(a) attached
hereto. Specifically excluded from this transaction are desktop and laptop
personal computers, furniture, fixtures and leasehold improvements, which
otherwise may be used by the Personnel to perform their duties.
"Full Service Agreement" shall mean that Full Service Agreement
referenced in the recitals herein, a form of which is attached hereto as Exhibit
A.
"Network Assets" shall mean those certain tangible assets owned
or leased by the Company that are used by Company in providing network services
to its current United States subscribers and all communications equipment which
is directly linked to providing such network services, which assets include
without limitation, related warranty information, maintenance information, and
operating manuals, and which could be used by Provider to perform the Full
Service Agreement and which are set forth in Schedule 1.1(b) hereof, but shall
exclude: any owned, leased or licensed real property interests; all leased or
licensed personal property interests other than as set forth in Schedule 1.1(b);
all assets relating to the directory machines; all assets relating to the
ISP referral servers; and all assets relating to Company's wide area access
(800# call option) plans.
"Network Business" shall mean that portion of Company's business
that relates to providing network services to the Company's subscribers, which
services Provider will perform pursuant to the terms and conditions of the Full
Service Agreement.
"Permitted Encumbrances" shall mean the encumbrances to title set
forth on Schedule 4.3 hereof.
"Personnel" shall mean those certain employees and contractors of
Company who work in Company's network operations division and listed on Schedule
4.10(a) attached hereto, and any reference herein to "Direct Employees" shall
mean only the Company employees on Schedule 4.10(a) without any reference to the
independent contractors.
"Sublease Agreement" shall mean that agreement of sublease
between Company and Provider, a form of which is attached hereto as Exhibit C,
which provides for Provider to sublease certain space from Company in Company's
Yorktown Heights, New York facility.
"Transition Services Agreement" shall mean that certain
transition services agreement between Company and Provider, a form of which is
attached hereto as Exhibit B, which will, among other things, require Company to
provide certain support efforts and administrative assistance to Provider and to
continue to manage some or all of the Network Assets, from July 1, 1997 through
or prior to December 31, 1997.
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ARTICLE II
TRANSFER OF ASSETS
(a) Upon the terms and subject to the conditions contained herein, the
Company will sell, convey, transfer, assign and deliver the Assets to Provider,
free and clear of all Encumbrances, except the Permitted Encumbrances, in a
Conveyance and Assignment Agreement dated as of July 1, 1997 in the form of
Exhibit D hereto. With respect to those assets transferred in the form of leases
described in Schedule 2, Provider shall acquire such assets subject to such
leases, and shall also assume all liability related to such leases. Company and
Provider agree that the consideration for the Assets will be the execution by
Provider of the Full Service Agreement.
(b) Provider shall not buy any Assets other than those contemplated by this
Agreement, and Provider shall not assume or agree to pay, perform or discharge
any Encumbrance, liabilities or obligations of Company, whether accrued,
absolute, contingent or otherwise, except as specifically provided for in this
Agreement.
(c) Notwithstanding any provision herein to the contrary Provider will
assume leases for five (5) 3745/46s as referenced in the Memorandum dated June
17, 1997 from Company to ▇▇▇▇ ▇▇, which 3745/46s connect Proteon 600 to TPF
specifically for SNA traffic designated for Prodigy Classic subscribers' direct
access, subject to Provider's review of the respective leases encumbering such
3745/46s. In addition, Provider will assume NCP licenses and maintenance
contracts associated with such 3745/46s, subject to Provider's review of the
respective licenses and maintenance contracts. Any other 37XX network-related
equipment which is located at Yorktown as of June 24, 1997 and which has related
leases, licenses or maintenance contracts shall be identified on Schedule 2(c)
by Company no later than June 30, 1997. Company shall transfer such Assets, and
Provider shall assume the obligations associated with such Assets, and Company
will reimburse Provider for Provider's costs associated with Provider's
assumption of leases, licenses or maintenance contracts related to such
obligations, plus 10%, subject to Provider's review of the respective leases,
licenses and maintenance contracts.
(d) Provider does not agree to assume and will not assume any obligations
of Company which relate to any Asset which obligations are not disclosed on
Schedule 2.(c), as amended, or Schedule 4.3, as amended.
(e) Schedule 3 contains a list of new network related assets which are in
Company's possession but are not included in the definition of Assets, and for
which Company has not yet executed contracts for purchase or lease with the
respective vendors. Company will transfer right of possession of such assets on
the Closing Date and Provider will assume the payment obligations for such
assets upon receipt.
ARTICLE III
CLOSING
To effect the transfer referred to in Article II, Company shall, on or
before the Closing Date, deliver the following:
(a) Company shall deliver all documents required to be
delivered pursuant to Article VIII.
(b) Prior to Closing, Company shall deliver all Schedules
referenced herein which
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are not attached hereto and, on the Closing Date.
(c) All instruments and documents executed and delivered to
Provider pursuant hereto shall be in form and
substance, and shall be executed in a manner,
reasonably satisfactory to Provider. All instruments
and documents executed and delivered to Company
pursuant hereto shall be in form and substance, and
shall be executed in a manner, reasonably satisfactory
to Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Provider as follows:
4.1 Organization of Company and Authority Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to conduct its
business as it is presently being conducted and to own and lease its properties
and assets. Company is duly qualified to do business and is in good standing in
the State of New York and each other foreign jurisdiction in which such
qualification is necessary under the applicable law as a result of the conduct
of its business or the ownership of its properties and where the failure to be
so qualified would have a material adverse effect on the business or financial
condition of Company. Company has all necessary corporate authority to enter
into this Agreement, the Full Service Agreement, the Transition Services
Agreement and the Sublease Agreement, and has taken all necessary corporate
action to execute each such agreement and to consummate all the transactions
contemplated hereby and to perform its obligations thereunder. This Agreement,
the Full Service Agreement, the Transition Services Agreement and the Sublease
Agreement, are each duly executed and delivered by Company and each is the valid
and binding obligation of Company, enforceable against it in accordance with its
terms.
4.2 Absence of Certain Changes or Events. Since December 31. 1996,
solely with respect to the Assets, and except as disclosed in Schedule 4.2(a),
there has not been any:
(a) change in Company's condition (financial or otherwise), assets,
liabilities, working capital, reserves, earnings or operations, or change which
has, individually or in the aggregate, had a material adverse effect on the
Company's Network Business, other than matters disclosed on Schedule 4.2(a) and
those relating to (i) changes previously disclosed to Provider, (ii) matters of
public knowledge relating to Company, and (iii) to Company's industry in
general;
(b) sale, assignment or transfer of any of the Network Assets of
Company, individually or in the aggregate, other than in the ordinary course of
business;
(c) cancellation of any indebtedness or waiver of any rights of
significant value to the network division of Company;
(d) damage, destruction or loss not covered by insurance materially
adversely affecting the properties, business or prospects of Company;
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(e) declaration or payment of distributions or dividends with respect
to any stockholder of Company, except a repayment of a loan to Mr. ▇▇▇▇ ▇▇▇▇ in
the approximate amount of six million dollars ($6,000,000.00);
(f) payment, discharge or satisfaction of any liabilities other than
the payment, discharge or satisfaction, in the ordinary course of business and
consistent with past practice, of liabilities reflected or reserved against in
the Financial Statements, or incurred in the ordinary course of business and
consistent with past practice;
(g) indebtedness incurred by Company for borrowed money or any
commitment to borrow money entered into by Company, or any loans made or agreed
to be made by Company except in connection with certain loans made or to be made
by the Company by Banco Inbursa and others; and
(h) agreement by Company to do any of the foregoing.
4.3 Title to Assets and Value of Assets. Except for the Encumbrances as
disclosed in Schedule 4.3, Company has good and marketable title to the Network
Assets and the Fixtures, Equipment and Facilities free and clear of any
Encumbrances. Company has in all respects performed all the obligations required
to be performed by it with respect to all assets leased by it through the
Closing Date, except where the failure to perform would not have a material
adverse effect on the business or financial condition of Company. The book value
of the Network Assets is not greater than $14,000,000 as of May 31, 1997.
4.4 No Conflict or Violation. Except as disclosed in Schedule 4.4,
neither the execution nor delivery of this Agreement, the Full Service
Agreement, the Transition Services Agreement, the Sublease Agreement nor the
consummation of the transactions contemplated hereby will result in (a) a
violation of or a conflict with any provision of the Company's Certificate of
Incorporation or Bylaws, as amended, (b) a breach of, or a default under, any
term or provision of any contract, agreement, indebtedness, lease, Encumbrance,
commitment, license, franchise, permit, authorization or concession to which
Company is a party or by which the Assets are bound, which breach or default
would have a material adverse effect on the business or financial condition of
Company, (c) a violation by Company of any statute, rule, regulation, ordinance,
code, order, judgment, writ, injunction, decree or award, which violation would
have a material adverse effect on the business or financial condition of Company
or the ability of Company to consummate the transactions contemplated hereby,
or (d) an imposition of any Encumbrance, restriction or charge on the business
of Company or any of the Assets.
4.5. Financial Statements. Except as otherwise set forth therein, the
Financial Statements present fairly, in all material respects, Prodigy, Inc.'s
assets, liabilities and financial condition as of the dates indicated and
results of operations for the periods indicated in accordance with generally
accepted accounting principles consistently applied.
4.6 Litigation. Except as disclosed in Schedule 4.6, there is no action,
order, writ, injunction, judgment or decree outstanding or claim, suit,
litigation, proceeding, labor dispute (other than routine grievance procedures,
or routine uncontested claims for benefits under any employee benefit plan),
arbitral action or investigation (collectively, "Actions") pending, threatened,
anticipated against or relating to (i) any Employee Benefit Plan (as hereinafter
defined) or any fiduciary or administrator thereof, (ii) the transactions
contemplated by this Agreement, or (iii) the Company in general. Company is not
in default with respect to any judgment, order, writ, injunction or decree of
any court or
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governmental agency, and there are no unsatisfied judgments against Company or
the business or activities of Company. There is not a reasonable likelihood of
an adverse determination of any pending Actions which would, individually or in
the aggregate, have a material adverse effect on the business or financial
condition of Company, this Agreement, the Full Services Agreement or the
Transition Services Agreement.
4.7 Liabilities. Except as disclosed on Schedule 4.7, Company has no
liabilities or obligations (absolute, accrued, contingent or otherwise) except
(i) liabilities which are reflected and reserved against in the Financial
Statements, (ii) liabilities incurred in the ordinary course of business and
consistent with past practice since December 31, 1996, (iii) liabilities arising
under contracts, letters of credit, purchase orders, licenses, permits, purchase
agreements and other agreements, business arrangements and commitments arising
in the ordinary course of business which because of the dollar amount or other
qualifications (including rights of termination) are not material to Company,
and (iv) the Permitted Encumbrances.
4.8 Compliance with Law. The Company is in compliance with all
applicable laws, statutes, ordinances and regulations, whether federal, state or
local, except where the failure to comply would not have a material adverse
effect on the business or financial condition of Company or the transactions
contemplated by this Agreement. The Company has not received any written notice
to the effect that, or otherwise been advised that, it is not in compliance with
any of such laws, statutes, ordinances or regulations, where the failure to
comply would have a material adverse effect on the business or financial
condition of Company or the transactions contemplated by this Agreement, and
Company has no reason to anticipate that any presently existing circumstances
are likely to result in any such violation which would, individually or in the
aggregate, have a material adverse effect on the business or financial condition
of Company, or the transactions contemplated by this Agreement.
4.9 Proprietary Rights. No proceedings have been instituted against or
notices received by Company alleging that Company's use of any of its
registrations of trademarks and of other marks, trade names or other trade
rights, pending applications for any such registrations, and its patents and
copyrights and all pending applications therefor, and all other trade secrets,
designs, plans, specifications and other proprietary rights owned by Company
that are material to the business of Company (collectively, "Proprietary
Rights") infringes upon or otherwise violates any rights of a third party in or
to such Proprietary Rights.
4.10 Employee and Independent Contract Matters.
(a) Cash Compensation. Schedule 4.10(a) contains a complete and
accurate list, as of the Effective Date, of the names, titles and current rate
of compensation, including without limitation wages, salaries, bonuses
(discretionary and formula), hourly or monthly rates and other cash compensation
(the "Cash Compensation") of the Personnel. In addition, Schedule 4.10(a)
contains a complete and accurate description of any promised increases, in Cash
Compensation of Personnel that have not yet been effected.
(b) Compensation Plans. Schedule 4.10(b) contains a complete and
accurate list of all compensation plans, arrangements or practices (the
"Compensation Plans") sponsored by Company or to which Company contributes on
behalf of the Direct Employees (other than Employee Benefit Plans (as defined in
Section 4.11(a)), including those that provide for severance pay, deferred
compensation, incentive, bonus or performance awards, and stock ownership or
stock options.
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(c) Employment and Independent Contractor Agreements. Schedule 4.10(c)
contains a complete and accurate list of all employment and independent
contractor agreements (the "Employment and Independent Contractor Agreements")
to which Company is a party with respect to Personnel, including without
limitation employee leasing agreements, employee services agreements and
non-competition agreements.
(d) Employee Policies and Procedures. Schedule 4.10(d) contains a
complete and accurate list of all employee manuals, policies, procedures and
work-related rules (the "Employee Policies and Procedures") that apply to the
Direct Employees. Prior to the Effective Date, Company will provide Provider a
copy of all written Employee Policies and Procedures and a written description
of all unwritten Employee Policies and Procedures. Subject to applicable law,
each of the Employee Policies and Procedures can be amended or terminated at
will by Company.
(e) Unwritten Amendments. Except as disclosed in Schedule 4.10(e), no
unwritten amendments have been made, whether by oral communication, pattern of
conduct or otherwise, with respect to any, Cash Compensation, Compensation
Plans, Employment and Independent Contractor Agreements or Employee Policies and
Procedures.
(f) Labor Compliance. Except as disclosed in Schedule 4.10(f),
Company (i) has been and is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices, terms
and conditions of employment and wages and hours relating to the Personnel, and
(ii) is not liable for any arrears of wages or penalties for failure to comply
with any of the foregoing relating to the Personnel. Company has not to its
knowledge engaged in any unfair labor practice or discriminated on the basis of
race, color, religion, sex, national origin, age or disability in its employment
conditions or practices relating to the Personnel. With respect to the
Personnel, there are no (i) unfair labor practice charges or complaints or
racial, color, religious, sex, national origin, age or disability discrimination
charges or complaints pending, or to the knowledge of Company threatened,
against Company before any federal, state or local court, board, department,
commission or agency nor does any basis therefor exist or (ii) existing or, to
the knowledge of Company, threatened labor strikes, disputes, grievances,
controversies or other labor troubles affecting Company, nor does Company know
of any basis therefor.
(g) Unions. Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit. None of the Personnel
are represented by any union, labor organization or collective bargaining unit.
To the knowledge of Company, the Personnel have no intention to and have not
threatened to organize or join a union, labor organization or collective
bargaining unit.
(h) Aliens. All of the Personnel are citizens of, or are authorized to
be employed in, the United States.
4.11 Employee Benefit Plans.
(a) Identification. Schedule 4.11(a) contains a complete and accurate
list of all employee benefit plans (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) sponsored
by Company or to which Company contributes on behalf of the Direct Employees and
all Employee Benefit Plans previously sponsored or contributed to on behalf of
the Direct Employees within the three years preceding the date hereof (the
"Employee Benefit Plans"). Company will provide Provider with copies of all
summary plan descriptions and
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summaries of material modifications. Each of the Employee Benefit Plans can be
terminated or amended at will by Company. No unwritten amendment exists with
respect to any Employee Benefit Plan.
(b) Retirees. Schedule 4.11(b) contains a complete and accurate list of
any obligation or commitment of Company to provide medical, dental or life
insurance benefits to or on behalf of any Direct Employee who may retire.
(c) Claims and Litigation. No pending, or to the knowledge of Company
threatened, claims, suits or other proceedings exist with respect to any
Employee Benefit Plan other than normal uncontested benefit claims filed by
participants or beneficiaries.
4.12 Consents and Approvals. No consent, approval or authorization
of, or declaration, filing or registration with, any governmental or regulatory
authority is required to be made or obtained by Company in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby.
4.13 No Brokers. Neither Company nor any affiliate of Company has
entered into or will enter into any contract, agreement, arrangement or
understanding with any person or firm which will result in the obligation of
Provider to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
4.14 No Other Agreements or Negotiations to Sell the Assets of Company.
Company has no legal obligation, absolute or contingent to, and is not in
negotiations with, any other person or business entity to sell any of the
Assets.
4.15 Environmental and Safety Matters. None of the Assets are currently
in violation of, or subject to, any existing, pending or threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under any laws or regulations pertaining to health, safety or the
environment (collectively, "Health and Safety Laws"). To the knowledge of
Company, the Assets have never been used in a manner that would be in violation
of any Health and Safety Laws.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PROVIDER
Provider hereby represents and warrants to Company as follows:
5.1 Organization of Provider. Provider is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and has all requisite corporate power and authority to conduct its
business as it is presently being conducted, and to own and lease its
properties. On or before December 31, 1997, Provider will be duly qualified to
do business and be in good standing in each jurisdiction in which such
qualification is necessary under the applicable law as a result of the conduct
of its business or the ownership of its properties and where the failure to be
so qualified would have a material adverse effect on the business or financial
condition of Provider.
5.2 Authorization. Provider has all necessary corporate authority
to enter into this Agreement, the Full Service Agreement, the Transition
Services Agreement and the Sublease Agreement and has taken all necessary
corporate action to enter into each such agreement and to consummate the
transactions contemplated hereby and to perform its obligations hereunder. This
Agreement, the Full
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Service Agreement, the Transition Services Agreement and the Sublease Agreement
each have been duly executed and delivered by Provider and each is the valid and
binding obligation of Provider, enforceable against it in accordance with its
terms.
5.3 Consents and Approvals. No consent, approval or authorization of, or
declaration, filing or registration with, any United States federal or state
governmental or regulatory authority is required to be made or obtained by
Provider in connection with the execution, delivery and performance of this
Agreement, the Full Service Agreement, the Transition Services Agreement and the
Sublease Agreement and the consummation of the transactions contemplated hereby.
Based on the good faith determination by the Board of Directors of Provider with
respect to the value of the Assets transferred hereby, and representations from
Company regarding the Network Assets, no filing or notice pursuant to the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act, as amended, shall be necessary in
connection with the transactions contemplated hereby.
5.4 No Brokers. Neither Provider, nor any affiliate of Provider has
entered into or will enter into any agreement, arrangement or understanding with
any person or firm which will result in the obligation of Company to pay any
finder's fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby.
5.5 No Conflict or Violation. Neither the execution and delivery of
this Agreement, the Full Service Agreement, the Transition Services Agreement,
the Sublease Agreement nor the consummation of the transactions contemplated
hereby will result in (a) a violation of or a conflict with any provision of the
Articles of Incorporation or Bylaws of Provider, (b) a breach of, or a default
under, any term or provision of any contract, agreement, indebtedness, lease,
commitment, license, franchise, permit, authorization or concession to which
Provider is a party which breach or default would have a material adverse effect
on the business or financial condition of Provider or its ability to consummate
the transactions contemplated hereby or (c) a violation by Provider of any
statute, rule, regulation, ordinance, code, order, judgment, writ, injunction,
decree or award, which violation would have a material adverse effect on the
business or financial condition of Provider or its ability to consummate the
transactions contemplated hereby.
5.6 Litigation. "Provider has received no notice of any Actions,
or, to the knowledge of Provider, threatened or anticipated Actions, relating to
the transactions contemplated by this Agreement or the operations of Provider.
Provider is not in default with respect to any judgment, order, writ, injunction
or decree of any court or governmental agency, and there are no unsatisfied
judgments against Provider, its business or activities.
5.7 Due Diligence. The due diligence material, ("Material")
provided by Provider to Company under cover dated June 17, 1997, and letter
dated June 23, 1997 addressed to Company from Provider, and the Subscription
Agreements dated June 24, 1997 from ▇▇▇▇ ▇▇ and ▇▇▇▇▇ ▇▇▇, L.L.C. to Provider
are true and accurate in all material respects except as revised and provided to
Company thereafter. However, Provider makes no representation with respect to
the financial statements and projections included in the Material, except that
it was prepared in good faith and do in fact represent Provider's intended
business plan. Company shall not have any claim against Provider arising out of
the furnishing of the Material.
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ARTICLE VI
ACTIONS BY COMPANY AND PROVIDER PRIOR TO THE CLOSING DATE
Company and Provider covenant as follows from the Effective Date through
the Closing Date:
6.1 Consents and Reasonable Commercial Efforts. Company will, as soon as
possible, commence to take all action required to obtain all consents, approvals
and agreements of, and to give all notices and make all other filings with, any
third parties, including governmental authorities, necessary on Company's part
to authorize, approve or permit the sale, conveyance, assignment or transfer of
the Assets and Provider shall cooperate with Company with respect thereto. In
addition, subject to the terms and conditions herein provided, each of the
parties hereto covenants and agrees to use its reasonable commercial efforts to
take, or cause to be taken, all action or do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and the transactions contemplated hereby and to cause the fulfillment
of the parties' obligations hereunder.
6.2 Notification of Certain Matters. Company shall give prompt notice to
Provider, and Provider shall give prompt notice to Company, of the occurrence,
or failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty of such Company or Provider, respectively,
contained in this Agreement to be untrue or inaccurate in any material respect
any time from the date hereof through July 1, 1997. Company or Provider, as the
case may be, shall give prompt notice to the other party hereto of the failure
of such party to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder, and each party shall use all
reasonable commercial efforts to remedy same. Provider hereby acknowledges
receipt of notice that shortly after the execution of this Agreement, Company
will terminate its various agreements with Advantis.
6.3 Employee Matters. Company shall not, without the prior written
approval of Provider, except as required by law:
(a) increase the Cash Compensation of any Personnel;
(b) enter into, adopt, amend or terminate any Compensation
Plan, Employment Agreement, Employee Policies and
Procedures or Employee Benefit Plan;
(c) institute any employment-related litigation;
(d) enter into any agreement with any union, labor
organization or collective bargaining unit; or
(e) take any action that could deplete the assets of any
Employee Benefit Plan, other than routine payment of
benefits in the ordinary course to participants and
beneficiaries.
6.4 Business Operations. Company shall operate its business in the
ordinary course and will not introduce any new method of management or
operation. Company shall use its reasonable commercial efforts to retain its
present suppliers and customers so that they will continue their relationship
with Provider after Closing. Company shall not take any action that could
materially adversely affect the condition (financial or otherwise) of the
Company without the prior written consent of Provider.
6.5 Risk of Loss. The Company shall have the risk of loss with respect
to the Assets until the transfer of the Assets to Provider on the Closing Date.
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ARTICLE VII
CONDITIONS TO COMPANY'S OBLIGATIONS
The obligations of Company herein to transfer the Assets to Provider on the
Closing Date are subject, in the discretion of Company, to the satisfaction, on
or prior to the Closing Date, of each of the following conditions:
7.1 Representations, Warranties and Covenants. All representations and
warranties contained in Article V of Provider contained in this Agreement shall
be true and correct in all respects at and as of the Effective Date as if such
representations and warranties were made at and as of the Effective Date, and
Provider shall have performed in all respects all agreements and covenants
required hereby to be performed by it prior to or at the Effective Date. There
shall be delivered to Company a certificate to the foregoing effect.
7.2 Consents. To the best of Company's ability, all consents, approvals
and waivers from governmental authorities and other parties necessary to permit
Company to transfer the Assets to Provider as contemplated hereby shall have
been obtained.
7.3 No Governmental Proceedings or Litigation. No suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to have a material adverse effect upon Company if the
transactions contemplated hereunder are consummated.
7.4 Certificates. Provider will furnish Company with such certificates
of its officers to evidence compliance with the conditions set forth in this
Article VII as may be reasonably requested by Company.
7.5 Full Service Agreement and Transition Services Agreement. Company
shall have received a Full Service Agreement, Transition Services Agreement and
Sublease Agreement executed by Provider.
7.6 No Material Adverse Change. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Provider shall have occurred.
ARTICLE VIII
CONDITIONS TO PROVIDER'S OBLIGATIONS
The obligations of Provider to purchase the Assets as provided hereby
are subject in the discretion of Provider, to the satisfaction, on or prior to
the Closing Date, of each of the following conditions:
8.1 Representations, Warranties and Covenants. All representations and
warranties contained in Article IV of Company contained in this Agreement shall
be true and correct in all respects at and as of the Effective Date as if such
representations and warranties were made at and as of the Effective Date, and
Company shall have performed in all respects all agreements and covenants
required
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hereby to be performed by it prior to or at the Effective Date. There shall be
delivered to Provider certificates to the foregoing effect.
8.2 Consents. To the best of Provider's ability, All consents, approvals
and waivers from governmental authorities and other parties necessary to permit
Company to transfer the Assets to Provider as contemplated hereby shall have
been obtained.
8.3 Opinion. Counsel to Company shall have delivered to Provider its
legal opinion, dated as of the Closing Date, in form and substance satisfactory
to counsel for Provider.
8.4 No Material Adverse Change. Except as disclosed on the schedules
attached hereto, no material adverse change in the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Company
shall have occurred since the date of the most recent audited balance sheet
included in the Financial Statements, whether or not such change shall have been
caused by the deliberate act or omission of Company.
8.5 Due Diligence Review. Provider and its accounting, financial and
legal advisors, shall have been furnished timely all Schedules and other
documents required to be provided by Company under this Agreement. Provider and
its accounting, financial and legal advisors shall have completed a review of
such information, and the results of such review shall be satisfactory to
Provider in its sole discretion.
8.6 No Governmental Proceeding or Litigation. No suit, action,
investigation, inquiry or other proceeding by any governmental authority or
other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to have a materially adverse effect upon the value of the
Assets, the Company or Provider if the transactions contemplated hereunder are
consummated.
8.7 Employee Compensation and Benefits. Proof that, as of the Effective
Date Company is current on all obligations to Personnel for any and all amounts
then accrued relating to all Cash Compensation, Compensation Plans, Employment
and Independent Contractor Agreements and Employee Benefit Plans as
applicable.
8.8 Supplier Verification. Verification by Provider that Company's
vendors, suppliers, licensors, lessors and other like entities that Company does
business with, as chosen or selected by Provider, will continue to supply or
provide Provider with the same or similar terms as those currently available to
Company.
8.9 Full Service Agreement, Transition Services Agreement and Sublease
Agreement. Provider shall have received a Full Service Agreement, Transition
Services Agreement and Sublease Agreement executed by Company.
8.10 Certificates and Schedules. Company shall furnish Provider (i) such
certificates of the respective officers of Company to evidence compliance with
the conditions set forth in this Article VIII as may be reasonably requested by
Provider, (ii) bringdown certificates of the respective officers of Company that
all Schedules and all representations and warranties of Company as of Closing
are accurate and complete, and (iii) updated Schedules, if necessary, including
but not limited to Financial Statements with a signed report from Coopers &
▇▇▇▇▇▇▇ L.L.P.
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8.11 Conveyance and Assignment Agreement. Provider shall have received
Conveyance and Assignment Agreement dated as of July 1, 1997 executed by
Company, in the form of Exhibit D.
ARTICLE IX
ACTIONS BY COMPANY AND PROVIDER AFTER THE EFFECTIVE DATE
9.1 Books and Records. Company and Provider agree that any books,
records and files relating to the Assets which are in existence prior to
Effective and within the possession of Company or available to it, shall be
available to either party (at its expense) for inspection and to make copies of
the same at any time upon at least ten (10) days written notice during business
hours for any proper purpose.
9.2 Further Assurances. On and after the Effective Date, Company and
Provider will take all appropriate action and execute all documents, instruments
or conveyances of any kind which may be reasonably necessary or advisable to
carry out any of the provisions hereof, including without limitation, vesting in
Provider ownership, possession and use of the Assets.
9.3 Updated Network Assets Schedule. Prior to or on the Closing Date,
Company will furnish Provider with an updated Schedule 1.1(b) Network Assets and
Schedule 4.3 Permitted Encumbrances. Company agrees that the updated Schedule
1.1(b) will not materially increase the book value of the assets listed on
Schedule 1.1(b) furnished to Provider as of the Effective Date. Company further
agrees that the updated Schedule 4.3 shall not include material Encumbrances
which were not listed on Schedule 4.3 furnished to Provider on the Effective
Date, other than maintenance contracts and software licenses.
9.4 Solicitation of Employees. From and after the date of this Agreement
for a period of one year after the Effective Date, (i) Company shall not, and
shall cause any affiliate not to, actively solicit the employment of any current
employee or independent contractor of Provider, and (ii) Provider shall not, and
shall cause any affiliate not to, actively solicit the employment of any current
employee or independent contractor of Company, other than the Personnel.
ARTICLE X
INDEMNIFICATION
10.1 Survival of Representations, Etc. The representations and warranties
of Company and Provider contained herein shall survive the Effective Date until
December 31, 1998.
10.2 Indemnification Company shall indemnify Provider against, and hold
Provider harmless from, any damage, claim, liability or expense, including
without limitation, interest, penalties and reasonable attorneys' fees
(collectively "Damages"), arising out of the breach of any warranty or
representation of Company contained in this Agreement. Provider shall indemnify
and hold Company harmless from any Damages arising out of the breach of any
warranty or representation of Provider contained in this Agreement. There shall
be a $100,000 per claim deductible for any Damages sustained by Company or
Provider and covered by this indemnity. Limitations upon scope Of
Indemnification herein contained are not intended to affect any other rights or
remedies that may be available to the parties.
10.3 Indemnification Procedures. (a) Upon Provider becoming aware of a
fact, condition or
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event which constitutes a breach of any of the representations or warranties of
Company contained herein, if a claim for Damages in respect thereof is to be
made against Company under this Article X, Provider will with reasonable
promptness notify Company in writing of such fact, condition or event. If such
fact, condition or event is the assertion of a claim by a third party, Company
will be entitled to participate in the defense against such claim, provided that
Company and its counsel shall proceed with diligence and in good faith with
respect thereto and shall in no way interfere with Provider's defense. If
Company acknowledges its obligation to indemnify Provider hereunder, then it
shall have the right to assume and control the defense of this action.
(b) Upon Company becoming aware of a fact, condition or event which
constitutes a breach of any of the representations or warranties of Provider
contained herein, if a claim for Damages in respect thereof is to be made
against Provider under this Article X, Company will with reasonable promptness
notify Provider in writing of such fact, condition or event. If such fact,
condition or event is the assertion of a claim by a third party, Provider will
be entitled to participate in or take charge of the defense against such claim,
provided that Provider and its counsel shall proceed with diligence and in good
faith with respect thereto. If Provider acknowledges its obligation to indemnify
Company hereunder, then it shall have the right to assume and control the
defense of this action.
(c) The indemnitor shall not settle or resolve any action without the
indemnitee's prior written consent, which shall not be unreasonably withheld.
The overall liability of Company and Provider pursuant to this paragraph 10.3
shall in no event exceed two million five hundred thousand dollars
($2,500,000.00) each.
ARTICLE XI
MISCELLANEOUS
11.1 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Company without the prior written
consent of Provider, or by Provider without the prior written consent of
Company, except that Provider shall have the right to assign its rights and
obligations hereunder to any affiliate of Provider, provided that such assignee
assumes all of Provider's obligations hereunder. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, and no other person shall have any right, benefit or
obligation hereunder.
11.2 Notices. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by either party to the other
shall be in writing and delivered in person or by courier, telegraphed, telexed
or by facsimile transmission or mailed by certified mail, postage prepaid,
return receipt requested (such mailed notice to be effective on the date of such
receipt is acknowledged), as follows:
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If to Company:
Prodigy Services Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
with a Copy to:
Prodigy Services Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
(email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇)
If to Provider:
SplitRock Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P. C.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
or to such other place and with such other copies as any party may designate as
to itself by written notice to the others.
11.3 Choice of Law and Forum Selection. This Agreement shall be
construed, interpreted and the rights of the parties determined in accordance
with the internal laws of the State of Texas without regard to conflict of law
rules, except with respect to matters of law concerning the internal corporate
affairs of any party, and as to those matters the law of the jurisdiction under
which the respective entity derives its powers shall govern. Any action or
proceeding brought under this agreement shall be brought in the federal and
state courts located in ▇▇▇▇▇▇ County, Texas.
11.4 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto, constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
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11.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.6 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
11.7 Headings. The headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
11.8 Expenses. Except as specifically provided herein, Company and
Provider will each be liable for its own costs and expenses incurred in
connection with the negotiation, preparation, execution and performance of this
Agreement.
11.9 Limitation of Remedies. In the event of a breach of contract claim
of the Full Service Agreement, Company hereby waives any claim it may have for
failure of consideration, insufficient consideration, lack of consideration or
similar claim which could result in the transfer of the assets, as herein
contemplated, becoming void or nullified, or result in title to the assets
vesting in Company, and Company hereby covenants not to ▇▇▇ Provider for any
such claim.
11.10 Publicity. Neither party shall issue any press release or make any
public statement, either prior to or after the Effective Date, regarding the
transactions contemplated hereby prior to the Effective Date, without the prior
approval of the other party, and the parties hereto shall issue a mutually
acceptable press release as soon as practicable after Effective Date.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
PRODIGY SERVICES CORPORATION SPLITROCK SERVICES, INC.
("Company") ("Provider")
By: /s/ ▇▇▇▇ ▇. DELALEY By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------- -------------------------
Name : ▇▇▇▇ ▇. Delaley Name : ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President Title: President
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