FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 4, 1999
(February 17, 1999) -----------------
- --------------------
ICG SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 333-51037 84-1448147
- ----------------------------- --------------------------- -------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
161 Inverness Drive West, Englewood, Colorado 80112
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(Address of principal executive offices) (Zip Code)
Registrant's telephone numbers, including area codes:(888) 424-1144 or
(303) 414-5000 -------------------
- ----------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On February 17, 1999, ICG Services, Inc. ("ICG Services" or the "Company"),
a wholly owned subsidiary of ICG Communications, Inc. ("ICG"), sold certain of
the assets and liabilities of NETCOM On-Line Communication Services, Inc.
("NETCOM"), including the NETCOM trade name, to MindSpring Enterprises, Inc., an
Internet service provider ("ISP") located in Atlanta, Georgia ("MindSpring").
Total proceeds from the sale were $245.0 million, consisting of $215.0 million
in cash and 376,116 shares of restricted common stock of MindSpring, valued at
approximately $79.76 per share. Assets and liabilities sold to MindSpring
include those directly related to the domestic operations of NETCOM's Internet
dial-up, dedicated access and Web site hosting services. The Company has
retained the Internet backbone assets formerly owned by NETCOM for the purpose
of providing wholesale network services to MindSpring and other ISPs.
On February 1, 1999, the Company announced that ICG Services entered into
two definitive agreements to sell all of the capital stock of NETCOM's
international operations. MetroNET Communications Corp. ("MetroNET"), a Canadian
entity, and Providence Equity Partners ("Providence"), located in Providence,
Rhode Island, have agreed to together purchase the 80% interest in NETCOM Canada
Inc. owned by NETCOM for approximately C$44.5 million (approximately $31.8
million, using the exchange rate on March 3, 1999), including approximately
C$4.0 million (approximately $2.6 million, using the exchange rate on March 3,
1999) in common stock of MetroNET. Additionally, Providence has agreed to
purchase the capital stock of NETCOM Internet Access Services Limited, NETCOM's
operations in the United Kingdom, for approximately $12.2 million in cash. The
Company anticipates the sales of NETCOM's international operations to close by
March 20, 1999.
The Company will record a gain on the NETCOM transactions during the three
months ended March 31, 1999. Since the operations sold and to be sold were
acquired by ICG in a transaction accounted for as a pooling of interests, the
gain on the sales will be classified in the Company's consolidated statement of
operations as an extraordinary item.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBIT
(b) Pro Forma Financial Information.
The following unaudited pro forma condensed consolidated balance sheet at
December 31, 1998 gives effect to the sales of the operations of NETCOM,
including the anticipated effects of the sales of NETCOM's international
operations, as though the NETCOM transactions were completed on December 31,
1998. The pro forma adjustments include the receipt of actual and anticipated
proceeds from the sales, the elimination of the assets and liabilities sold, the
reclassification of the assets and liabilities retained by the Company from net
assets and liabilities of discontinued operations, and the accrual for income
taxes and future liabilities directly associated with the NETCOM transactions.
For the year ended December 31, 1998, the Company's consolidated statement of
operations presents the operations of NETCOM as discontinued. Additionally,
since the operations sold and to be sold were acquired by ICG in a transaction
accounted for as a pooling of interests, the gain on the sales will be
classified in the Company's consolidated statement of operations during the
three months ended March 31, 1999 as an extraordinary item. Consequently, the
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NETCOM transactions will have no effect on the Company's loss from continuing
operations or loss per share from continuing operations, and accordingly, no pro
forma condensed consolidated statements of operations are presented herein.
The unaudited pro forma condensed consolidated balance sheet is not
necessarily indicative of the results that would have actually occurred if the
NETCOM transactions had been completed on December 31, 1998.
(b) Exhibit.
(10) Material Contract.
10.1:Asset Purchase Agreement by and between MindSpring Enterprises,
Inc. and NETCOM On-Line Communication Services, Inc., dated as of
January 5, 1999. (Copies of omitted schedules and exhibits shall
be furnished supplementally to the Commission upon request).
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<PAGE>
ICG SERVICES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
------------------ ---------------------- -------------------
(in thousands)
<S> <C> <C> <C>
Assets
- ------
Cash and cash equivalents $ 114,380 256,663 (1)(2) 371,043
Marketable securities and short-term investments
available for sale 41,000 32,600 (1) 73,600
Other current assets 145,535 1,823 (2) 147,358
------------------ -------------------
Total current assets 300,915 592,001
------------------ -------------------
Net property, plant and equipment 297,905 20,310 (2) 318,215
Other non-current assets, net of accumulated
amortization 26,906 194 (1)(2) 27,100
Net non-current assets of discontinued operations 54,023 (54,023)(1)(2) -
------------------ -------------------
Total assets $ 679,749 937,316
================== ===================
Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Accounts payable, accrued liabilities and deferred
gain on sales $ 30,149 61,014 (1)(2) 91,163
Net current liabilities of discontinued operations 22,328 (22,328)(1)(2) -
------------------ -------------------
Total current liabilities 52,477 91,163
------------------ -------------------
Long-term debt, net of discount, and capital lease
obligations, net of current portion 594,617 2,053 (2) 596,670
------------------ -------------------
Total liabilities 647,094 687,833
------------------ -------------------
Stockholders' equity:
Additional paid-in capital 207,798 207,798
Accumulated (deficit) earnings (175,024) 216,828 (1) 41,804
Accumulated other comprehensive loss (119) (119)
------------------ -------------------
Total stockholders' equity 32,655 249,483
------------------ -------------------
Total liabilities and stockholders' equity $ 679,749 937,316
================== ===================
</TABLE>
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(1) Reflects the sales of the operations of NETCOM, including a deferral of the
gain on the sales of approximately $24.0 million and direct costs of the
dispositions.
(2) Reflects the reclassification of the carrying value of the Internet
backbone assets retained by ICG from net assets and liabilities of
discontinued operations.
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EXHIBIT 10.1
Asset Purchase Agreement by and between MindSpring Enterprises, Inc. and
NETCOM On-Line Communication Services,
Inc., dated as of January 5, 1999.
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
MINDSPRING ENTERPRISES, INC.
AND
NETCOM ON-LINE COMMUNICATION SERVICES, INC.
DATED AS OF JANUARY 5, 1999
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS 1
ARTICLE II
PURCHASE AND SALE 7
SECTION 2.1 Basic Transaction. 7
SECTION 2.2 Purchase Price 9
SECTION 2.3 Payment of Purchase Price 9
SECTION 2.4 Assumption of Liabilities 10
SECTION 2.5 Closing; Closing Date 11
SECTION 2.6 Deliveries at the Closing 11
(a) Deliveries by Seller 11
(b) Deliveries by Buyer 12
SECTION 2.7 Transfer Taxes 13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER 14
SECTION 3.1 Organization, Good Standing, Etc. 14
SECTION 3.2 [Intentionally Omitted] 14
SECTION 3.3 Authority; No Violation 14
SECTION 3.4 Subsidiary 15
SECTION 3.5 Consents and Approvals 15
SECTION 3.6 Financial Statements 15
SECTION 3.7 Absence of Certain Changes or Events 15
SECTION 3.8 Tax Matters 16
SECTION 3.9 Assets and Properties 16
SECTION 3.10 Contracts 17
SECTION 3.11 Litigation, Compliance with Applicable Laws and Permits 18
SECTION 3.12 Insurance 18
SECTION 3.13 Pension and Employee Benefit Matters 18
SECTION 3.14 Labor and Employment 18
SECTION 3.15 Environmental Matters 19
SECTION 3.16 Intellectual Property 19
SECTION 3.17 Brokers' Fees and Commissions 20
SECTION 3.18 Employees 20
SECTION 3.19 Books and Records 21
SECTION 3.20 Subscribers 21
SECTION 3.21 Securities Matters 21
SECTION 3.22 Year 2000 Compliance 22
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER 22
SECTION 4.1 Organization and Qualification, Etc 22
SECTION 4.2 Authority Relative to Agreement 22
SECTION 4.3 Non-Contravention 23
SECTION 4.4 Consents and Approvals 23
SECTION 4.5 Brokers' Fees and Commissions 23
SECTION 4.6 The Shares 24
ARTICLE V
PRE-CLOSING COVENANTS 24
SECTION 5.1 General. 24
SECTION 5.2 Operation and Preservation of Business 24
SECTION 5.3 Full Access 25
SECTION 5.4 Notice of Developments. 25
SECTION 5.5 Announcements 26
SECTION 5.6 Confidentiality. 26
SECTION 5.7 Consents and Approvals 26
SECTION 5.8 Values of Assets. 26
SECTION 5.9 Name 27
SECTION 5.10 Resale Prospectus 27
ARTICLE VI
POST-CLOSING COVENANTS 27
SECTION 6.1 Further Assurances. 27
SECTION 6.2 Cooperation 27
SECTION 6.3 Confidentiality 28
SECTION 6.4 Resale Prospectus and Listing of Shares 28
SECTION 6.5 Restriction on Distribution 28
ARTICLE VII
CONDITIONS TO CLOSING 29
SECTION 7.1 Conditions to Obligation of Buyer 29
SECTION 7.2 Conditions to Obligation of Seller 30
ARTICLE VIII
REMEDIES FOR BREACHES OF THIS AGREEMENT 31
SECTION 8.1 Indemnification Provisions for Benefit of Buyer 31
SECTION 8.2 Indemnification Provisions for Benefit of Seller 31
SECTION 8.3 Matters Involving Third Parties 32
SECTION 8.4 Survival 33
SECTION 8.5 Limitations 33
SECTION 8.6 Basket and Ceiling 34
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ARTICLE IX
TERMINATION 34
SECTION 9.1 Termination of Agreement 34
SECTION 9.2 Effect of Termination. 35
SECTION 9.3 Confidentiality. 35
ARTICLE X
MISCELLANEOUS 35
SECTION 10.1 No Third-Party Beneficiaries 35
SECTION 10.2 Entire Agreement 36
SECTION 10.3 Succession and Assignment 36
SECTION 10.4 Counterparts 36
SECTION 10.5 Headings, Terms 36
SECTION 10.6 Notices 36
SECTION 10.7 Governing Law 37
SECTION 10.8 Amendments and Waivers 37
SECTION 10.9 Severability 37
SECTION 10.10 Expenses 38
SECTION 10.11 Arbitration 38
SECTION 10.12 Construction 38
SECTION 10.13 Incorporation of Exhibits and Schedules 38
SECTION 10.14 Representations as to Knowledge 39
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<PAGE>
EXHIBIT
Exhibit A Network Services Agreement
SCHEDULES
Schedule 1.1(i) Other Assets
Schedule 1.1(ii) Latest Balance Sheet
Schedule 1.1(iii) Other Contracts
Schedule 2.4(a) Assumed Liabilities
Schedule 2.4(b) Retained Employees
Schedule 3.1 Organization, Good Standing, Etc.
Schedule 3.3 Violations
Schedule 3.5 Seller Notices and Consents
Schedule 3.6(a) Audited Financial Statements
Schedule 3.6(b) Unaudited Financial Statements
Schedule 3.7 Changes or Events
Schedule 3.8 Taxes
Schedule 3.9(a) Description of Premises and Equipment
Schedule 3.9(b) Encumbrances on Assets
Schedule 3.10 Seller Contracts
Schedule 3.11(a) Outstanding Litigation, Etc.
Schedule 3.11(c) Authorizations and Permits
Schedule 3.14 Labor and Employment
Schedule 3.16 Intellectual Property
Schedule 3.18 Employees
Schedule 3.20 Subscribers
Schedule 4.4 Buyer Notices and Consents
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is entered into as of
January 5, 1999, by and between MINDSPRING ENTERPRISES, INC., a Delaware
corporation ("Buyer"), and NETCOM ON-LINE COMMUNICATION SERVICES, INC., a
Delaware corporation ("Seller").
RECITALS
A. Seller owns or leases and uses certain tangible and intangible assets
and rights in connection with the Internet services business currently operated
by Seller in the United States, which business provides, among other services,
dial-up access services, dedicated access services and Web-hosting services
(collectively, the "Business").
B. Buyer desires to purchase the Assets from Seller and Seller desires to
sell the Assets to Buyer, all in accordance with and subject to the terms and
conditions in this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the Parties hereto hereby agree
as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement:
Adverse Consequences means all losses, damages, costs, expenses, fees and
Liabilities, but will not include any losses or damages arising from or
attributable to lost profits, or consequential, incidental, speculative or
punitive damages (except to the extent such items are payable to a Person not a
Party to this Agreement).
Affiliate means, with respect to any Person, any Person Controlling,
Controlled by or under common Control with such Person.
Agreement means this Asset Purchase Agreement entered into between Buyer
and Seller.
Assets means, collectively, all right, title, benefit and interest of
Seller in and to the following assets, rights, benefits and privileges, both
tangible and intangible (including without limitation the Business as a "going
concern" and customer relationships and reputation of Seller ("Goodwill")),
wherever situated or located, owned, leased, used, held for use or otherwise
held by Seller in connection with the Business, including all such assets
existing on the date of this Agreement and all such assets acquired between that
date and the Closing Date in connection with the Business:
<PAGE>
(a) all Subscriber Contracts;
(b) the contracts described on Schedule 1.1(iii) except (i) contracts
involving bounty payments of $50 or more per Subscriber, (ii) contracts
involving the payment of monthly recurring revenue, and (iii) contracts
involving annual payments, in cash or in kind, in excess of One Hundred
Thousand Dollars ($100,000) per annum, unless Buyer elects prior to the
Closing to treat any of such excepted contracts as Assets;
(c) all of Seller's rights in and to the name "NETCOM" and related
intellectual property in all jurisdictions in the world except Canada, the
United Kingdom and Brazil;
(d) all Intellectual Property, including that described in the
preceding clause (c);
(e) all engineering, business and other books, papers, files and
records directly relating to the Business, including customer lists;
(f) all manufacturer's warranties with respect to the Assets, if any,
to the extent assignable;
(g) customer accounts receivable as of the Closing; and
(h) all other assets, rights, benefits and privileges owned, leased,
used or held for use or otherwise held by Seller in connection with the
Business and any contract or agreement relating thereto, a partial list of
which is set forth on Schedule 1.1(i) and which list will be supplemented
by the inventory pursuant to Section 2.1(c)(i) to create a true, correct
and complete list of such assets, rights, benefits and privileges; provided
that in no event will the Assets be deemed to include (a) any benefits
arising under or relating to any of the above-described Assets attributable
to the period prior to the Closing, (b) any receivables held by Seller
from, or other amounts owed to Seller by, ICG or its Affiliates, (c) the
Retained Assets, (d) any cash or cash equivalents held or beneficially
owned by Seller in any Seller account or otherwise or (e) any interest of
Seller in NETCOM Internet Limited or NETCOM Canada, Inc.
Assumed Liabilities means (a) all Liabilities of Seller arising with
respect to or otherwise associated with the Business that are described on
Schedule 2.4(a) attributable to the period following the Closing, (b) the
employee-related Liabilities described in Section 2.4(b)(i) and (c) the
obligation to pay accrued bonuses and vacation pay under Section 2.4(b)(iii);
provided, that in no event will Buyer assume any of Seller's Liabilities
relating to (a) the payment of Taxes of Seller with respect to any period prior
to the Closing Date, (b) any Plans, which Liabilities are due to any of Seller's
current (active or non-active), former or retired employees, (c) any Liability
of Seller to ICG or its Affiliates, or (d) any Liabilities under Seller
Contracts with respect to services rendered to Subscribers or events occurring
in either case prior to the Closing.
Basket Amount has the meaning set forth in Section 8.6(a).
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Business shall have the meaning specified in Recital A.
Business Day means any day on which commercial banks are open for business
in Denver, Colorado and in Atlanta, Georgia.
Buyer means MindSpring Enterprises, Inc., a Delaware corporation.
Buyer Documents means, collectively, the documents described in Section
2.6(b).
Closing and Closing Date have the meanings given in Section 2.5.
Closing Permitted Encumbrances means all Pre-Closing Permitted Encumbrances
other than those described in clause (ii) of the definition of Pre-Closing
Permitted Encumbrances.
Code means the Internal Revenue Code of 1986, as amended, and all Legal
Requirements promulgated pursuant thereto or in connection therewith.
Confidential Information means, with respect to any Person, any information
concerning such Person or its business, products, financial condition, prospects
and affairs that is not already generally available to the public.
Control means the power to direct the management or policies of any Person,
through the power to vote shares or other equity interests, by contract or
otherwise.
Employees has the meaning specified in Section 3.18.
Encumbrance means any mortgages, pledges, liens, claims, security
interests, agreements, restrictions, defects in title, easements, restrictions,
encumbrances, or charges.
Environmental Obligations means all Legal Requirements and Permits
concerning land use, public health, safety, welfare or the environment,
including, without limitation the Resource Conservation and Recovery Act (42
U.S.C. ss. 6901 et seq.), as amended, and the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), as
amended.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and any regulations, rules or orders promulgated under the Employee
Retirement Income Security Act of 1974, as amended.
Financial Statements has the meaning set forth in Section 3.6.
GAAP means generally accepted accounting principles as in effect from time
to time in the United States.
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Goodwill has the meaning set forth in the definition of Assets.
Governmental Authority means the United States of America or any foreign
jurisdiction, any state, commonwealth, territory or possession of the United
States of America or any such foreign jurisdiction, any political subdivision of
any of them (including counties, municipalities, home-rule cities and the like),
and any agency, authority or instrumentality of any of the foregoing, including,
without limitation, any court, tribunal, department, bureau, commission or
board.
Hart-Scott-Rodino means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and all Legal Requirements promulgated pursuant thereto or in
connection therewith.
ICG means ICG Services, Inc., a Delaware corporation.
Indemnified Party has the meaning set forth in Section 8.3(a).
Indemnifying Party has the meaning set forth in Section 8.3(a).
Intellectual Property means all intellectual property of Seller held or
used in connection with the Business, including: (i) all inventions (whether
patentable or unpatentable and whether or not reduced to practice) held or used
in connection with the Business, all improvements thereto and all patents,
patent applications and patent disclosures held or used in connection with the
Business, (ii) all trademarks, service marks, trade dress, logos, trade names,
and corporate names held or used in connection with the Business, together with
all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith; provided that the term
Intellectual Property will apply to Seller's rights in and to the name NETCOM
(and related trademarks and other intellectual property) only to the extent of
Seller's rights in and to such name and related items anywhere in the world
except Canada, Brazil and the United Kingdom, (iii) all copyrightable works, all
copyrights and maskworks and all applications, registrations and renewals in
connection therewith held or used in connection with the Business, and the right
to bring suit or make any claim for infringement of rights in any such works,
(iv) all trade secrets and confidential information held or used in connection
with the Business (including all ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, business and marketing plans and proposals and
other information or material within the definition of a "trade secret" as set
forth in ss. 1(4) of the Uniform Trade Secrets Act (1995), (v) all computer
programs (including, without limitation, data and related documentation) held or
used in connection with the Business, (vi) all other intellectual property held
or used in connection with the Business, (vii) all rights as a licensee or
authorized user of the intellectual property of any third party, and (ix) all
copies and tangible embodiments of the foregoing in whatever form or medium;
provided that in no event will the term Intellectual Property be deemed to
include any Retained Assets.
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<PAGE>
Latest Balance Sheet means the unaudited balance sheet of Seller and the
related unaudited statement of operations dated as of September 30, 1998 and
attached as Schedule 1.1(ii).
Legal Requirement means any constitution, statute, ordinance, code, or
other law (including common law), rule, regulation, Order, notice, standard,
procedure or other requirement enacted, adopted, applied or issued by any
Governmental Authority, including, without limitation, judicial decisions
applying or interpreting any such Legal Requirement.
Liability means any liability or obligation (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due).
Material means, unless the context otherwise requires, material with
respect to the Business or the Assets.
Material Adverse Effect means, with respect to the Business or the Assets,
any event, fact, circumstance or condition that in the aggregate results in, or
is likely to result in, a material adverse impact on the Business or the Assets.
MindSpring Stock means the common stock of Buyer, par value $.01 per share.
NASDAQ means the over-the-counter national market of the National
Association of Securities Dealers, Inc.
Network means the Internet network currently operated by Seller, including
all intellectual property (which is not Intellectual Property) used or held for
use in connection therewith.
Orders means all judgments, injunctions, orders, rulings, decrees,
directives, notices of violation or other requirements of any Governmental
Authority or arbitrator having jurisdiction in the matter, including a
bankruptcy court or trustee.
Ordinary Course of Business means, with respect to Seller and the operation
of the Business, with respect to any period, the ordinary course of business
consistent with past practices of Seller.
Party means each of Buyer and Seller.
Permits means all governmental permits, licenses, consents, franchises,
authorizations, approvals, privileges, waivers, exemptions, variances,
exclusionary or inclusionary Orders and other concessions, including, without
limitation, those relating to environmental, public health, welfare or safety
matters.
Pre-Closing Permitted Encumbrances has the meaning set forth in Section
3.9(b).
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Person means an individual, and a partnership, corporation, association,
joint stock company, trust, joint venture, limited liability company,
unincorporated organization, Governmental Authority or other entity.
Plans has the meaning set forth in Section 3.13(a).
Premises means the real property, buildings and improvements on such real
property constituting the Business premises of Seller as described on Schedule
3.9(a).
Purchase Price has the meaning specified in Section 2.2, as such amount may
be adjusted pursuant to Section 2.3(c).
Resale Prospectus has the meaning set forth in Section 5.10.
Retained Assets means all assets, rights, benefits and privileges, both
tangible and intangible, wherever situated or located, owned, leased, used or
held for use or otherwise held by Seller other than the Assets, all of which
items are to be retained by Seller, including the software described in Section
2.1(c)(ii)(A)(1) and (4), as of and after the Closing.
Schedules means the disclosure Schedules attached to this Agreement.
SEC means the United States Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
Seller means NETCOM On-Line Communication Services, Inc., a Delaware
corporation.
Seller Contracts has the meaning set forth in Section 3.10.
Seller Documents means, collectively, the documents described in Section
2.6(a).
Seller Software means the software developed by employees, consultants, and
independent contractors of Seller which (a) is owned by Seller, and (b) is
transferred to Buyer under this Agreement, including software that is licensed
or provided to the Subscribers.
Shares has the meaning set forth in Section 2.3(b).
Subscriber means a subscriber to Seller's dial-up or dedicated Internet
access services or Web-hosting services.
Subscriber Contracts means all contracts for the provision of dial-up or
dedicated Internet access services or Web-hosting services between Seller and
any Subscriber.
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<PAGE>
Survival Period means, with respect to a representation or warranty, the
applicable period after the Closing Date during which such representation or
warranty survives pursuant to Section 8.4.
Tax means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, documentary, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other tax of any kind whatsoever, or any escheat
obligations, including any interest, penalty or addition, whether disputed or
not.
Tax Return means any return, declaration, report, claim for refund or
information return or statement relating to Taxes of Seller, including any
schedule or attachment to any of them, and including any amendment of any of
them.
Third Party Claim has the meaning set forth in Section 8.3(a).
Third Party Products has the meaning set forth in Section 3.22.
WARN Act means the Worker Adjustment and Retraining Notification Act, 29
U.S.C. Sec. 2101 et. seq.
ARTICLE II
PURCHASE AND SALE
SECTION 2.1 Basic Transaction.
(a) Subject to the terms and conditions set forth in this Agreement, Buyer
agrees to purchase and assume from Seller, and Seller agrees to sell and
transfer to Buyer, or to such Affiliate or Affiliates of Buyer as Buyer may
designate in writing to Seller, all of Seller's right, title and interest in, to
and under the Assets, for the consideration specified in Section 2.2.
(b) Seller will retain, and Buyer will not acquire or assume, any of the
Retained Assets.
(c) (i) It is the intent of this Agreement that the Assets will comprise,
and Seller will assign and transfer to Buyer at the Closing, all of the real,
personal and mixed assets and property, both tangible and intangible, which are
being used or held for use by Seller in the conduct of the Business, as of the
date of this Agreement and as of and at the Closing consistent with Seller's
historical and current practices. The Parties acknowledge and agree that the
Schedules attempt to accurately describe the Assets, but certain Schedules,
including Schedules 1.1(i), 1.1(iii), 3.9(a), 3.10 and 3.16, may not describe
the Assets with the specificity desired by Buyer. Seller will undertake an
7
<PAGE>
inventory of all personal property comprising the Assets, including tangible and
intangible property, the names of all Subscribers as of a date no earlier than
five days prior to the Closing, and the Intellectual Property, and will deliver
such inventory to Buyer as promptly as practicable but in any event no earlier
than ten days or later than five days prior to the Closing Date.
(ii) The Parties acknowledge and agree to the following in respect of
Intellectual Property comprised of computer software:
(A) Computer software used or held for use by Seller as of the
date of this Agreement consists of the following five categories:
(1) Software licensed from third parties that is not
assignable to Buyer by its terms if the licensor of such software
withholds its consent to such assignment (where the requirement
of such consent is applicable); provided that Seller will use its
commercially reasonable best efforts to secure such consent;
(2) Software licensed from third parties that is used
exclusively in connection with the Business and that is
assignable either by its terms or pursuant to the consent of the
other parties thereto where such consent is obtained;
(3) Internally-developed software that is used exclusively
in connection with the Business;
(4) Software licensed from third parties and
internally-developed software that is used exclusively in
connection with the Network; and
(5) Software licensed from third parties and
internally-developed software that is used both in connection
with the Business and the Network.
Based on the above clauses (1) through (5), the Parties further agree as
follows: (a) ownership of the software described in the preceding clauses (1)
(subject to the provisions of Section 2.1(d)) and (4) will be retained by Seller
and constitute part of the Retained Assets and will not be considered to be
Assets under this Agreement; (b) ownership of the software described in the
preceding clause (2) will be assigned to Buyer; (c) ownership of the software
described in the preceding clause (3) will be assigned and transferred to Buyer;
(d) software described in the preceding clause (5) will be licensed to Buyer
under a worldwide, perpetual, royalty-free licensing arrangement (including both
source and object code) to be mutually satisfactory to Seller and Buyer and
under which arrangement both Seller and Buyer will have unfettered use of such
software and the right to modify and develop such software consistent with the
operation of each of their respective businesses after the Closing; and (e) if
any software described above the ownership of which is transferred to Buyer
under this paragraph is used in connection with the business conducted by NETCOM
Canada, Inc. or NETCOM Internet, Ltd., such use to be determined in Seller's
reasonable discretion, Buyer will enter into with Seller as of the Closing a
perpetual, royalty-free license arrangement (including both source and object
code), to be mutually satisfactory to Buyer and Seller, providing for the
unfettered use of such software in Canada and/or the United Kingdom, as the case
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may be, and the right to modify and develop such software consistent with the
operation of the business by those two Affiliates of Seller. In furtherance of
the agreements set forth in this Section 2.1(c)(ii), the Parties will cooperate
with each other, and enter into appropriate agreements and licensing
arrangements to be effective as of the Closing, to ensure the continued use of
such software to the maximum extent possible by Buyer and Seller (and to the
extent applicable, by NETCOM Canada, Inc. or NETCOM Internet, Ltd.) after the
Closing in connection with their operation of the Business and the Network (and
the business conducted by NETCOM Canada, Inc. or NETCOM Internet, Ltd., as
applicable), respectively.
(d) Notwithstanding anything else in this Agreement to the contrary, this
Agreement shall not constitute an agreement to assign or transfer any Asset or
part thereof or any rights or benefit arising thereunder or resulting therefrom
if an attempted assignment or transfer thereof, without the consent of a third
party thereto, would constitute a breach thereof, or make Buyer or Seller liable
for damages or other penalties. If such consent is not obtained prior to
Closing, or if an attempted assignment thereof would be ineffective or would
affect the rights of Buyer or Seller so that Buyer would not in fact receive
substantially all such rights, Seller (i) at Seller's cost and expense shall
continue to use its commercially reasonable efforts to obtain such consent and
(ii) if any such consent is unobtainable, shall cooperate with Buyer in a
mutually agreed-upon arrangement under which at Seller's cost and expense Buyer
would obtain the benefits and assume the obligations thereunder, or under which
Seller would enforce for the benefit of Buyer, at Buyer's cost and expense, with
Buyer assuming Seller's obligations, any and all rights of Seller against a
third party thereto. To the extent the benefits therefrom have been provided to
Buyer by alternative arrangements as provided above or a consent is obtained,
the contract, agreement or other asset shall be deemed to be an Asset
transferred to Buyer.
SECTION 2.2 Purchase Price. At the Closing, and in addition to the
assumption of the Assumed Liabilities as set forth in Section 2.4, Buyer agrees
to pay to Seller, and Seller agrees to accept from Buyer, an aggregate purchase
price (the "Purchase Price") equal to Two Hundred Forty-Five Million Dollars
($245,000,000), payable as described in Section 2.3. The Purchase Price will be
allocated among the Assets in accordance with Section 5.8.
SECTION 2.3 Payment of Purchase Price. The Purchase Price shall be payable
to Seller at the Closing as follows:
(a) Buyer will pay to Seller the amount of Two Hundred Fifteen Million
Dollars ($215,000,000) in cash in immediately available funds by wire transfer
to an account or accounts designated in writing by Seller; and
(b) Buyer will deliver to Seller certificates representing that number of
shares (the "Shares") of MindSpring Stock obtained by dividing (i) Thirty
Million Dollars ($30,000,000) by (ii) the average closing price for the
MindSpring Stock, as reported on the NASDAQ, for the five consecutive trading
days ending the last trading day immediately before the Closing. The Shares will
be delivered to Buyer at the Closing free and clear of all Liabilities, Taxes
and other Encumbrances, other than those allowed to arise solely by Seller.
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(c) Within ten days following the Closing Date, Buyer and Seller will make
a calculation to determine whether there shall be a Purchase Price adjustment.
For the purposes of this calculation, as of the Closing Date each dial-up
Subscriber will be valued at $490.1838, each Web-hosting Subscriber will be
valued at $1,225.4595 and each dedicated access Subscriber will be valued at
$12,254.5950. If Buyer and Seller calculate that the aggregate value of all the
Subscribers who are current customers (as defined in Section 3.20) as of the
Closing Date is less than Two Hundred Forty Million One Hundred Thousand Dollars
($240,100,000), a Purchase Price adjustment will be payable in cash from the
Seller to the Buyer in an amount equal to the difference between such aggregate
value and Two Hundred Forty Million One Hundred Thousand Dollars ($240,100,000),
such payment to be made by Seller within 15 days after the Closing Date.
SECTION 2.4 Assumption of Liabilities.
(a) At the Closing, Buyer, or the Affiliate of Buyer that purchases the
Assets pursuant to Section 2.1(a), as the case may be, will assume the Assumed
Liabilities. Except for the Assumed Liabilities, Buyer (or such Affiliate) will
not assume or have any responsibility for any liabilities or other obligations
of any kind or description of Seller, whether connected with the Business, the
Assets or otherwise.
(b) (i) Except as provided in Section 2.4(b)(ii), as of the Closing, Buyer
will offer to employ all of the employees of the Seller (including for this
purpose all employees of Seller hired in the Ordinary Course of Business in
connection with the Business after the date of this Agreement and before the
Closing) other than the employees that are listed on Schedule 2.4(b) as of the
Closing Date; provided that Buyer will not be prevented from terminating the
employment of any such employee after the Closing in accordance with Buyer's
practices and procedures. A preliminary list of the employees to be employed by
Buyer under this Section 2.4(b)(i) as of the Closing is set forth on Schedule
3.18, which list will be finalized within ten days following the date of this
Agreement and contain a listing of employees reasonably necessary for the
operation of the Business. Schedule 2.4(b) sets forth a preliminary list of
employees to be employed by Seller after the Closing, which list will be
finalized within ten days following the date of this Agreement. Buyer will not
assume, and will have no Liability with respect to, any Plan maintained or
contributed to by Seller, and will not assume, and will have no liability for,
any Liability arising out of or accruing during the period prior to the Closing,
except as expressly set forth in the next sentence or Section 2.4(b)(iii). After
the Closing, Buyer will comply with the requirements, if any, under the WARN Act
with respect to the employees who accept employment offers from Buyer under this
Section 2.4(b)(i) and are subsequently terminated by Buyer. Buyer will assume
all costs of employee compensation and other Liabilities relating to such
employees attributable to the period after the Closing. Seller will remain
responsible for all Legal Requirements relating to group health plan
continuation coverage to which any employee or former employee (or dependent of
either) of Seller is entitled because of a qualifying event (as defined in
Section 4980(f)(3) of the Code) occurring through the Closing Date, and any
benefit or excise tax liability or penalty or other costs arising from any
failure by Seller to provide such group health plan continuation coverage.
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(ii) By written notification to Seller at least ten days prior to the
Closing, Buyer may identify those executive officers of Seller who Buyer
will not offer to employ as of the Closing, and Buyer will have no
responsibility for, and bear no Liability for, those identified executive
officers under Section 2.4(b)(i). Buyer agrees that for a period of six
months following the Closing, neither Buyer nor any of its Affiliates will
employ any of such identified executive officers, whether as an employee,
consultant, independent contractor, advisor or in any other capacity. The
Parties agree that the restriction set forth in the preceding sentence is a
material element of this Agreement and will be specifically enforceable by
Seller against Buyer, and upon a breach by Buyer of such restriction, Buyer
agrees that Seller could not be adequately compensated at law.
(iii) Buyer will assume the obligation to pay bonuses and vacation pay
accrued on the books and records of Seller as of the Closing, in an amount
not to exceed One Million Seven Hundred Thousand Dollars ($1,700,000), with
respect to the employees who Buyer is required to offer to employ as of the
Closing in accordance with Section 2.4(b)(i). Within ten days after the
Closing, Seller will pay to Buyer in cash Five Hundred Thousand Dollars
($500,000) in respect of the obligation assumed by Buyer for vacation pay
described in the immediately preceding sentence. In the event that Buyer
actually pays any bonuses to any such employee and such bonuses relate to
any period preceding the Closing Date, Seller will reimburse Buyer for all
amounts actually paid with respect to such bonuses to the extent that such
amounts relate to any period preceding the Closing Date; provided that the
aggregate amount to be reimbursed by Seller to Buyer under this sentence
will not exceed One Million Two Hundred Thousand Dollars ($1,200,000). All
bonus reimbursements required by Seller under this Section 2.4(b)(iii) will
be paid to Buyer within ten days of the receipt by Seller from Buyer of
evidence reasonably satisfactory to Seller of the payment by Buyer of
reimbursable bonuses.
SECTION 2.5 Closing; Closing Date. The closing of the transactions
contemplated by this Agreement (the "Closing") will take place within two
Business Days after the satisfaction or waiver of all conditions set forth in
Sections 7.1 and 7.2, at the offices of Sherman & Howard L.L.C. in Denver,
Colorado, and all transactions contemplated by this Agreement will be effective
at 12:01 a.m. local time in Denver, Colorado, on the day of the Closing (such
effective time being the "Closing Date").
SECTION 2.6 Deliveries at the Closing.
(a) Deliveries by Seller. At or before the Closing, Seller will deliver to
Buyer the following documents, dated as of the Closing Date and duly executed by
Seller, ICG or Seller's counsel, as applicable.
(i) the Bill of Sale in a form reasonably acceptable to Buyer and
Seller;
(ii) the Assignment and Assumption of Contracts and Leases in a form
reasonably acceptable to Buyer and Seller;
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(iii) the Assumption Agreement in a form reasonably acceptable to
Buyer and Seller;
(iv) the Network Services Agreement substantially in the form attached
as Exhibit A;
(v) the opinion of Sherman & Howard L.L.C. in a form reasonably
acceptable to Buyer;
(vi) copies of the resolutions of the board of directors of Seller and
ICG, certified by the Secretaries of Seller and ICG, respectively, as being
correct and complete and then in full force and effect, authorizing the
execution, delivery and performance of this Agreement and of the Seller
Documents, and the consummation of the transactions contemplated hereby and
thereby;
(vii) certificates of Seller signed by an Executive Vice President of
Seller certifying to the fulfillment of the conditions identified in
Section 7.1(a) through (f);
(viii) certificates of Seller and ICG signed by the Secretaries or
Assistant Secretaries of Seller and ICG as to the incumbency of the
officers of Seller and ICG; and
(ix) all such other general instruments of transfer, assignment and
conveyance, assignments, evidences of consent or waiver, and other
instruments or documents, including appropriate license and other
agreements between Seller and Buyer, and assignments of copyrights and
trademarks/service marks, with respect to the use of intellectual property
as contemplated in Section 2.1(c)(ii), in form and substance reasonably
satisfactory to Buyer, as shall be necessary to evidence or perfect the
sale, assignment, transfer and conveyance of the Assets to Buyer and the
assumption by Buyer of the Assumed Liabilities, and effectively vest in
Buyer all right, title and interest in the Assets free and clear of any and
all Encumbrances (other than the Closing Permitted Encumbrances), together
with possession (or constructive possession, in the case of intangibles)
thereof, all in accordance with the terms and conditions of this Agreement,
and such other certificates, instruments, opinions or documents as Buyer
may reasonably request in order to effect and document the transactions
contemplated hereby.
(b) Deliveries by Buyer. At or before the Closing, Buyer shall deliver to
Seller the following:
(i) The Purchase Price payable at the Closing in the amount and manner
set forth in Sections 2.2 and 2.3;
(ii) the Assignment and Assumption of Contracts and Leases in a form
reasonably acceptable to Buyer and Seller;
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(iii) the Assumption Agreement in a form reasonably acceptable to
Buyer and Seller;
(iv) the Network Services Agreement substantially in the form attached
as Exhibit A;
(v) the opinion of Hogan & Hartson L.L.P. in a form reasonably
acceptable to Seller;
(vi) copies of the resolutions of the board of directors of Buyer,
certified by the Secretary of Buyer as being correct and complete and then
in full force and effect, authorizing the execution, delivery and
performance of this Agreement and of the Buyer Documents, and the
consummation of the transactions contemplated hereby and thereby;
(vii) a certificate of Buyer signed by the Chairman, the President or
an Executive Vice President of Buyer certifying to the fulfillment of the
conditions identified in Section 7.2(a) and (b);
(viii) a certificate signed by the Secretary or an Assistant Secretary
of Buyer as to the incumbency of the officers of the Buyer executing this
Agreement or any of the Buyer Documents on behalf of Buyer; and
(ix) such other certificates, instruments, opinions or documents as
Seller may reasonably request in order to effect and document the
transactions contemplated by this Agreement, including all appropriate
licensing and other agreements between Seller and Buyer as contemplated by
Section 2.1(c)(ii).
SECTION 2.7 Transfer Taxes.
(a) Buyer will be responsible for the payment of any Taxes or fees imposed
by any Governmental Authority with respect to the transfer to Buyer of any of
the Assets or the assumption of the Assumed Liabilities by Buyer pursuant to
this Agreement. Seller will cooperate on a reasonable basis with Buyer to
minimize to the maximum lawful extent Buyer's Liability for such Taxes or fees.
(b) All (i) property taxes, ad valorem taxes and special taxes or
assessments attributable to the Assets (including real estate taxes and special
taxes and assessments required to be paid on the Premises or under leases,
whether required to be paid directly to applicable Taxing authorities or the
lessors under leases) for the fiscal year during which the Closing Date occurs
and (ii) amounts payable under equipment leases and outsourcing contracts to be
transferred to and assumed by Buyer as of the Closing will be prorated and
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adjusted as of the Closing Date. If the real property taxes, personal property
or ad valorem taxes for the fiscal year during which the Closing Date occurs are
not finally determined as of the Closing Date, then such Taxes for the
immediately preceding fiscal year will be used for purposes of prorating taxes
on the Closing Date, with a further adjustment to be made after such taxes or
assessments are finalized.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows, in each case as of the
date of this Agreement:
SECTION 3.1 Organization, Good Standing, Etc. Except as set forth on
Schedule 3.1, Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is qualified and
authorized to do business as a foreign corporation and is in good standing in
each jurisdiction in which the failure to be so qualified and authorized would
result in a Material Adverse Effect. Seller has all requisite corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as is now being conducted. ICG is the sole shareholder of
Seller.
SECTION 3.2 [Intentionally Omitted].
SECTION 3.3 Authority; No Violation. Seller has the full and absolute
right, corporate power, authority and legal capacity to execute, deliver,
perform and consummate the transactions contemplated on its part by this
Agreement and all other documents and agreements to be executed and delivered by
Seller pursuant to this Agreement. The execution and delivery by Seller of this
Agreement and all other documents and agreements to be executed and delivered by
Seller pursuant to this Agreement, and the consummation by Seller of the
transactions contemplated on its part hereby and thereby, have been duly
authorized by Seller's board of directors and ICG. No other corporate approvals
on the part of the Seller's board of directors or ICG are necessary to authorize
the execution and delivery of this Agreement and such other documents. Assuming
the due authorization, execution and delivery by other applicable parties, this
Agreement constitutes, and all other documents and agreements to be executed and
delivered by Seller pursuant to this Agreement when executed and delivered will
constitute, the legal, valid, and binding obligation of, and will be enforceable
in accordance with their respective terms against, Seller, except as such
enforcement is subject to the effect of (i) any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting creditors'
rights generally, and (ii) general principles of equity, including concepts of
reasonableness, good faith and fair dealing, and other similar doctrines
affecting the enforceability of agreements generally (regardless of whether
considered in a proceeding in equity or at law). Except as set forth on Schedule
3.3, the execution, delivery and performance of this Agreement and all other
documents and agreements to be executed and delivered by Seller pursuant to this
Agreement, and the consummation of the transactions contemplated hereby and
thereby, will not (a) violate any provision of the certificate of incorporation
or bylaws of Seller, (b) violate, with or without the giving of notice or the
lapse of time or both, or result in the breach or termination of any provision
of, or a diminution of the rights of Seller under, or constitute a default
under, or give any Person the right to accelerate any obligation under, or
result in the creation of any material Encumbrance upon the Assets or the
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Business, pursuant to any indenture, mortgage, deed of trust, lien, lease,
license, Permit, agreement, instrument or other arrangement to which Seller is a
party or by which Seller, or any of the Assets is bound or subject, or (c)
violate in any material respect any Legal Requirement to which Seller is
subject.
SECTION 3.4 Subsidiary. Seller has no subsidiary, and no equity investment
or other interest in any Person, that owns or holds any interest in the Assets
or the Business.
SECTION 3.5 Consents and Approvals. Except as set forth in Schedule 3.5, no
filing or registration with, no notice to and no permit, authorization, consent
or approval of any Governmental Authority or any Person is necessary for the
consummation by Seller of the transactions contemplated by this Agreement other
than (a) requirements of federal and state securities laws, (b) the
authorization of all applicable regulatory agencies necessary or desirable to
consummate the transactions contemplated by this Agreement and (c) those
consents and approvals already obtained as described on Schedule 3.5.
SECTION 3.6 Financial Statements. Seller has delivered to Buyer complete
and correct copies of (a) the audited consolidated balance sheet and related
audited consolidated statements of operations, stockholders' equity and cash
flows for Seller for and as of the year ended December 31, 1997 and all notes
and schedules to such financial statements and (b) the unaudited consolidated
balance sheet of Seller, and the related unaudited consolidated statement of
operations for the calendar quarters ending March 31, 1998, June 30, 1998 and
September 30, 1998 (collectively, the "Financial Statements"). The Financial
Statements are in accordance with the books and records of Seller, as
applicable, and were prepared in accordance with GAAP on a consistent basis
throughout the periods covered and present fairly in all material respects
Seller's financial position and results of operations as of the dates and for
the periods indicated, subject in the case of the unaudited Financial Statements
to standard year-end adjustments (none of which will be material in amount) and
the omission of footnotes. Copies of the financial statements described in
clause (a) of this Section 3.6 are attached as Schedule 3.6(a), and copies of
the financial statements described in clause (b) of this Section are attached as
Schedule 3.6(b). All balance sheets, statements of operations and other
financial statements prepared by or with respect to Seller that are delivered to
Buyer after the date of this Agreement until the Closing will be prepared on a
basis and in a manner consistent with the Financial Statements, subject to
standard year-end adjustments (none of which will be material in amount) and the
omission of footnotes.
SECTION 3.7 Absence of Certain Changes or Events. Since September 30, 1998,
and except as disclosed in Schedule 3.7, the Business has been conducted in the
Ordinary Course of Business and there has not been (i) any material adverse
change or any change except in the Ordinary Course of Business in the financial
condition or operations of the Business, (ii) any damage, destruction or loss
that materially and adversely affects the financial condition or operations of
the Business or (iii) except as permitted or contemplated by this Agreement or
as a result of any action taken with the approval or consent of Buyer, (a) any
action by Seller which, if taken on or after the date of this Agreement, would
be prohibited without the consent of Buyer pursuant to Section 5.2 or (b) any
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agreement by Seller, whether in writing or otherwise, to take any action
described in this Section 3.7.
SECTION 3.8 Tax Matters.
(a) Except as described on Schedule 3.8, Seller has paid, and will continue
to pay, all Taxes, including, without limitation, all federal, state and local
excise Taxes, due and payable by it or required to be withheld or collected and
paid by it for or with respect to all periods, whether or not shown on any Tax
Return.
(b) Seller has filed, and will continue to file, on a timely basis all Tax
Returns that it was or will be required to file. All such Tax Returns were and
will be accurate and complete in all material respects. There are no security
interests on any of the assets of Seller that arose in connection with any
failure (or alleged failure) to pay any Tax.
(c) Seller has withheld and paid, and will continue to withhold and pay,
all Taxes required to have been or to be withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
(d) Seller has no knowledge of any facts or circumstances that could give
rise to a reasonable expectation that any Tax authority may assess any
additional Taxes for any period for which Tax Returns of Seller have been or
will be filed. Seller has made available to Buyer correct and complete copies of
all federal income Tax returns, examination reports and statements of
deficiencies assessed against or agreed to by Seller since December 31, 1995.
SECTION 3.9 Assets and Properties.
(a) Schedule 3.9(a) lists (i) the Premises and (ii) all of the material
equipment leased by Seller in relation to the Business as of the date of this
Agreement.
(b) As of the date of this Agreement, Seller owns or leases (to the extent
described in Schedule 3.9(a)) all of the Assets free and clear of all
Encumbrances and has valid title to (or, in the case of the Assets that are
leased, valid leasehold interests in) all of the Assets that are material to the
financial position or results of operations of the Business subject, in each
case, only to (i) statutory Encumbrances arising or incurred in the Ordinary
Course of Business with respect to which the underlying objections are not
delinquent or the validity of which is being contested in good faith by
appropriate proceedings as disclosed on Schedule 3.9(b), (ii) Encumbrances
disclosed or reflected in the Latest Balance Sheet, (iii) Encumbrances for Taxes
not yet delinquent, (iv) Encumbrances which constitute valid leases or subleases
from Seller to third parties none of which leases are delinquent, (v)
Encumbrances and defects in title disclosed on Schedule 3.9(b), and (vi)
Encumbrances and defects in title that are not, individually or in the
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aggregate, material to the financial position or results of operations of the
Business (the types of liens described in the foregoing clauses (i) through (vi)
being referred to in this Agreement as "Pre-Closing Permitted Encumbrances").
(c) On the Closing Date, Buyer shall acquire good and marketable title to,
and all right, title and interest in, the Assets, free and clear of all
Encumbrances, except for Closing Permitted Encumbrances. The Assets so acquired
at the Closing shall constitute all of the real, personal and mixed assets and
property, both tangible and intangible, which are being used by Seller in the
conduct of the Business, consistent with historical and current practices.
(d) The tangible Assets are in good operating condition and repair, free of
material defects and are suitable, adequate and fit for the uses for which they
are intended or are being used consistent with historical practice.
SECTION 3.10 Contracts.
(a) All contracts, agreements, licenses, leases, commitments, arrangements
or understandings (both written and oral) described within the definition of the
term Assets constitute "Seller Contracts."
(b) Except as set forth on Schedule 3.10, Seller has not entered into any
binding agreement with respect to any Seller Contract that could adversely
affect Seller's ability to enforce its rights under such Seller Contract. Seller
has delivered, or otherwise made available, true and complete copies of all
written Seller Contracts (and all amendments and modifications thereto) to Buyer
prior to the execution of this Agreement.
(c) Each Seller Contract is in full force and effect, and constitutes a
valid and binding obligation of Seller in accordance with its terms, and, to
Seller's knowledge, is legally enforceable in accordance with its terms. Seller
is not in default under any Seller Contract and, to Seller's knowledge, there
does not exist any event that (whether with or without notice, lapse of time, or
the happening or occurrence of any other event) would result in such a default.
To Seller's knowledge, there exists no default by any other party to any Seller
Contract. Within the last year, Seller has not received any written notice from
any other party to any material Seller Contract (other than any Subscriber
Contract) pursuant to which such other party threatened cancellation or
revocation of such Seller Contract.
(d) Schedule 3.10 sets forth a partial list of all notices, consents,
waivers or approvals contemplated or required by the terms of any Seller
Contract in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement, which list will
be supplemented by the inventory pursuant to Section 2.1(c)(i) and which list,
as supplemented, will contain all such notices, consents, waivers or approvals
except for any such notices, waivers, consents or approvals the failure of which
to receive would not result in a Material Adverse Effect.
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SECTION 3.11 Litigation, Compliance with Applicable Laws and Permits.
(a) There is no outstanding Order against, nor, except as set forth on
Schedule 3.11(a), is there any material litigation, proceeding, arbitration or
investigation by any Governmental Authority or other Person pending or, to the
knowledge of Seller, threatened against, Seller, its properties or businesses or
relating to the transactions contemplated in this Agreement, nor to the
knowledge of Seller is there any basis for any such action.
(b) The Assets and Seller's ownership, lease and use of the Assets are not
in violation of any applicable material Legal Requirement. Seller has not
received notice from any Governmental Authority or other Person of any violation
or alleged violation of any material Legal Requirement relating to the Business
or the Assets, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or commenced or is pending or,
to the knowledge of Seller, threatened against Seller with respect to any such
violation.
(c) Except as disclosed on Schedule 3.11(c), Seller possesses all material
authorizations, Permits, licenses and Orders required or necessary to conduct
the Business in the manner in which such Business is being and historically has
been conducted. Each authorization and Permit of Seller is valid and effective
and Seller is in compliance with all material terms, conditions and requirements
of such authorizations and Permits.
SECTION 3.12 Insurance. The properties and the conduct of the Business are,
in the reasonable judgment of Seller, adequately insured by financially sound
and reputable insurers.
SECTION 3.13 Pension and Employee Benefit Matters.
(a) Neither Seller nor any employee benefit plan (as defined in Section
3(3) of ERISA) maintained by Seller or in which employees of Seller participate
(the "Plans"), is in material violation of any provision of ERISA or the Code.
No reportable event (within the meaning of Title IV of ERISA) has occurred and
is continuing with respect to any Plan and no prohibited transaction (as defined
in Section 406 of ERISA) has occurred with respect to any Plan which would
result in material liability to Seller.
(b) No material accumulated funding deficiency (as defined in Section 302
of ERISA) exists with respect to any Plan.
(c) Seller has not ever been required to contribute to any multiemployer
plan (as defined in Section 3(37) of ERISA).
SECTION 3.14 Labor and Employment. Except as described on Schedule 3.14,
there are no material labor or employment controversies pending or, to the
knowledge of Seller, threatened against Seller which could reasonably be
expected to have a Material Adverse Effect. Except as disclosed on Schedule
3.14, there are no collective bargaining agreements, employment agreements
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between Seller and any of its Employees, or professional service agreements not
terminable at will relating to the Business or any of the Assets. Except as set
forth in Section 2.4(b)(i), the sale of the Assets and the Business to Buyer
pursuant to the terms of this Agreement will not cause Buyer to incur or suffer
any liability relating to, or obligation to pay, severance, termination or other
similar payments to any current or former employee or independent contractor of
Seller, except as disclosed on Schedule 3.14.
SECTION 3.15 Environmental Matters. Seller is conducting and at all times
has conducted the Business, and has occupied, used and operated the Premises and
all other real property and facilities presently or previously occupied, used or
operated by Seller in material compliance with all Environmental Obligations and
so as not to give rise to any material Liability under any Environmental
Obligations or to any Material Adverse Effect.
SECTION 3.16 Intellectual Property.
(a) Within ten days of the date of this Agreement, Seller will provide to
Buyer a partial list of all Intellectual Property, which list will be
supplemented by the inventory pursuant to Section 2.1(c)(i) and which list, as
supplemented, will constitute a true, correct and complete list of all
Intellectual Property. Such list will identify Seller as either the owner, joint
owner or licensee of each item of Intellectual Property and in the cases where
Seller is a licensee, will identify the related licensors and license agreements
for such Intellectual Property. Seller either owns, owns jointly or has the
right to use as a licensee all of the Intellectual Property, free and clear of
Encumbrances, including any exclusive rights, however described, granted to
Persons other than Seller with respect to the Intellectual Property, other than
such rights that are described on Schedule 3.16. All federal and foreign
trademark and service mark registrations owned by Seller and all applications
owned by Seller to register any trademarks or service marks on any trademark
register maintained by the United States government or any state or foreign
government are based on truthful affidavits or declarations of use or a bona
fide intention to use.
(b) Except as set forth on Schedule 3.16, with respect to each item of
Intellectual Property required to be identified herein:
(i) such Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(ii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or, to the knowledge of Seller, is
threatened which challenges the legality, validity, enforceability, use or
ownership of such piece of Intellectual Property; and
(iii) Seller has not licensed or permitted any third party to use such
piece of Intellectual Property other than in the Ordinary Course of
Business.
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(c) Seller has not received notice, orally or in writing, that any other
Person claims any interest in any Intellectual Property, and to the knowledge of
Seller no such other Person has, or has made, such a claim. Seller has the right
to bring action for the infringement of all Intellectual Property. Seller has
not received any notice, charge, claim or assertion nor otherwise has any
knowledge that the Intellectual Property infringes the proprietary rights of any
third party.
(d) Seller has taken all commercially reasonable measures to protect and
maintain the rights of Seller in the Intellectual Property. All Intellectual
Property used by Seller is used with the authorization of every other claimant
thereto and the execution, delivery and performance of this Agreement by Seller
will not impair such use.
(e) Seller has not sent or otherwise communicated to any other Person any
notice, charge, claim or assertion of, nor brought any action for, and Seller
does not have any knowledge of, any present, impending or threatened
infringement by such other Person of any Intellectual Property, and to the
knowledge of Seller, no third party has interfered with, infringed upon,
misappropriated, disclosed or otherwise come into conflict with any Intellectual
Property.
SECTION 3.17 Brokers' Fees and Commissions. Except for Salomon Smith
Barney, none of Seller or any of Seller's directors, officers, employees or
agents, has employed any investment banker, broker or finder in connection with
the transactions contemplated by this Agreement, and none of Seller or Buyer
will have any liability to any such Persons (other than Salomon Smith Barney) on
account of any brokerage, finder's or similar fee payable with respect to
services rendered to Seller or any of Seller's directors, officers, employees or
agents in connection with the transactions contemplated by this Agreement.
Seller will pay and discharge any amounts owing to Salomon Smith Barney as a
result of the transactions contemplated by this Agreement.
SECTION 3.18 Employees. Seller has no written employment contract with any
person with respect to the Business except any employment contracts as are set
forth on Schedule 3.14. Schedule 3.18 sets forth a preliminary list of all
current employees of Seller employed with respect to the Business (collectively,
the "Employees"), showing each such Person's name, position, initial employment
date, and annual remuneration (without exclusions for deduction pursuant to Code
Sections 125 or 401(k)), plus actual bonus or incentive compensation paid in
calendar year 1998, if any, which list will be finalized within ten days
following the date of this Agreement. Except as set forth on Schedule 3.18 or
otherwise entered into in the Ordinary Course of Business, other than general
understandings which may exist for employment at will, no oral understandings
currently exist between any executive officer or other representative of Seller
authorized to enter into such understandings on behalf of Seller and any
Employee regarding changes in compensation, promotion or any other change in
status. Except as disclosed on Schedule 3.18, as of the date of this Agreement,
other than in the Ordinary Course of Business no Employee has advised any
executive officer of Seller, and to the knowledge of Seller's executive officers
without any investigation or due diligence on their part, no Employee has
advised any manager or supervisor of Seller, orally or in writing, that he or
she intends to terminate such employment or to refuse employment by Buyer after
the Closing.
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SECTION 3.19 Books and Records. Seller has maintained business records
reasonably adequate for the operation of the Business, and Seller has no
knowledge of any material deficiencies in such business records.
SECTION 3.20 Subscribers. As of January 1, 1999, the number of the dial-up,
Web-hosting and dedicated access, respectively, Subscribers that are current
customers (that is, Subscribers who paid for service the last time their credit
card was charged (with respect to those who pay by credit card) or non-credit
card Subscribers who paid for service within 31 days of receipt of their most
recent invoice), and the average revenue per Subscriber with respect thereto,
are not less than as shown on Schedule 3.20. As of the Closing, Seller will
certify whether or not the aggregate value of the Subscribers who are current
customers (as provided in the prior sentence, and as determined as of the
Closing) is at least One Hundred Ninety Six Million Dollars ($196,000,000),
using for purposes of calculation the values for such Subscribers set forth in
Section 2.3(c).
SECTION 3.21 Securities Matters.
(a) Seller is experienced in evaluating and investing in high-technology
companies such as Buyer. Seller has substantial experience in investing in and
evaluating private placement transactions of securities in companies similar to
Buyer and is capable of evaluating the risks and merits of its investment in
Buyer and has the capacity to protect its own interests.
(b) Seller is acquiring the Shares for investment for its own account and
not with a view to, or for resale in connection with, any distribution thereof,
except in compliance with applicable securities laws, and Seller has no present
intention of selling or distributing the Shares except in compliance with
applicable securities laws. Seller understands that as of the date of this
Agreement the Shares have not been registered under the Securities Act.
(c) Seller acknowledges that, because the Shares have not been registered
under the Securities Act, the Shares that Seller receives at the Closing must be
held indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. Seller is aware of the provisions
of Rule 144 promulgated under the Securities Act which permits limited resale of
shares purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the resale occurring not less than
one year after a party has purchased and paid for the security to be sold.
(d) Without in any way limiting the effect of the representations and
warranties of Buyer set forth in this Agreement, Seller has had an opportunity
to discuss in detail Buyer's business, management and financial affairs with
Buyer's officers and management employees and has reviewed all documents and
records of Buyer which Buyer has provided in response to Seller's request.
(e) Seller is an "accredited investor" as that term is defined in Rule
501(a) under the Securities Act. Seller has not been organized for the specific
purpose of acquiring Shares.
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(f) Seller has its principal office in the State of California.
SECTION 3.22 Year 2000 Compliance. To the knowledge of Seller, without any
investigation or due diligence on its part or on the part of any of Seller's
employees or any other Person, the Seller Software accurately processes
date/time data (including calculating, comparing, and sequencing) from, into,
and between the twentieth and twenty-first centuries, and the years 1999 and
2000 and leap year calculations when either (A) used as a standalone
application, or (B) integrated into or otherwise used in conjunction with the
third party hardware, software, firmware and data ("Third Party Products") with
which such Seller Software was designed or intended to operate at the time such
Seller Software was (i) developed or (ii) first provided to Seller's customers
or tested by Seller for such customers, whichever is later. Notwithstanding the
foregoing, the Seller shall not be considered to be in breach of the
representation and warranty in the immediately preceding sentence if the failure
of such Seller Software to comply with such representation and warranty is
attributable solely to (x) a failure by any Third Party Product to accurately
process date/time data (including but not limited to, calculating, comparing,
and sequencing) from, into, and between the twentieth and twenty-first
centuries, and the years 1999 and 2000 and leap year calculations; or (y) any
modification of the Seller Software by any party other than Seller (unless such
modification was made at the direction of Seller). As Buyer's sole and exclusive
remedy for breach of the representation and warranty in this Section 3.22,
Seller will (i) exercise commercially reasonable best efforts to correct any
material breach of the warranty reported to Seller on or before June 30, 2000
and (ii) provide any resulting fix to Buyer without charge.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows, in each case as of the
date of this Agreement:
SECTION 4.1 Organization and Qualification, Etc. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as it is now
being conducted. Buyer is qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified would result in a
material adverse effect on Buyer's business.
SECTION 4.2 Authority Relative to Agreement. Buyer has the full and
absolute right, corporate power, authority and legal capacity to execute,
deliver, perform and consummate the transactions contemplated on its part by
this Agreement and all other documents and agreements to be executed and
delivered by Buyer pursuant to this Agreement. The execution and delivery by
Buyer of this Agreement and all other documents and agreements to be executed
and delivered by Buyer pursuant to this Agreement, and the consummation by Buyer
of the transactions contemplated on its part hereby and thereby, have been duly
authorized by Buyer's board of directors. No other corporate approvals on the
part of Buyer's board of directors or shareholders are necessary to authorize
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the execution and delivery of this Agreement and such other documents. Assuming
the due authorization, execution and delivery by other applicable parties, this
Agreement constitutes, and all other documents and agreements to be executed and
delivered by Buyer pursuant to this Agreement when executed and delivered will
constitute, the legal, valid, and binding obligation of, and will be enforceable
in accordance with their respective terms against, Buyer, except as such
enforcement is subject to the effect of (i) any applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting creditors'
rights generally, and (ii) general principles of equity, including concepts of
reasonableness, good faith and fair dealing, and other similar doctrines
affecting the enforceability of agreements generally (regardless of whether
considered in a proceeding in equity or law).
SECTION 4.3 Non-Contravention. The execution, delivery and performance of
this Agreement and all other documents and agreements to be executed and
delivered by Buyer pursuant to this Agreement, and the consummation of the
transactions contemplated hereby and thereby, will not (a) violate any provision
of the certificate of incorporation or bylaws of Buyer, (b) violate, with or
without the giving of notice or the lapse of time or both, or conflict with or
result in the breach or termination of any provision of, or a diminution of the
rights of Buyer under, or constitute a default under, or give any Person the
right to accelerate any obligation under, or result in the creation of any
material Encumbrance upon any properties, assets or business of Buyer, pursuant
to any indenture, mortgage, deed of trust, lien, lease, license, Permit,
agreement, instrument or other arrangement to which Buyer is a party or by which
Buyer, or any of its assets and properties, is bound or subject, or (c) violate
in any material respect any Legal Requirement to which Buyer is subject.
SECTION 4.4 Consents and Approvals. Except as described in Schedule 4.4, no
filing or registration with, no notice to and no permit, authorization, consent
or approval of any Governmental Authority or any Person is necessary for the
consummation by Buyer of the transactions contemplated by this Agreement other
than (a) requirements of federal and state securities laws, (b) the
authorization of all applicable regulatory agencies necessary or desirable to
consummate the transactions contemplated by this Agreement and (c) those
consents and approvals already obtained as described on Schedule 4.4.
SECTION 4.5 Brokers' Fees and Commissions. Except for ING Baring Furman
Selz LLC, neither Buyer nor any of Buyer's directors, officers, partners,
employees or agents, has employed any investment banker, broker or finder in
connection with the transactions contemplated by this Agreement, and none of
Buyer, Seller or ICG, or their Affiliates, will have any liability to any such
Persons (other than ING Baring Furman Selz LLC) on account of any brokerage,
finder's or similar fee payable with respect to services rendered to Buyer or
any of Buyer's directors, officers, partners, employees or agents in connection
with the transactions contemplated by this Agreement. Buyer will pay and
discharge any amounts owing to ING Baring Furman Selz LLC as a result of the
transactions contemplated by this Agreement.
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SECTION 4.6 The Shares. Upon delivery to Seller at the Closing, the Shares
will be (a) duly authorized, (b) validly issued and fully paid and nonassessable
and (c) free of any Liability, Tax or other Encumbrance, except as may be
created or allowed to arise solely by Seller.
ARTICLE V
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing:
SECTION 5.1 General. Each of the Parties will use its commercially
reasonable efforts to take all actions necessary, proper or advisable, in order
to consummate and make effective the transactions contemplated by this Agreement
(including the satisfaction, but not the waiver, of the closing conditions set
forth in Article VII) and the other agreements contemplated by this Agreement.
SECTION 5.2 Operation and Preservation of Business. Seller will through the
Closing Date: (a) use its commercially reasonable efforts to preserve the
Business and in connection therewith maintain its existing franchises and
licenses and to preserve Seller's present relationships with customers,
suppliers, consultants, employees and any other Persons having business
relations therewith; and (b) maintain the Assets in the same working order and
condition as the Assets are in on the date of this Agreement, consistent with
how the Assets historically have been maintained in the Ordinary Course of
Business, reasonable wear and tear excepted. Except as contemplated by this
Agreement or as reasonably required to carry out its obligations hereunder,
Seller will, through the Closing Date, conduct the Business in the Ordinary
Course of Business and, in addition, will not (except to the extent that Buyer
has consented in writing thereto or that such action or inaction would not
reasonably be expected to materially affect or be binding upon any part of the
Business or the Assets): (i) grant any increase in the compensation payable or
to become payable by Seller to officers or employees of the Business other than
in the Ordinary Course of Business, or enter into any bonus, insurance, pension,
profit sharing, incentive, deferred compensation, severance pay, retirement,
hospitalization, employee benefit or other similar plan, payment or arrangement
for or with any of such officers or employees other than in the Ordinary Course
of Business; (ii) enter into any agreement in connection with the Business that
involves more than $25,000 individually or $500,000 in the aggregate that may
not be terminated on less than 31 days' notice or that may reasonably be
expected to have a Material Adverse Effect on the Business or the Assets or
enter into the Marketing and Distribution Agreement with American Automobile
Association, a draft copy of which has been furnished to Buyer; (iii) make any
capital purchases or commitments relating to the Business that exceed $50,000
individually or $200,000 in the aggregate; (iv) other than in the Ordinary
Course of Business, place, or allow to be placed, an Encumbrance on any of the
Assets; (v) sell, assign, lease or otherwise transfer or dispose of any interest
in any Asset (other than in the Ordinary Course of Business); (vi) commit any
act or omit to do any act, or engage in any activity or transaction or incur any
obligation (by conduct or otherwise), that (individually or in the aggregate)
reasonably could be expected to have a Material Adverse Effect; (vii) except for
actions taken or not taken in compliance with this Section 5.2, do or omit to do
any act (or permit such action or omission) which reasonably could be expected
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to cause a material breach of any Seller Contract; or (viii) take any action or
fail to take any action that would reasonably be expected to cause any of the
representations, warranties or covenants of Seller contained herein to be untrue
or incorrect in any material respect or incapable of being performed or
satisfied on the Closing Date. Prior to the Closing Date, Seller will maintain
in full force and effect all of its existing casualty, liability, and other
insurance relating to the Business or the Assets through the Closing Date in
amounts not less than those in effect on the date hereof, except for changes in
such insurance that are made in the Ordinary Course of Business.
SECTION 5.3 Full Access. Seller will permit Buyer and its agents to have
full access at all reasonable times, and in a manner so as not to interfere with
the normal business operations of Seller, to all Premises, properties,
personnel, accounting books and records, contracts and documents of or
pertaining to Seller. Buyer's investigation of the financial and operating data,
Assets and other information with respect to the Business and Assets shall in no
way affect the obligations of Seller, or ICG as applicable, with respect to the
agreements, representations, warranties, covenants and indemnification
provisions set forth in this Agreement.
SECTION 5.4 Notice of Developments.
(a) Seller will give prompt written notice to Buyer of any development
which occurs after the date of this Agreement and materially affects the
Business, the Assets, or the liabilities, financial condition, operations,
results of operations, representations, warranties, covenants or disclosure
Schedules of Seller, and will provide Buyer with all information (including,
without limitation, copies of all documents relating thereto) reasonably
requested by Buyer concerning any claims instituted, threatened or asserted
after the date of this Agreement against or affecting the Business or Assets at
law or in equity before or by any Governmental Authority.
(b) Promptly after Seller has knowledge thereof, Seller will, through the
Closing Date, notify Buyer in writing of the occurrence of any event, or the
failure of any event to occur, prior to the Closing that results in a breach of
any of the covenants, representations or warranties made by or on behalf of
Seller in this Agreement, but, in the event the Closing occurs and subject to
the second sentence of Section 8.5(a), such notification will not excuse
breaches of representations, warranties, covenants or agreements disclosed in
such notification.
(c) Promptly after Buyer has knowledge thereof, Buyer will, through the
Closing Date, notify Seller in writing of the occurrence of any event, or the
failure of any event to occur, prior to the Closing that results in a breach of
any of the covenants, representations or warranties made by or on behalf of
Buyer in this Agreement or any other document or agreement furnished by Buyer in
connection with or pursuant to this Agreement, but in the event the Closing
occurs and subject to the second sentence of Section 8.5(a), such notification
will not excuse breaches of representations, warranties, covenants or agreements
disclosed in such notification.
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SECTION 5.5 Announcements. Except as may be required by law, no Party will
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the other Party.
SECTION 5.6 Confidentiality. Each of the Parties shall keep, and shall
cause its employees, agents, attorneys, accountants and other advisors to keep,
confidential the existence, terms and conditions of this Agreement and all
communications and discussions between or among the Parties. Subject to Section
5.5, without the consent of Buyer and Seller, except as may be required by law
(including disclosure requirements under applicable securities laws), neither
Buyer, nor Seller will make any disclosure of the information described in this
Section 5.6. Nothing contained in this Agreement shall be construed to prohibit
any Party from disclosing the information described in this Section 5.6 or any
Confidential Information in connection with the institution or defense of any
claim pursuant to this Agreement or other claims which may be the subject of
judicial proceedings.
SECTION 5.7 Consents and Approvals.
(a) The Parties, at each of their own expense except as otherwise provided
in this Agreement, shall take all commercially reasonable measures reasonably
necessary or advisable to secure such consents, authorizations and approvals of
Governmental Authorities and of other Persons or entities with respect to the
transactions contemplated by this Agreement, and to the performance of all other
obligations of such Parties under this Agreement, as may be required by any
applicable statute or regulation of the United States or any country, state or
other jurisdiction or by any agreement of any kind whatsoever to which Buyer or
Seller is a party or by which Buyer or Seller is bound.
(b) Buyer and Seller will (i) cooperate in the filing of all forms,
notifications, reports and information, if any, required or reasonably deemed
advisable pursuant to applicable statutes, rules, regulations or orders of any
Governmental Authority in connection with the transactions contemplated by this
Agreement and (ii) use their respective commercially reasonable efforts to cause
any applicable waiting periods thereunder to expire and any objections to the
transactions contemplated hereby to be withdrawn before the Closing.
(c) In addition to the obligations set forth in Section 5.7(b), as promptly
as practicable, and in any event no later than 15 days following the execution
of this Agreement, Seller and Buyer will complete any filing that may be
required pursuant to Hart-Scott-Rodino, or shall mutually agree that no such
filing is required. Seller and Buyer will diligently take (or fully cooperate in
the taking of) all actions, and provide any additional information, required or
reasonably requested in order to comply with the requirements of
Hart-Scott-Rodino. Buyer and Seller will each pay one-half of the
Hart-Scott-Rodino filing fee.
SECTION 5.8 Values of Assets. As soon as practicable after the Closing (but
not later than 75 days after the Closing Date, Buyer will prepare and submit to
Seller for its approval, which approval will not be unreasonably withheld, a
schedule allocating the Purchase Price among the Assets. For purposes of this
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allocation, the Purchase Price will be deemed to include the amount of the
Assumed Liabilities. Seller will be required to approve such allocation so long
as it is reasonable. Seller will be deemed to have approved such allocation
unless it gives written notice of objection to Buyer within ten days after
receipt of the schedule setting forth such allocation. If such notice of
objection is given, within five days after such notice is given, the dispute
will be submitted to Arthur Andersen LLP, whose determination will be
conclusive. The fees and expenses payable to such firm will be borne equally by
Seller and Buyer. When the allocation of the Purchase Price is finally
determined, the Parties will report the allocation of the Purchase Price
according to that determination for all applicable income, sales, use and
transaction Tax purposes, and Seller and Buyer will file all required Tax forms
with the applicable Taxing authorities consistent with such determination.
SECTION 5.9 Name. As of the Closing, Seller will change its corporate name
to a name dissimilar to its current name, which name will not include the word
"NETCOM," and thereafter will not use the word "NETCOM" in its corporate name.
As of and after the Closing, neither Seller nor its Affiliates will use the
tradename "NETCOM" nor use such name in any service mark, and any pending
applications for the use of such name will be abandoned.
SECTION 5.10 Resale Prospectus. Provided that Seller has provided or made
available to Buyer all information relating to Seller and reasonably required by
Buyer for inclusion therein, Buyer will prepare and file with the SEC as
promptly as practicable after the date of this Agreement a resale registration
statement on Form S-3 or other eligible Form (the "Resale Prospectus"), in form
and substance reasonably satisfactory to Seller, that provides for the sale by
Seller of the Shares after the Closing. Buyer will provide to Seller for its
review a draft copy of the Resale Prospectus prior to its filing with the SEC.
Buyer will use its commercially reasonable best efforts to cause the Resale
Prospectus to become effective with the SEC as of the Closing or, if such
effectiveness does not occur or is not permitted under applicable federal
securities laws, as soon as possible after the Closing.
ARTICLE VI
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following the
Closing.
SECTION 6.1 Further Assurances. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, Seller, on the one hand, and Buyer, on the other hand, will take such
further action (including the execution and delivery of such further instruments
and documents) as the other party reasonably may request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Article VIII).
SECTION 6.2 Cooperation. In the event and for so long as Seller, on the one
hand, or Buyer, on the other hand, actively is contesting or defending against
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any action, suit, proceeding, hearing, investigation, charge, complaint, claim
or demand in connection with (a) any transactions contemplated by this Agreement
or (b) any fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act or transaction on or
prior to the Closing Date involving any of the Assets or the Business, the other
Party will cooperate with such party and its counsel in the contest or defense,
make available their personnel (except to the extent that making their personnel
available unreasonably affects the ability of such personnel to perform their
normal duties), and provide such testimony and access to their books and records
as shall be reasonably necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor under
Article VIII). The Parties also will cooperate with each other in all reasonable
respects to provide for the transition of the operation of the Business to Buyer
and the retention and operation of the Network by Seller after the Closing,
including reasonable cooperation regarding access to accounting systems and
other items.
SECTION 6.3 Confidentiality. Buyer will treat and hold as confidential all
Confidential Information (except to the extent that the same relates to the
Assets or the Business) concerning Seller and its Affiliates, refrain from using
any such Confidential Information (except to the extent that the same relates to
the Assets or the Business) and deliver promptly to Seller or destroy, at the
request of Seller, all such Confidential Information (except to the extent that
the same relates to the Assets or the Business) in its possession. Seller will
treat and hold as confidential all Confidential Information concerning Buyer and
the Business or Assets, refrain from using any such Confidential Information and
deliver promptly to Buyer or destroy, at the request and option of Buyer, all of
such Confidential Information in its possession.
SECTION 6.4 Resale Prospectus and Listing of Shares. In the event the
Resale Prospectus is not effective with the SEC as of the Closing, Buyer will
use its commercially reasonable best efforts to cause the Resale Prospectus to
become effective with the SEC as soon as possible after the Closing and to
maintain the effectiveness of the Resale Prospectus in accordance with the terms
thereof. Prior to or as of the effectiveness of the Resale Prospectus, the
Shares will be listed for trading on the NASDAQ.
SECTION 6.5 Restriction on Distribution. During the period beginning on the
Closing Date and ending 18 months after the Closing Date, ICG will not
distribute to its shareholder, ICG Communications, Inc., or any Affiliate of ICG
Communications, Inc. that is not a subsidiary of or otherwise controlled by ICG,
any amounts attributable to the Purchase Price that it has received from Seller
after the Closing; provided that if at the end of such 18 month period Buyer has
pending claims for indemnification against Seller and ICG under Article VIII,
the restriction set forth in this Section 6.5 will continue to apply to the
extent of the amount of such pending claims until such claims are finally
resolved. ICG will not sell, assign or transfer any of its assets or properties
in any transaction in which ICG does not receive consideration of a reasonably
equivalent value for such assets or properties. ICG will not incur any liability
for borrowed money without receiving funds corresponding to such borrowing.
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ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.1 Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) Seller's representations and warranties (other than the representations
and warranties set forth in Section 3.20), to the extent qualified by a
reference to materiality, shall be correct and complete, and to the extent not
so qualified, shall be correct and complete in all material respects at and as
of the Closing Date and the Closing, and there shall have occurred no uncured
breach of Seller's representations and warranties which, individually or in the
aggregate, taking into account all such breaches, has resulted in any or may
reasonably be expected to result in any Material Adverse Effect;
(b) Seller shall have performed and complied in all material respects with
all of its covenants hereunder required to be performed or complied with through
the Closing;
(c) Seller shall have given all notices and procured all of the material
third-party consents, authorizations and approvals (including all consents,
authorizations and approvals by Governmental Authorities and the expiration of
the Hart-Scott-Rodino waiting period) required to consummate the transactions
contemplated by this Agreement, all in form and substance reasonably
satisfactory to Buyer;
(d) no action, suit or proceeding shall be pending or threatened, other
than an action, suit or proceeding instituted by the Buyer, that involves any
Governmental Authority as a party and wherein an unfavorable Order would, and no
injunction shall be in effect that would, (i) prevent consummation of any of the
transactions contemplated by this Agreement, (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation or (iii)
materially affect adversely the right of Buyer to use or operate the Assets in
connection with the Business, and no such Order shall be in effect;
(e) there shall have occurred no event, fact or circumstance, including any
failure of Buyer to obtain any required consent with respect to the transfer of
any Asset to Seller under this Agreement, that has had or could reasonably be
expected to have a material adverse effect on Buyer's right to conduct the
Business substantially as such Business was being conducted on September 30,
1998;
(f) there shall have occurred after September 30, 1998, no Material Adverse
Effect; provided that if the number of Subscribers as of the Closing is less
than that set forth in Schedule 3.20, that difference in the number of
Subscribers will not be considered to be a Material Adverse Effect;
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(g) Seller shall have delivered to Buyer (i) a certificate to the effect
that each of the conditions specified above in Sections 7.1(a) through (f) is
satisfied in all respects and (ii) good standing certificates for Seller and
ICG, dated within ten days of the Closing, from the Secretary of State of
Seller's and ICG's jurisdiction of incorporation and each other jurisdiction in
which Seller is qualified or authorized to do business as a foreign corporation;
(h) Seller shall have made the certification set forth in the last sentence
of Section 3.20; and
(i) Seller shall have delivered to Buyer the Seller Documents and such
other instruments, certificates and documents as are reasonably requested by
Buyer in order to consummate the transactions contemplated by this Agreement,
all in form and substance reasonably satisfactory to Buyer.
Buyer in its sole discretion may waive any condition specified in this
Section 7.1 at or prior to the Closing.
SECTION 7.2 Conditions to Obligation of Seller. The obligation of Seller to
consummate the transactions contemplated by this Agreement is subject to
satisfaction of the following conditions:
(a) Buyer's representations and warranties, to the extent qualified by a
reference to materiality, shall be correct and complete, and to the extent not
so qualified, shall be correct and complete in all material respects at and as
of the Closing Date and the Closing;
(b) Buyer shall have performed and complied in all material respects with
all of its covenants hereunder required to be performed or complied with through
the Closing;
(c) Buyer shall have delivered to Seller a certificate to the effect that
each of the conditions specified above in Sections 7.2(a) and (b) is satisfied
in all respects;
(d) no action, suit or proceeding shall be pending or threatened, other
than an action, suit or proceeding instituted by Seller, that involves any
Governmental Authority as a party and wherein an unfavorable Order would, and no
injunction shall be in effect that would, (i) prevent consummation of any of the
transactions contemplated by this Agreement or (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, and no such Order shall be in effect;
(e) Buyer shall have paid the cash portion of the Purchase Price pursuant
to Sections 2.2 and 2.3, assumed the Assumed Liabilities and delivered
certificates evidencing the Shares, and the Shares shall be delivered to Seller
free and clear of any Liability, Tax or other Encumbrance, other than those
created or allowed to arise solely by Seller; and
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(f) Buyer shall have delivered to Seller the Buyer Documents and such other
documents as are reasonably requested by Seller in order to consummate the
transactions contemplated by this Agreement, all in form and substance
reasonably satisfactory to Seller.
Seller in its sole discretion may waive any condition specified in this
Section 7.2 at or prior to the Closing.
ARTICLE VIII
REMEDIES FOR BREACHES OF THIS AGREEMENT
SECTION 8.1 Indemnification Provisions for Benefit of Buyer. If this
Agreement is not terminated prior to the Closing in accordance with Article IX,
and Seller breaches (a) any of the representations or warranties of Seller
contained herein or in the closing certificate delivered by Seller pursuant to
Section 7.1(g), and Buyer gives notice of a claim for indemnification against
Seller within the applicable Survival Period, or (b) any covenants or agreements
of Seller contained herein or in any Seller Document and Buyer gives notice
thereof to Seller, then, subject to Section 8.6, Seller and ICG, jointly and
severally, will indemnify, defend and hold harmless Buyer from and against any
Adverse Consequences Buyer may suffer arising out of or resulting from any of
the foregoing regardless of whether the Adverse Consequences are suffered during
or after any applicable Survival Period. Subject to Section 8.6, Seller and ICG,
jointly and severally, also will indemnify, defend and hold harmless Buyer from
and against any Adverse Consequences Buyer may suffer, whether suffered during
or after the Survival Period, arising out of or resulting from (c) any Liability
against Buyer or any of the Assets by virtue of the application of any bulk
sales or other similar laws to the sale and transfer of the Assets to Buyer, or
failure of Seller to comply with any applicable bulk sales laws or (d) any
Liability of Seller other than an Assumed Liability, (e) any Liability of Seller
arising from or relating to the matters described in Schedule 3.11(a) or (f)
except as expressly set forth in this Agreement, any Liability relating to the
operation of the Business by Seller prior to the Closing. In determining the
amount of Adverse Consequences suffered by Buyer for purposes of this Section
8.1 as a result of a breach by Seller described in Section 8.1(a) or Section
8.1(b) above of any representation, warranty, covenant or agreement of Seller
qualified by the words "material," "materiality," "in all material respects,"
"knowledge," "to the knowledge of," or words of similar import, or by any phrase
using any such terms or words, such Adverse Consequences will be deemed to
include only amounts that are material or arising out of matters of which Seller
or ICG had knowledge, as the case may be. If any dispute arises concerning
whether any indemnification is owing which cannot be resolved by negotiation
among the Parties within 30 days of notice of claim for indemnification from the
party claiming indemnification to the Party against whom such claim is asserted,
the dispute will be resolved by arbitration pursuant to this Agreement.
SECTION 8.2 Indemnification Provisions for Benefit of Seller. If this
Agreement is not terminated prior to the Closing in accordance with Article IX,
and Buyer breaches (a) any of its representations or warranties contained herein
or in the closing certificate delivered by Buyer pursuant to Section 7.2(c), and
Seller gives notice of a claim for indemnification against Buyer within the
applicable Survival Period, or (b) any covenants or agreements of Buyer
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contained herein or in any Buyer Document and Seller gives notice thereof to
Buyer, then, subject to Section 8.6(d), Buyer will indemnify, defend and hold
harmless Seller from and against any Adverse Consequences Seller may suffer
arising out of or resulting from any of the foregoing regardless of whether the
Adverse Consequences are suffered during or after the applicable Survival
Period. In determining the amount of Adverse Consequences suffered by Seller for
purposes of this Section 8.2 as a result of a breach by Buyer described in
Sections 8.2(a) and 8.2(b) above of any representation, warranty, covenant or
agreement of Buyer qualified by the words "material," "materiality," "in all
material respects," "knowledge," "to the knowledge of," or words of similar
import, or by any phrase using any such terms or words, such Adverse
Consequences will be deemed to include only amounts that are material or arising
out of matters of which Buyer had knowledge, as the case may be. Subject to
Section 8.6(d), Buyer also will indemnify, defend and hold harmless Seller from
all Adverse Consequences Seller may suffer, whether suffered during or after the
Survival Period, (c) as a result of Buyer's failure to comply with any
applicable requirement under the WARN Act as required under Section 2.4(b)(i) or
(d) attributable to or arising out of the Assumed Liabilities, or from the
operation of the Business after the Closing. If any dispute arises concerning
whether any indemnification is owing which cannot be resolved by negotiation
among the Parties within 30 days of notice of claim for indemnification from the
Party claiming indemnification to the party against whom such claim is asserted,
the dispute will be resolved by arbitration pursuant to this Agreement.
SECTION 8.3 Matters Involving Third Parties.
(a) If any Person not a party to this Agreement (including, without
limitation, any Governmental Authority) notifies Seller, on the one hand, or
Buyer, on the other hand, (the "Indemnified Party") with respect to any matter
(a "Third Party Claim") which may give rise to a claim for indemnification
against the Party (or in the case of Seller, Seller and ICG) (the "Indemnifying
Party"), then the Indemnified Party will notify the Indemnifying Party thereof
in writing within 15 days after receiving such notice. No delay on the part of
the Indemnified Party in notifying the Indemnifying Party will relieve the
Indemnifying Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced by such delay.
(b) The Indemnifying Party will have the right, at its sole cost and
expense, to defend the Indemnified Party against the Third Party Claim with
counsel of its choice satisfactory to the Indemnified Party so long as (i) the
Indemnifying Party notifies the Indemnified Party in writing within ten days
after the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences for which the Indemnified Party is entitled
to indemnification, (ii) the Indemnifying Party provides the Indemnified Party
with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (iii) the
Third Party Claim involves only money damages and does not seek an injunction or
other equitable relief, (iv) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice materially adverse
to the continuing business interests of the Indemnified Party, and (v) the
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Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. At any time that the Indemnifying Party is entitled to conduct the
defense of the Third Party Claim in accordance with this Section 8.3(b), the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim. In the event any of the
conditions in this Section 8.3(b) is or becomes unsatisfied, the Indemnified
Party may defend against the Third Party Claim so long as the Indemnified Party
conducts the defense of the Third Party Claim actively and diligently.
(c) At any time that a party is defending a Third Party Claim, neither
party will consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without obtaining (A) an entry of
dismissal, with prejudice, or an entry of dismissal, without prejudice, and a
covenant not to sue (if legal action is instituted), (B) the full and
unconditional release of the other party from all liability in respect of such
Third Party Claim and (C) the prior written consent of the other party (not to
be withheld unreasonably).
(d) If the Indemnified Party has the right to and is in fact defending the
Third Party Claim, the Indemnifying Party will reimburse the Indemnified Party
promptly and periodically for the costs of defending against the Third Party
Claim (including reasonable attorneys' fees and expenses), and the Indemnifying
Party will remain responsible for any Adverse Consequences for which the
Indemnified Party is entitled to indemnification.
SECTION 8.4 Survival. The representations and warranties made in this
Agreement or in any other agreement referred to in this Agreement, or in any
certificate or other document delivered pursuant to this Agreement or in
connection with this Agreement will survive the Closing Date for a period of 18
months from the Closing Date, except that the representations and warranties of
Seller in Sections 3.8 and 3.13 will survive until the expiration of all
applicable statutes of limitations with respect to any such claims that could be
brought regarding such matters and the representations and warranties set forth
in Section 3.15 will survive the Closing Date for a period of five years from
the Closing Date. Neither Buyer, Seller nor ICG will have any obligation to
indemnify any Person pursuant to this Agreement with respect to any breach of a
representation or warranty after the applicable period set forth above. The
covenants and agreements of Seller and Buyer made in Article VI, and the
provisions of Articles VIII and X will survive the Closing Date indefinitely,
except as otherwise specifically provided herein.
SECTION 8.5 Limitations.
(a) Subject solely to Section 9.2, the indemnification and other provisions
of this Article VIII will constitute the exclusive remedy by Seller, on the one
hand, and Buyer, on the other hand, against the other arising by virtue of a
breach of any agreement, representation, warranty, or covenant under this
Agreement. Notwithstanding anything to the contrary in this Agreement, other
than liability for specific performance under Section 9.2, Seller and ICG will
have no liability to Buyer, and Buyer will have no liability to Seller or ICG,
for any Adverse Consequences or other amounts in the event this Agreement is
terminated prior to the Closing in accordance with Article IX.
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(b) Notwithstanding any provision in this Agreement to the contrary, in no
event will Seller or ICG, on the one hand, or Buyer, on the other hand, be
liable to the other for amounts attributable to lost profits, or consequential,
incidental, speculative or punitive damages (except to the extent such items are
payable to a Person not a Party to this Agreement).
SECTION 8.6 Basket and Ceiling.
(a) Buyer will not be entitled to indemnification from Seller and ICG under
Section 8.1 or Section 8.3 unless and until the aggregate amount of Adverse
Consequences that Buyer would otherwise be entitled to assert under either
Section 8.1 or Section 8.3 exceeds One Million Dollars ($1,000,000) (the "Basket
Amount"). When the aggregate amount of such Adverse Consequences exceeds the
Basket Amount, Buyer will be entitled to indemnification under Section 8.1 or
Section 8.3, as applicable, for all such Adverse Consequences and not just those
in excess of the Basket Amount.
(b) Subject to Section 8.6(a), Seller and ICG will be required to indemnify
Buyer under this Article VIII for all Adverse Consequences suffered as a result
of the breach of any of the representations, warranties or covenants set forth
in Article III or elsewhere in this Agreement, other than the representations,
warranties or covenants set forth in any of Sections 3.8, 3.13 and 3.15 and the
indemnification obligation set forth in Section 8.1(e), only in an amount, in
the aggregate for all or any of such breaches, not in excess of 75 percent of
the Purchase Price.
(c) Subject to Section 8.6(a), Seller and ICG will be required to indemnify
Buyer under this Article VIII for all Adverse Consequences suffered as a result
of one or more breaches of the representations and warranties set forth in
Sections 3.8, 3.13 and 3.15 and the indemnification obligation set forth in
Section 8.1(e), only in an amount, in the aggregate for all or any of such
breaches, not in excess of the Purchase Price.
(d) Buyer will be required to indemnify Seller under this Article VIII for
all Adverse Consequences suffered as a result of one or more breaches of the
representations, warranties or covenants set forth in Article IV or elsewhere in
this Agreement in an amount not in excess of the Purchase Price.
ARTICLE IX
TERMINATION
SECTION 9.1 Termination of Agreement. The parties may terminate this
Agreement as provided in this Section 9.1:
(a) Buyer and Seller may terminate this Agreement by mutual written consent
at any time prior to the Closing;
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(b) Buyer may terminate this Agreement by giving written notice to Seller
at any time prior to the Closing (i) in the event Seller has breached any
agreement, representation, warranty or covenant contained in this Agreement and
such breach, individually or in the aggregate taking into account all such
breaches, has remained uncured and has resulted in, or reasonably may be
expected to result in, a Material Adverse Effect, Buyer has notified Seller of
the breach, and the breach has not been cured within 30 days after the notice of
breach (unless the representation, warranty or covenant failure results
primarily from Buyer breaching any agreement contained in this Agreement in any
material way); or (ii) if the Closing has not occurred on or before 180 days
following the date of this Agreement because of the failure of any condition
precedent to Buyer's obligations to consummate the Closing; or
(c) Seller may terminate this Agreement by giving written notice to Buyer
at any time prior to the Closing (i) if Buyer has materially breached any
agreement, representation, warranty or covenant contained in this Agreement,
Seller has notified Buyer of the breach, and the breach has not been cured
within 30 days after the notice of breach (unless the failure results primarily
from Seller or ICG breaching any agreement, representation, warranty or covenant
contained in this Agreement in any material way) or (ii) if the Closing has not
occurred on or before 180 days following the date of this Agreement because of
the failure of any condition precedent to Seller's or ICG's obligations to
consummate the Closing.
(d) Either Buyer or Seller may terminate this Agreement if as of the
Closing the aggregate value of the Subscribers who are current customers (as
determined under Section 3.20 and using the values for such Subscribers set
forth in Section 2.3(c)), is less than One Hundred Ninety-Six Million Dollars
($196,000,000).
SECTION 9.2 Effect of Termination. Upon the termination of this Agreement
by a Party pursuant to Section 9.1(b)(i) or (c)(i), notwithstanding such
termination, the terminating party will have as its sole additional remedy the
equitable remedy of specific performance, and in that regard each Party agrees
that the other Party could not be adequately compensated by its remedies at law.
SECTION 9.3 Confidentiality. If this Agreement is terminated, each Party
will treat and hold as confidential all Confidential Information concerning the
other Party which it acquired from such other Party in connection with this
Agreement and the transactions contemplated by this Agreement, and upon the
request of Seller, on the one hand, or Buyer, on the other hand, as applicable,
Seller and Buyer will return to the other all such Confidential Information
within its possession.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 No Third-Party Beneficiaries. This Agreement will not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
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SECTION 10.2 Entire Agreement. This Agreement (including the Schedules and
documents referred to herein) constitutes the entire agreement among the parties
and supersedes any prior understandings, agreements or representations by or
among the parties, written or oral, to the extent they relate in any way to the
subject matter hereof; provided that the Confidentiality Agreement dated
September 9, 1998 between ICG Communications, Inc. and Buyer will survive the
execution of this Agreement in accordance with its terms.
SECTION 10.3 Succession and Assignment. This Agreement will be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. No Party may assign this Agreement or any of its rights,
interests or obligations hereunder without the prior written approval of the
other Party; provided, however, that Buyer may assign to an Affiliate, by prior
written notice to Seller as permitted by law, its rights and obligations under
this Agreement, but not its obligation to pay the Purchase Price.
SECTION 10.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument. The execution of a
counterpart of the signature page to this Agreement will be deemed the execution
of a counterpart of this Agreement. The delivery of this Agreement may be made
by facsimile, and facsimile signatures shall be treated as original signatures
for all applicable purposes.
SECTION 10.5 Headings, Terms. The section headings contained in this
Agreement are inserted for convenience only and will not affect in any way the
meaning or interpretation of this Agreement. Terms used with initial capital
letters will have the meanings specified, applicable to both singular and plural
forms, for all purposes of this Agreement. All pronouns (and any variation) will
be deemed to refer to the masculine, feminine or neuter, as the identity of the
Person may require. The singular or plural includes the other, as the context
requires or permits. The word include (and any variation) is used in an
illustrative sense rather than a limiting sense. The word day means a calendar
day.
SECTION 10.6 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if it is sent by
registered or certified mail, return receipt requested, postage prepaid, or by
courier, telecopy or facsimile, and addressed to the intended recipient as set
forth below:
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If to Seller or ICG:
c/o ICG Services, Inc.
161 Inverness Drive West
Englewood, Colorado 80112
Attention: H. Don Teague, Esq.
Executive Vice President, Secretary
and General Counsel
Telecopy: (303) 414-8839
If to Buyer:
MindSpring Enterprises, Inc.
1430 W. Peachtree, Suite 400
Atlanta, Georgia 30309
Attention: Mr. Charles Brewer
Chairman and Chief Executive Officer
Telecopy: (404) 892-7616
Notices will be deemed given seven days after mailing if sent by certified mail,
when delivered if sent by courier, and upon receipt of confirmation by person or
machine if sent by telecopy or facsimile transmission. Any party may change the
address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice in the manner
herein set forth.
SECTION 10.7 Governing Law. This Agreement will be governed by and
construed in accordance with the domestic laws of the State of Colorado without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Colorado or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Colorado.
SECTION 10.8 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same is in writing and signed by Buyer,
Seller and ICG. No waiver by any party of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, will be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence, and no waiver will be
effective unless set forth in writing and signed by the party against whom such
waiver is asserted.
SECTION 10.9 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction will not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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SECTION 10.10 Expenses. Except as otherwise provided in this Agreement, (a)
Buyer will bear its own costs and expenses incurred either before or after the
date of this Agreement in connection with this Agreement or the transactions
contemplated by this Agreement, and (b) Seller will bear its own costs and
expenses incurred by Seller either before or after the date of this Agreement in
connection with this Agreement or the transactions contemplated by this
Agreement.
SECTION 10.11 Arbitration. Any disputes arising under or in connection with
this Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to binding
arbitration under the Commercial Arbitration Rules of the American Arbitration
Association under the authority of federal and state arbitration statutes, and
will not be the subject of litigation in any forum. EACH PARTY, BY SIGNING THIS
AGREEMENT, VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH PARTY
MAY OTHERWISE HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING THE
RIGHT TO JURY TRIAL. The arbitration will be conducted only in Denver, Colorado,
before three arbitrators, one selected by Buyer, one selected by Seller and the
third selected by the two aforementioned arbitrators, or if they cannot agree
within 30 days of their selection, by the American Arbitration Association. The
arbitrators will have full authority to order specific performance and award
damages and other relief available under this Agreement or applicable law, but
shall have no authority to add to, detract from, change or amend the terms of
this Agreement or existing law. All arbitration proceedings, including
settlements and awards, will be confidential. The decision of the arbitrators
will be final and binding, and judgment on the award by the arbitrators may be
entered in any court of competent jurisdiction. THIS SUBMISSION AND AGREEMENT TO
ARBITRATE WILL BE SPECIFICALLY ENFORCEABLE. The arbitrators will have no power
to award punitive or exemplary damages, to ignore or vary the terms of this
Agreement, and will be bound to apply controlling law. The Party who prevails on
entry of the award of judgment will be entitled to his or its costs and
expenses, including reasonable attorney's fees incurred in connection with the
arbitration. A judgment upon the award may be entered in any court having
jurisdiction.
SECTION 10.12 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement will be construed as
if drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The parties intend that each representation,
warranty and covenant contained herein will have independent significance. If
any party breaches any representation, warranty or covenant contained herein in
any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
SECTION 10.13 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
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SECTION 10.14 Representations as to Knowledge. Except as otherwise provided
in this Agreement, the representations and warranties contained in Article III
and Article IV will, in each and every case where a statement to the "knowledge"
is required on behalf of any Party to this Agreement, be deemed to require that
such statement be in good faith after reasonable investigation.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BUYER:
MINDSPRING ENTERPRISES, INC.
By: /s/ Charles M. Brewer
----------------------------------------
Name: Charles M. Brewer
----------------------------------------
Title: Chief Executive Officer
----------------------------------------
SELLER:
NETCOM ON-LINE COMMUNICATION
SERVICES, INC.
By: /s/ H. Don Teague
----------------------------------------
Name: H. Don Teague
----------------------------------------
Title: Executive Vice President
----------------------------------------
Acknowledgment of ICG Services, Inc. for the Asset Purchase Agreement by and
between MindSpring Enterprises, Inc. and NETCOM On-Line Communication Services,
Inc. dated as of January 5, 1999.
ICG Services, Inc. ("ICG") acknowledges and agrees that it will honor the
Agreement as it applies to ICG and perform the obligations set forth thereunder
as they apply to ICG.
ICG SERVICES, INC.
By: /s/ H. Don Teague
----------------------------------------
Name: H. Don Teague
----------------------------------------
Title: Executive Vice President
----------------------------------------
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ICG Services, Inc.
Date: March 4, 1999 By:/s/Harry R. Herbst
-------------------------------------------
Harry R. Herbst
Executive Vice President and Chief
Financial Officer (Principal Financial
Officer)
