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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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): November 5, 1999
PRODIGY COMMUNICATIONS CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
000-25333 04-3323363
__________________________ _________________________________
(Commission File Number) (IRS Employer Identification No.)
44 SOUTH BROADWAY, WHITE PLAINS, NY 10601
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(Address of principal executive offices) (Zip code)
(Registrant's telephone number, including area code): (914) 448-8000
NA
_______________________________________________________________
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On November 5, 1999, Prodigy Communications Corporation ("Prodigy"), a
wholly owned subsidiary of Prodigy ("Sub") and FlashNet Communications, Inc.
("FlashNet") entered into an Agreement and Plan of Merger ("Merger Agreement").
In the merger, Sub will merge with and into FlashNet, with FlashNet surviving
the merger as a wholly owned subsidiary of Prodigy. The merger, which has been
approved by the Board of Directors of each company, is subject to regulatory and
FlashNet stockholder approval and other customary conditions to closing.
Certain affiliates of FlashNet, holding an aggregate of approximately 27%
of the outstanding shares of FlashNet common stock, have agreed to vote in favor
of the merger. In the event that the Merger Agreement is terminated under
certain circumstances, a termination fee of $5,000,000 is payable.
Pursuant to the Merger Agreement, Prodigy will issue 0.35 share of Prodigy
common stock for each share of FlashNet common stock outstanding immediately
prior to the close of the transaction. Based on the number of shares of
FlashNet and Prodigy currently outstanding, Prodigy will issue approximately
4,990,000 shares to complete the merger, representing approximately 7% of
Prodigy's then outstanding shares. In addition, Prodigy will assume all
FlashNet stock options and warrants outstanding at the effective time of the
merger. The transaction is intended to be treated as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, and to be accounted for as a purchase.
In connection with the merger, Prodigy and FlashNet also entered into a
Stock Option Agreement, dated as of November 5, 1999, whereby FlashNet has
granted Prodigy an option to purchase up to 19.9% of the outstanding shares of
FlashNet common stock at a price of $8.6625 per share, which option may be
exercised in certain circumstances.
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 thereunto duly authorized.
Date: November 16, 1999 PRODIGY COMMUNICATIONS CORPORATION
(Registrant)
By: /s/ Andrea S. Hirsch
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Andrea S. Hirsch
Executive Vice President and General
Counsel
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EXHIBIT INDEX
Exhibit No. Description
- - ----------- -----------
99 Press Release dated November 8, 1999 by the Registrant.
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EXHIBIT 99
[Logo]
PRODIGY COMMUNICATIONS CORPORATION
FOR IMMEDIATE RELEASE
PRODIGY TO ACQUIRE
TEXAS-BASED National ISP FLASHNET
--Prodigy Member Base Exceeds 1.5 million subscribers--
WHITE PLAINS, NY (November 8, 1999)-- Prodigy Communications Corporation
(Nasdaq: PRGY) announced today that it has signed a definitive agreement to
acquire FlashNet Communications, Inc. (Nasdaq: FLAS) in a stock-for-stock
merger, Prodigy's third acquisition since its IPO in February 1999. Under the
terms of the merger agreement, Prodigy will issue 0.35 shares of Prodigy common
stock for each share of FlashNet common stock outstanding on the closing date of
the transaction. Based on the number of shares of FlashNet and Prodigy currently
outstanding, Prodigy will issue approximately 4,990,000 shares to complete the
merger, representing approximately 7% of Prodigy's then outstanding shares.
"In a single transaction, Prodigy acquires a talented pool of dedicated
employees and significantly bolsters our infrastructure, customer service
operations and acquisition channels," comments Samer Salameh, chairman and CEO
of Prodigy. "FlashNet is an attractive acquisition target that further
strengthens Prodigy's position in the ISP marketplace."
The acquisition of FlashNet will increase Prodigy's existing 1.2 million managed
subscribers by 244,000 new subscribers for a total managed subscriber base of
just over 1.5 million members on a pro forma basis which includes Prodigy's
early fourth quarter acquisition of small business web hosting company,
BizOnThe.Net.
FlashNet brings to Prodigy a national network operations center with state-of-
the-art disaster recovery capability, additional network infrastructure
including 182 local Points of Presence (POPs) and FlashNet's well-regarded in-
house Customer Service operations and call center. Prodigy will also take
advantage of FlashNet's independent agents/referral marketing program, a proven,
low-cost acquisition sales channel for FlashNet.
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"We are excited to become part of the Prodigy family. The efficiency of
FlashNet's operations and the strength of our sales channels combined with
Prodigy's brand leadership and strategic positioning is an extremely powerful
alliance," said Scott Leslie, CEO of FlashNet.
FlashNet Communications was founded as a consumer and small business ISP start-
up in 1995 by providing Internet access in Dallas and Fort Worth, Texas via two
points of presence (POPs). By December of 1996, FlashNet had grown by 8000%
serving 50,000 customers in various regions nationwide. Today FlashNet offers
service in 450 cities across the country and boasts the largest customer base in
the southwestern United States of any ISP.
Prodigy shareholder approval of the merger is not required. Approval by FlashNet
shareholders is required and a significant percentage of FlashNet shareholders
have agreed to vote in favor of the merger. Closing of the merger, expected in
the first quarter of the year 2000, is subject to customary conditions including
regulatory approval.
About Prodigy Communications Corporation:
Prodigy Communications Corporation is a leading nationwide Internet service that
provides fast and reliable Internet access and related value-added services.
Prodigy utilizes a nationwide network covering more than 750 cities in all 50
states allowing approximately 90% of the United States population to access
Prodigy's services with a local telephone call.
About FlashNet Communications, Inc.:
FlashNet Communications based in Fort Worth, Texas serves consumer and small-
business customers nationwide with a complete suite of access, communications
and content solutions. FlashNet continues to lead the industry with marketing
innovations and has developed an outstanding reputation for customer service.
# # #
This press release contains forward-looking statements that involve a number of
risks and uncertainties. Among the important factors that could cause actual
results to differ materially from those indicated by such forward-looking
statements are the intense competition in the Company's industry, subscriber
turnover, disruption in the Company's network services or in other services
provided by third parties, the impact of year 2000 issues, as well as the risk
factors detailed from time to time in the Company's periodic reports and
registration statements filed with the Securities an Exchange Commission.
