ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement"), dated December 13, 2000
(the "Effective Date"), by and between AT&T Corp., a New York corporation
("Seller"), and Swift Telecommunications Inc., a Delaware corporation ("Buyer").
WHEREAS, Seller is engaged, among other things, in the business of
providing network-based messaging services and applications utilizing the
EasyLink global network to certain of its business customers, which services are
known as AT&T EasyLink Services (the "Services" or the "Business"); and
WHEREAS, upon the terms and subject to the conditions set forth herein
and for the consideration described herein, Seller desires to sell, and Buyer
desires to purchase, certain of the assets relating to the Business as specified
herein for the purpose of Buyer carrying on the Business as a going concern in
succession to Seller;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto do
hereby agree as follows:
1. Purchase and Sale of Assets. Upon the terms and subject to the conditions set
forth in this Agreement, at the closing (the "Closing") of the transactions
contemplated hereby (the "Transaction"), Seller shall sell, transfer, convey,
assign and deliver to Buyer, and Buyer shall purchase and acquire from Seller,
the following assets of Seller relating to the Business, as the same shall exist
on the Closing Date (collectively, the "Assets"):
1.1 Contracts. Seller's right, title and interest in (a) the
customer contracts for the Services to the extent applicable to the Business
(the "Customer Contracts") including customer contracts for the Services with
the Customers listed on Schedule 1.1(a) to the extent applicable to the
Business, which Customers account for approximately 80% of the billed revenue
for the U.S. portion of the Business for the period from January 1 through
September 30, 2000, and (b) (i) the Underlease of ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇'▇, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ Docklands (the "Docklands 6th Floor Property"),
dated August 1, 1989, as amended, between Stockley Academy Limited and AT&T (UK)
Limited, as amended; (ii) the Lease relating to the roof of the Northern & Shell
Tower City Harbour, ▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇ (▇▇▇ "Roof"; and together with the
Docklands 6th Floor Property, the "Docklands Property"), dated May 22, 1997, as
amended, between Guinness Flight Trustees s.a.r.l. and AT&T (UK) LTD; (iii) the
Lease relating to High Technology Centre, Madeley Road, North Moans Moat,
Redditch, Worcestershire (the "Redditch Property"; together with the Docklands
Property, the "EasyLink UK Properties") between ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
AT&T Istel Limited; and (iv) the contracts listed on Schedule 1.1(b), to the
extent applicable to the Business (collectively, the "Other Contracts" and
together with the Customer Contracts, the "Contracts"), in all cases, subject to
Section 7.4;
1.2 Receivables. All of Seller's right, title and interest in
the Accounts Receivable (as such term and certain other capitalized terms used
herein without definition are defined in Section 9.10); provided that the
parties expressly agree and acknowledge that the definition of Accounts
Receivable does not include, and that Seller shall retain all rights in and to,
any accounts receivables or other rights to receive payments accruing prior to
the Closing from any foreign telecommunications administrations in connection
with the routing or termination of international traffic, under the
international settlements process or otherwise; provided, further, that any
amounts due from Seller to such administrations related to the conduct of the
Business disclosed, reflected or reserved against in the Balance Sheet or
arising in the ordinary course of Business between the date of the Balance Sheet
and the Closing Date and reflected on the Closing Balance Sheet shall be assumed
by Buyer pursuant to Section 2.1(e);
1.3 Intellectual Property Rights. Intellectual property
rights, title and interest, as specified in the Intellectual Property Agreement
(the rights granted to Buyer under the Intellectual Property Agreement are
referred to herein as the "Intellectual Property Rights");
1.4 Equipment. All of Seller's right, title and interest in
and to the equipment described on Schedule 1.4 (collectively, the "Equipment").
The parties understand that the actual equipment may deviate slightly from
Schedule 1.4, which deviation shall not exceed five percent (5%) in value and
shall not have a Material Adverse Effect on Buyer's ability to conduct the
Business after the Closing;
1.5 Government Licenses. To the extent their transfer is
permitted by law, all Permits (as defined in Section 5.10);
1.6 EasyLink Services Ltd. All of the shares in AT&T
EasyLink Services Ltd. ("EasyLink UK"), a U.K. company that is a wholly-owned
subsidiary of Seller;
1.7 Goodwill. The goodwill associated with the
Business; and
1.8 Books and Records. All books and records of the Business,
including books and records related to inventory, purchasing, accounting, sales,
maintenance, repairs, marketing, customers and suppliers.
2. Assumption of Liabilities.
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2.1 Assumption of Liabilities by Buyer. At the Closing, Buyer
shall assume and thereafter pay, perform, satisfy and discharge the following
obligations and liabilities of Seller (collectively, the "Assumed Liabilities"):
(a) all of the liabilities and obligations of Seller
under the Contracts (subject to Section 8.1(b));
(b) all of the liabilities and obligations of Seller
under the applicable AT&T tariffs pursuant to which any of the EasyLink
Services are provided to customers;
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(c) all liabilities and obligations arising from or in
connection with the Business or the Assets after the Closing Date, including
without limitation, all obligations and liabilities associated with
interconnection arrangements and settlements and including without limitation
costs for transitioning the Business to Buyer;
(d) any liabilities and obligations for Taxes in connection
with (i) the operation of the Business after the Closing Date and (ii) the sale
and purchase of the Assets by Buyer and the consummation of the Transaction; and
(e) any other liabilities and obligations of Seller related to
the conduct of the Business or the Assets disclosed in this Agreement or
disclosed, reflected or reserved against in the Balance Sheet or arising in the
ordinary course of the Business between the date of the Balance Sheet and the
Closing Date.
2.2 Excluded Liabilities. Buyer is not assuming or agreeing to
pay, perform, assume or discharge, or otherwise be responsible for, any
liabilities of Seller, fixed or contingent, known or unknown, other than the
Assumed Liabilities (collectively, the "Excluded Liabilities").
3. Consideration for Sale of the Assets.
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3.1 Purchase Price. Upon the terms and subject to the
conditions set forth in this Agreement and in consideration for the sale and
transfer of the Assets, at the Closing Buyer shall assume the Assumed
Liabilities and shall pay to Seller the sum of $15,000,000 (subject to
adjustment as provided for in Sections 3.8 and 7.18, the "Cash Payment") by wire
transfer of immediately available funds to an account specified in writing by
Seller. In addition, at the Closing, Buyer shall deliver to Seller a promissory
note (the "Note"), in such form as reasonably determined by Seller, subject to
Buyer's approval which shall not be unreasonably withheld, in the principal
amount of $35,000,000 (subject to adjustment as provided for in Sections 3.8 and
7.18). The total amount of the Cash Payment and Note principal shall be the
Purchase Price.
3.2 Payments Under the Note. The Note will provide that, in 48
monthly installments commencing 60 days following the Closing Date, Buyer shall
pay to Seller the sum of $729,166.67 (subject to adjustment as provided for in
Sections 3.8 and 7.18) per month (except for the 48th installment which shall be
in the amount of $729,166.51, subject to adjustment as provided for in Sections
3.8 and 7.18) plus, with each monthly installment, accrued interest on the
unpaid balance from the Closing Date, calculated as follows:
The interest rate shall be established initially to be one percent (1%)
higher than the present-day prime rate listed in the Wall Street
Journal on the Closing Date, and shall be adjusted every six months to
be equal to one percent (1%) higher than the present day prime rate
listed in the Wall Street Journal on the date of adjustment (or if the
date of adjustment is not a Business Day, on the next Business Day
following the date of adjustment). Any payment hereunder that is not
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paid within ten (10) days of the date when such payment is due shall
accrue late payment interest at a rate of one and one-half percent
(1.5%) per month, calculated from the date such payment was due until
such payment is received by Seller.
Such Note shall be secured by a pledge of the Assets, all of the shares
of stock and assets owned by Buyer as of the Closing or thereafter acquired
(including, without limitation, all shares of Comtext (UK), a wholly-owned
subsidiary of Buyer), all assets owned by Comtext (UK) as of the Closing or
thereafter acquired, and all of the Buyer's issued and outstanding stock, which
pledge will be evidenced by such security agreements, guarantees and other
financing documents (collectively, "Security Agreements"), which Security
Agreements shall be in a form as reasonably determined by Seller, subject to
Buyer's approval which shall not unreasonably be withheld.
All payments by Buyer to Seller hereunder shall be by wire transfer of
immediately available funds to an account as specified in writing by Seller. The
aggregate amount of such payments due under this Section 3.2 shall equal
$35,000,000 plus applicable interest.
In the event that for any period of time after the Closing the Business
is completely inoperable due to a Force Majeure Event, then Buyer's obligations
to make payments under the Note shall be suspended during such period, which
period shall in no case exceed 120 days after the Force Majeure Event occurs.
The suspension of payments under this paragraph is contingent upon Buyer using
all reasonable efforts to ensure that the Business commences partial operation,
as well as full operation, as soon as possible after the Force Majeure Event
occurs at which point payment obligations will be reinstated in full. Interest
shall continue to accrue at the rate specified in Section 3.2 during the entire
period that payments are suspended hereunder.
In the event that for any period of time after the Closing the Business
is substantially and materially impaired (i.e., monthly billable revenues for
the EasyLink Services are reduced by more than 50%) due to a Force Majeure
Event, then Buyer's obligations to make principal payments under the Note shall
be suspended during such period, which period shall in no case exceed 120 days
after the Force Majeure Event occurs. The suspension of payments under this
paragraph is contingent upon Buyer using all reasonable efforts to remove and
mitigate such impairment at the earliest possible time so that it would no
longer be deemed substantial and material at which point all payment obligations
will be reinstated in full. Buyer's obligation to make interest payments
hereunder shall not be suspended at any time during such period of substantial
and material impairment.
3.3 Rights of Set-off. Buyer may not set-off any payments due
under this Article 3 against any other payments due (or which may be due) from
Seller to Buyer under the Agreement or any other agreement, arrangement or
understanding.
3.4 Audit. Each payment by Buyer of the amounts set forth in
Section 3.2 to Seller shall be accompanied by a detailed statement of accounting
of the underlying components of each such payment.
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3.5 Security Agreements. On the Closing Date,
Buyer shall deliver to Seller Security Agreements fully executed by the
appropriate parties in accordance with the requirements of Section 3.2.
3.6 Guaranty. On the Closing Date, Buyer shall deliver a
guaranty (in such form as reasonably determined by Seller, subject to Buyer's
approval which shall not be unreasonably withheld) to Seller provided by Tampa
Bay Financial, Inc., guaranteeing Buyer's payment of the first $15,000,000 of
principal due under the Note, together with interest as specified in Section
3.2. In addition, Buyer shall use its best reasonable commercial efforts to
deliver at Closing a guaranty (in such form as reasonably determined by Seller,
subject to Buyer's approval which shall not be unreasonably withheld) to Seller
provided by a Person reasonably acceptable to Seller guaranteeing Buyer's
payment of the remainder of the principal due under the Note, together with
interest as specified in Section 3.2.
3.7 Allocation of Purchase Price. Within twenty (20) days
after finalization of the Closing Balance Sheet pursuant to Section 7.16, Buyer
will provide Seller with Buyer's proposed allocation of the consideration herein
among the Assets (other than the shares of EasyLink UK) and the assets owned by
EasyLink UK as of the Closing (the "US Allocation"), as well as its proposed
apportionment of the Purchase Price to the shares of EasyLink UK described in
Section 1.6 (the "UK Allocation"; together with the US Allocation, the
"Allocation"). The US Allocation shall be consistent with the provisions of
Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"), and
the Treasury regulations promulgated thereunder. Within fifteen (15) days after
the receipt of the proposed Allocation, Seller will propose to Buyer any changes
to such Allocation (and in the event no such changes are proposed in writing to
Buyer within such time period, the Seller will be deemed to have agreed to, and
accepted, the Allocation). Buyer and Seller will act in good faith to resolve
any differences with respect to the Allocation within fifteen (15) days after
Buyer's receipt of written proposals from Seller. Buyer and Seller shall file
all Tax reports, returns and other statements and conduct any audit, tax
proceeding or tax litigation relating thereto consistent with such Allocation.
3.8 Sales of Assets by Buyer.
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(a) Nothing herein or in the Security Agreements shall
preclude Buyer from selling substantially all of the assets or all of the stock
of GN Comtext s.r.l., a wholly-owned subsidiary of Buyer; provided that if such
sale occurs prior to the payment in full of the Note, Buyer shall pay to Seller
one hundred percent (100%) of the cash proceeds (including any payments of
principal or interest under any note) received in connection with such sale
(after netting out up to $2,800,000 of the cash payment received at the closing
of such sale) within 3 Business Days after Buyer's receipt thereof, as a
prepayment of the Note in accordance with Section 3.8(c) below; provided,
further, that in the event that the Cash Payment made by Buyer at Closing is at
least $24,000,000, then Buyer shall have no obligation to pay to Seller any
portion of any proceeds received in connection with the sale of the assets or
stock of GN Comtext s.r.l.
(b) Nothing herein or in the Security Agreements shall
preclude Buyer from selling substantially all of the assets related to the fax
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and/or EDI and/or application-based e-mail portion of the EasyLink Business
operating on the IMS and/or GMS platforms (each, a "Line of Business"); provided
that if such sale occurs prior to the payment in full of the Note, (i) the
credit-worthiness of the purchaser (the "Purchaser") of such Line of Business
shall be subject to the approval of Seller, which approval shall not be
unreasonably withheld; (ii) the purchase price for such Line of Business shall
exceed 50% of the Annual Revenue (as defined below) attributable to such Line of
Business; (iii) at least forty percent (40%) of the total purchase price to be
received by Buyer in connection with such sale shall be in the form of a cash
payment at the closing of such sale; and (iv) the remainder of the purchase
price shall be in the form of a secured promissory note to be paid in full
within two years after the closing of such sale, which note shall be secured by
the assets being sold; provided, further, that Buyer shall pay to Seller within
three (3) Business Days after receipt: (A) ninety-five percent (95%) of all cash
proceeds received by Buyer from the Purchaser upon the closing of such sale; and
(B) eighty-five percent (85%) of all principal and interest payments paid by the
Purchaser under any note issued in connection with such sale.
For purposes of this Section 3.8(b), "Annual Revenue"
attributable to a Line of Business shall mean the revenue, determined in
accordance with U.S. generally accepted accounting principles consistently
applied, generated by such Line of Business during the twelve-full calendar
months immediately preceding the date upon which the applicable purchase
agreement is executed by Buyer and the Purchaser. At all times prior to the
payment in full of the Note, Buyer shall maintain books and records in
accordance with U.S. generally accepted accounting principles, consistently
applied over the period, for each Line of Business. In the event that Buyer
elects to sell a Line of Business hereunder, it shall provide Seller with
sufficient information and access to its books and records so that Seller may
ascertain the creditworthiness of the prospective Purchaser and whether the
prospective sale meets all of the criteria specified in this Section 3.8(b).
(c) All payments received by Seller under this Section 3.8
after the Closing shall be applied as a prepayment of the Note in the following
manner: such proceeds shall first be applied to prepay the 48th monthly
installment of principal due under the Note, together with interest accrued from
the Closing Date calculated in accordance with Section 3.2, then the 47th
installment and so on in reverse chronological order.
(d) Any sale of the telex portion of the Business shall be
subject to Seller's approval (including, without limitation, as to the structure
of the sale, the purchase price, the purchaser, and the amount of proceeds which
shall be applied to prepay the Note), which approval shall not be unreasonably
withheld.
4. Closing.
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4.1 Effective Date of Closing. The Closing shall be effective
as of the last day of the calendar month in which the parties have received all
required approvals under the HSR Act (the "Closing Date"); provided that the
Closing Date shall not occur in the year 2000 without Seller's consent and in
the event that pursuant to the preceding clause, the Closing Date were scheduled
to occur during the year 2000, then the Closing Date would be January 31, 2001.
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4.2 Closing. Upon the terms and subject to the conditions set
forth herein, the Closing shall take place at the offices of Seller at ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ at 5:00 p.m. local time upon the Closing Date or
if the Closing Date is not a Business Day, the Business Day immediately
preceding the Closing Date; provided that the Closing shall not be deemed
effective until the Closing Date.
5. Representations and Warranties of Seller.
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Seller hereby represents and warrants to Buyer as follows:
5.1 Seller's Organization and Authority. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New York and has all requisite corporate power and lawful
authority to carry on the Business as it is currently being conducted. Seller is
duly qualified or licensed to do business as a foreign corporation and is in
good standing as a foreign corporation in each jurisdiction in which the
ownership, operation or lease of the Assets or the conduct of the Business by
Seller requires qualification or licensing to do business as a foreign
corporation and in which the failure to so qualify would have a Material Adverse
Effect.
5.2 EasyLink UK Organization and Good Standing. EasyLink UK is
a limited liability company (Registration Number 3739714) duly organized,
validly existing and in good standing under the laws of England and Wales and
has all requisite corporate power and lawful authority to carry on the Business
as it is currently being conducted by EasyLink UK. EasyLink UK is duly qualified
or licensed to do business as a foreign corporation and is in good standing as a
foreign corporation in each jurisdiction in which its ownership, operation or
lease of the EasyLink UK Assets or the conduct of the Business by EasyLink UK
requires qualification or licensing to do business as a foreign corporation and
in which the failure to so qualify would have a Material Adverse Effect.
5.3 Authorization. Seller has all requisite corporate power
and authority to execute and deliver this Agreement and the other Transaction
Agreements, to consummate the Transaction and to perform fully its obligations
hereunder and thereunder. The execution, delivery and performance of this
Agreement and the other Transaction Agreements by Seller and the consummation by
Seller of the Transaction have been duly authorized by all necessary corporate
action of Seller, and no other board of directors, shareholder or other
corporate proceeding by or on behalf of Seller is necessary to authorize the
execution, delivery or performance of this Agreement or any other Transaction
Agreement, or the consummation of the Transaction. This Agreement constitutes,
and the other Transaction Agreements when executed and delivered will
constitute, the valid and legally binding obligation of Seller, enforceable
against Seller in accordance with their terms, subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting creditors' rights generally; and (ii) general principles
of equity (regardless of whether such enforceability is considered in a
proceeding at law or in equity).
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5.4 Freedom to Contract. The execution, delivery and
performance of this Agreement and the other Transaction Agreements by Seller and
the consummation by Seller of the Transaction will not: (i) violate or conflict
with any provision of the certificate of incorporation or by-laws of Seller,
each as amended; (ii) violate any of the terms, conditions or provisions of any
applicable law, rule, statute, regulation, order, writ, injunction, judgment or
decree of any Governmental Authority (collectively, "Applicable Law"); or (iii)
conflict with or result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under any of the terms,
conditions or provisions of any Contract (other than Contracts which shall be
treated in accordance with the provisions of Section 7.4). Other than as may be
required by the HSR Act, no authorization, approval, order, license, permit,
franchise or consent of, and no registration, declaration or filing with, any
Governmental Authority, is required in connection with Seller's execution,
delivery and performance of this Agreement or any other Transaction Agreement or
the consummation of the Transaction.
5.5 Title to Assets; Encumbrances, etc.
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(a) Seller has good title to all of the Assets (excluding all
Intellectual Property Rights), free and clear of any mortgage, pledge, security
interest, title defect or objection, lien, charge or encumbrance of any kind,
including without limitation, any lease, license or other right of occupancy,
possession or use, or any conditional sales contract or other title or interest
retention arrangement (collectively, "Liens"); except for Liens securing Taxes,
assessments, governmental charges or levies, or the claims of materialmen,
carriers, landlords and like persons, all of which are not yet due and payable
(collectively, "Permitted Liens"). Subject to Section 7.4, the instruments of
transfer executed and delivered by Seller at the Closing will be effective to
vest in Buyer good title to the Assets (excluding all Intellectual Property
Rights), free and clear of any and all Liens, other than Permitted Liens. No
third party has any rights to purchase any of the Assets (excluding all
Intellectual Property Rights), or any interest therein or portion thereof,
including rights of first offer or first refusal.
(b) EasyLink UK has good title to all of the assets (excluding
all Intellectual Property Rights) which are reflected on the Balance Sheet as
owned by EasyLink UK, except for such deviations as would not have a material
adverse effect on Buyer's ability to conduct the EasyLink UK business, and
excluding assets sold, consumed or otherwise disposed of in the ordinary course
of business since the date of the Balance Sheet (collectively, the "EasyLink UK
Assets"), free and clear of any Lien except for Permitted Liens and Liens that
individually or in the aggregate would not have a Material Adverse Effect.
5.6 Contracts.
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(a) Except as set forth in Schedule 5.6, Seller is not in
default, nor has it received written notice that it is in default, in any
material respect under any of the Contracts, which default individually or in
the aggregate would have a Material Adverse Effect.
(b) Except as set forth in Schedule 5.6, to Seller's
Knowledge, EasyLink UK is not in default nor has EasyLink UK received written
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notice that it is in default, under any contract to which it is a party
(including, without limitation, any lease), which default individually or in the
aggregate would have a Material Adverse Effect.
5.7 EasyLink UK. AT&T Investments UK LLC, a wholly-owned
subsidiary of Seller, is the record and beneficial owner of all of the
outstanding shares of capital stock of EasyLink UK, all of which are fully paid
and non-assessable, free and clear of any Liens, other than any Liens created by
this Agreement. There are no options, warrants, conversion or subscription
rights, agreements or contracts obligating EasyLink UK, conditionally or
otherwise, to issue or sell any new or existing shares of capital stock or any
instruments convertible into or exchangeable for any shares, or to purchase or
redeem any of its shares.
5.8 Litigation. Except as listed on Schedule 5.8, there is no
action, suit, inquiry, litigation, proceeding or investigation by or before any
Governmental Authority, pending or, to Seller's Knowledge, threatened, against
Seller or EasyLink UK relating to the Business or the Assets, which could
reasonably be expected to have a Material Adverse Effect. Neither Seller nor
EasyLink UK is subject to any judgment, order or decree entered in any lawsuit
or proceeding that could reasonably be expected to have a Material Adverse
Effect on Buyer's ability to conduct the Business after the Closing Date.
5.9 Compliance with Law. Neither Seller nor EasyLink UK is in
violation of any Applicable Law that could reasonably be expected to have a
Material Adverse Effect on Buyer's ability to conduct the Business after the
Closing Date.
5.10 Governmental Licenses and Approvals. Seller and EasyLink
UK have all material governmental licenses, franchises and permits required
under Applicable Law for the conduct of the Business as currently conducted (all
such licenses, franchises and permits being referred to herein as the
"Permits"), except where the absence thereof does not have a Material Adverse
Effect. Seller and EasyLink UK are in full compliance with, and in good standing
under, all such Permits, except where such lack of full compliance or good
standing would not have a Material Adverse Effect.
5.11 Financial Statements. Attached as Schedule 5.11 hereto
are the Financial Statements. The Financial Statements are complete and correct
in all material respects and have been prepared in accordance with U.S.
generally accepted accounting principles, consistently applied, except as
specified in Schedule 5.11 and that the Financial Statements will be subject to
normal year-end adjustments. Except as set forth on Schedule 5.11 hereto, the
Financial Statements fairly present the operating results of the Business during
the period indicated therein. To Seller's Knowledge, there are no material
liabilities or obligations applicable to the Business (whether accrued,
absolute, contingent, unasserted or otherwise) except (1) as disclosed,
reflected or reserved against in the Balance Sheet, and (2) liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since the date of the Balance Sheet.
5.12 Accounts Receivable. All Accounts Receivable of the
Business, whether reflected on the Balance Sheet or subsequently created, have
arisen from bona fide transactions in the ordinary course of business and are
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reflected on the Balance Sheet in accordance with U.S. generally accepted
accounting principles, consistently applied, or were subsequently created in the
ordinary course of business.
5.13 Taxes.
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(a) To the extent a failure to do so would have a Material
Adverse Effect, Seller has (i) timely filed within the time period for filing or
any extension granted with respect thereto all returns, declarations, reports,
claims for refund, or information returns or statements relating to Taxes ("Tax
Returns") which it is required to file with respect to taxable periods (or
portions thereof) ending on or before the Closing Date relating to or pertaining
to any and all Taxes attributable to or levied upon any Asset and (ii) paid any
and all Taxes it is required to pay in connection with the periods to which such
Tax Returns relate.
(b) EasyLink UK is a duly and properly registered taxable
person for Value Added Tax ("VAT") purposes in the UK. The Capital Goods Scheme
in Part XV of the Value Added Tax Regulations 1995 (SI 1995/2518) does not apply
to any of the EasyLink UK Assets.
(c) All documents (other than those which have ceased to have
any legal effect) which are necessary to establish the title to any of the
EasyLink UK Assets which are located in the UK and which attract stamp duty in
the UK have been duly stamped or adjudicated not liable to stamp duty and no
such documents which are outside the UK would attract stamp duty if they were
brought into the UK.
5.14 Restrictions on Business Activities. Except as set forth
in Schedule 5.14, there is no agreement, judgment, injunction, order or decree
to which either Seller or EasyLink UK is a party or which is otherwise binding
upon either Seller or EasyLink UK which materially restricts or limits its
ability to conduct the Business as conducted immediately prior to the Closing
Date.
5.15 Employee Related Matters.
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(a) Except to the extent set forth on Schedule 5.15(a),
none of the U.S. Business Employees or E.U. Business Employees (collectively,
the "Employees") is under notice of termination of employment given or received.
(b) Schedules 7.5(a)(i) and 7.5(a)(ii) are true and
correct in all material respects.
(c) Seller has not made, offered, promised or agreed to any
change to the current salary of any Employee as set forth in Schedules 7.5(a)(i)
or 7.5(a)(ii), as the case may be, other than regularly scheduled salary
adjustments and bonuses in the ordinary course of business. Copies of any
written agreements with Employees have been provided to Buyer.
(d) All agreements entered into by Seller or EasyLink UK with
the Employees may be terminated by not more than six months' notice and without
payment of compensation or damages, other than any payments arising under
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statutes relating to employment law, applicable collective bargaining
agreements, or as provided in this Agreement.
(e) Seller has made available to Buyer full and accurate
copies of all collective bargaining agreements with any unions, representatives
or other organizations which affect the Employees.
(f) Neither Seller nor EasyLink UK has received notice of any
material industrial or other such dispute with any of the Employees, any union,
employee representatives or other organization formed for a similar purpose
which would have a Material Adverse Effect and, to Seller's Knowledge, no such
dispute is existing, pending or threatened.
(g) There is no collective bargaining agreement or other
arrangement to which Seller or EasyLink UK is a party which Seller or EasyLink
UK has failed to comply with which failure would restrict the transactions
contemplated by this Agreement or would otherwise have a Material Adverse
Effect.
(h) To Seller's Knowledge, there are no pending or threatened
inquiries or investigations involving or relating to the Employees by the Equal
Opportunities Commission, the Commission for Racial Equity, the Health and
Safety Executive or similar authorities that would reasonably be expected to
have a Material Adverse Effect.
(i) There is no pending or threatened in writing litigation
and, to Seller's Knowledge, no existing material dispute involving or relating
to any of the Employees other than routine claims for benefits in the ordinary
course of the operation of Seller's or its Affiliates' benefit plans, or for
which Buyer will have no liability after the Closing Date.
(j) To Seller's Knowledge, Seller and EasyLink UK have at all
relevant times complied with all their obligations under statute and otherwise
concerning the health and safety at work of the Employees, except for failures
to comply which individually or in the aggregate would not have a Material
Adverse Effect, and to Seller's Knowledge there are no claims threatened or
pending by any party in respect of any accident or injury which are not fully
covered by insurance or by any Employee in respect of any accident or injury or
for which Buyer would have liability after the Closing Date.
(k) To Seller's Knowledge, Seller and EasyLink UK have fully
complied with their obligations under all applicable governmental regulations
and similar legislative or regulatory requirements to inform and consult with
union or other employee representatives concerning the transactions contemplated
by this Agreement, except for such failures to comply that would not
individually or in the aggregate have a Material Adverse Effect.
(l) To Seller's Knowledge, the job performances of all
Employees are reasonably satisfactory and none of the Employees is guilty of
misconduct that would be reasonably considered grounds for dismissing such
Employee.
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5.16 Sufficiency of Equipment. Except as set forth in Schedule
5.16, the Equipment comprises sufficient equipment for Buyer to provide the AT&T
EasyLink Services in the United States in all material respects in substantially
the same manner as they were provided by Seller in the United States as of the
Effective Date.
5.17 Environmental Matters. No Hazardous Substances (as
hereinafter defined) have been discharged, released or emitted by EasyLink UK
into the air, water, surface water, ground water, land surface or subsurface
strata or transported to or from any of the EasyLink UK Properties in the
operations of the Business except in accordance with all applicable
Environmental Laws, and except for incidental release of Hazardous Substances in
amounts or concentrations that would not have a Material Adverse Effect. Neither
Seller nor, to Seller's Knowledge, EasyLink UK has received any notification
from a governmental agency that there is any violation of any Environmental Law
with respect to the EasyLink UK Properties.
For purposes of this Agreement, the following terms shall have
the following meanings:
"Environmental Law" shall mean any statute, law, ordinance,
rule or regulation applicable to EasyLink UK or the EasyLink UK Properties and
any order to which EasyLink UK is a party or is otherwise bound with respect to
the operations of the Business on the EasyLink UK Properties, relating to
pollution or protection of the environment, including natural resources, or
exposure of persons, including employees, to Hazardous Substances; and
"Hazardous Substances" shall mean any substance, whether
liquid, solid or gas listed, identified or designated as hazardous or toxic
under any Environmental Law, which, applying criteria specified in any
Environmental Law, is hazardous or toxic, or the use or disposal of which is
regulated under any Environmental Law.
5.18 Brokers. Seller has not, directly or indirectly, employed
or utilized the services of any investment banker, broker, finder, consultant or
other intermediary in connection with this Agreement or the Transaction.
5.19 Disclaimer of Additional Representations and Warranties.
Except as expressly set forth in this Agreement, Seller makes no representations
or warranties with respect to Seller, EasyLink UK or the Business, or their
respective operations, assets (including, without limitation, the Assets),
liabilities, or conditions.
6. Representations and Warranties of Buyer.
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
6.1 Buyer's Organization and Authority. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and lawful authority to
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execute and deliver this Agreement and the other Transaction Agreements, to
consummate the Transaction and to perform fully its obligations under this
Agreement and the other Transaction Agreements.
6.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement and the other Transaction Agreements by Buyer and
the consummation by Buyer of the Transaction have been duly authorized by all
necessary corporate action of Buyer, and no other board of directors,
stockholder or other corporate proceedings by or on behalf of Buyer is necessary
to authorize the execution, delivery or performance of this Agreement or any
other Transaction Agreement or the consummation of the Transaction. This
Agreement constitutes, and the other Transaction Agreements when executed and
delivered will constitute, the valid and legally binding obligations of Buyer,
enforceable against Buyer in accordance with their terms, subject to (i)
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting creditors' rights generally; and (ii)
general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity).
6.3 Freedom to Contract. The execution, delivery and
performance of this Agreement or any other Transaction Agreement by Buyer and
the consummation by Buyer of the Transaction will not: (i) violate or conflict
with any provisions of the certificate of incorporation or by-laws of Buyer,
each as amended; (ii) violate any of the terms, conditions or provisions of any
Applicable Law; or (iii) conflict with or result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default under
any of the terms, conditions or provisions of any material contract of Buyer.
Other than as may be required by the HSR Act, no authorization, approval, order,
license, permit, franchise or consent of, and no registration, declaration or
filing with, any Governmental Authority, is required in connection with Buyer's
execution, delivery and performance of this Agreement or any other Transaction
Agreement or the consummation of the Transaction.
6.4 Brokers. Buyer has not, directly or indirectly, employed
or utilized the services of any investment banker, broker, finder, consultant or
other intermediary in connection with this Agreement or the Transaction.
7. Further Agreements of the Parties.
---------------------------------
7.1 Public Announcements. Neither Seller nor Buyer shall,
without the prior written approval of the other party, permit any of their
respective officers, directors or employees to make any public statement or
issue any press release with respect to this Agreement or the Transaction,
unless such statement or release is required by applicable law, rule or
regulation (provided that the other party shall, to the extent practicable, be
given an opportunity to review and consent to such statement or release).
7.2 Expenses. The parties to this Agreement shall bear their
respective expenses incurred in connection with the preparation, execution and
performance of this Agreement and the consummation of the Transaction,
including, without limitation, all fees and expenses of agents, representatives,
counsel and accountants.
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7.3 Indemnification for Fees of Brokers and Finders.
Notwithstanding anything to the contrary contained in this Agreement, Buyer, on
the one hand, and Seller, on the other, agree to indemnify and save the other
harmless from any claim or demand for commission or other compensation by any
broker, finder, agent or similar intermediary claiming to have been employed by
or on behalf of Buyer, on the one hand, or Seller, on the other hand.
7.4 Contracts. Seller shall use reasonable commercial efforts
to ensure that the leases for the EasyLink UK Properties are assigned to
EasyLink UK on or prior to the Closing Date. If any Contract (or applicable
tariff pursuant to which any of the Services are provided to customers) is not
assignable by Seller to Buyer, Seller shall, to the extent practicable, give
Buyer the benefit of the Contract (or tariff) to the same extent as if Seller
had not been excluded from assigning such Contract or tariff to Buyer, and Buyer
shall act as Seller's subcontractor and agent and shall perform all of the
obligations and assume all of the liabilities under such Contracts and tariffs.
Nothing in this Agreement shall be construed as an attempt to assign any
Contract for tariffed services or any Contract that by its terms is not
assignable without the consent of the other party or as an attempt to assign any
AT&T tariff pursuant to which service is provided to customers.
7.5 Employment Matters.
------------------
(a) Business Employees
(i) Schedule 7.5(a)(i) attached hereto lists
separately the names of all employees in the UK whose employment
contracts transfer pursuant to the Acquired Rights Directive or who are
performing services for EasyLink U.K. and are being assigned to the
Business ("E.U. Business Employees") and each E.U. Business Employee's
job title, location of employment, current salary, most recent bonus,
date of birth, date of employment and current status.
(ii) Within five Business Days after the Effective
Date, Buyer shall have extended written offers of employment contingent
upon the consummation of the Closing, and commencing immediately
following the Closing, to each of the U.S. employees of AT&T assigned
to the Business who is listed on Schedule 7.5(a)(ii) ("U.S. Business
Employees"). Schedule 7.5(a)(ii) lists each U.S. Business Employee's
name, job title, location of employment, current and previous year's
salary, target bonus opportunity, date of birth, date of employment and
current status (e.g., active, disability, leave of absence, etc.). U.S.
Business Employees shall have fifteen (15) Business Days to consider
and accept or reject such offer. U.S. Business Employees who do not
respond to such offers within such fifteen-Business-Day period shall be
deemed to have rejected such offer. U.S. Business Employees who accept
such offer and who become employed by Buyer after the Closing shall be
referred to as "Hired U.S. Business Employees". Buyer shall employ all
Hired U.S. Business Employees in positions substantially equivalent to
the positions they occupied immediately prior to the Closing, while
employed by Seller, and with a base salary and target bonus opportunity
which is no less than the base salary and bonus they were being paid by
Seller at the time of such offer (as specified in Schedule 7.5(a)(ii)),
14
and at locations within a Reasonable Commuting Distance of the work
location to which they were assigned immediately prior to the Closing.
The salaries of the Hired U.S. Business Employees shall be subject to
increases by Buyer, effective February 2001, in a manner that is
consistent with Seller's prior annual salary adjustment practices.
Employment with Buyer shall be effective at the first moment of the
Closing, except that offers of employment extended to Hired U.S.
Business Employees receiving short term disability benefits or on
approved leave of absence with a guaranteed right of reinstatement on
the Closing Date, if any, will become effective upon their return to
active status at the termination of the short term disability or
approved leave of absence, respectively.
(iii) All Hired U.S. Business Employees shall be
eligible to participate in such bonus or incentive compensation plans
or programs that Buyer may establish after the Closing Date.
(iv) After the Closing Date and for the one-year
period immediately following thereafter, Buyer shall retain all the
Hired U.S. Business Employees and not terminate the employment of any
such employee prior to the end of such one-year period, other than for
Cause (as defined below). While employed by Buyer during the one-year
period following the Closing Date, in addition to the requirements set
forth in this Section 7.5, Hired U.S. Business Employees shall be
entitled to at least the same base salary and target bonus opportunity
listed on Schedule 7.5(a)(ii), and salary increases in accordance with
Section 7.5(a)(ii).
(v) For purposes of this Agreement, "Cause" for
termination shall mean (1) conviction (including a plea of guilty or
nolo contendere) of a crime involving theft, fraud, dishonesty or moral
turpitude, (2) intentional or grossly negligent disclosure of
confidential or trade secret information of Buyer (or any of its
Affiliates) to anyone who is not entitled to receive such information,
(3) gross omission or gross dereliction of any statutory or common law
duty of loyalty to Buyer or any of its Affiliates, (4) willful
violation of the Buyer's written policies or procedures, or (5) failure
to carry out the duties of the employee's position. Buyer shall have no
obligation to pay severance or any other benefit to any Hired U.S.
Business Employee terminated for Cause within one year after the
Closing Date, other than as required by Applicable Law.
(vi) Any Hired U.S. Business Employee whose
employment with Buyer or any of its Affiliates is involuntarily
terminated prior to the end of the twenty-four-month period following
the Closing Date, other than for Cause as defined in Section
7.5(a)(v)(1), (2), (3), (4) or (5), shall receive a severance benefit
equal to the amount such employee would have received under the
applicable Seller severance pay plan as of the Closing Date (the
schedule of Seller's severance benefits is described in Schedule
7.5(a)(vi) attached hereto), taking into account for purposes of
calculating benefits due under such Schedule, all of such employee's
service with Seller prior to the Closing Date as set forth on Schedule
7.5(a)(ii), and all service with the Buyer or any of its Affiliates
after the Closing Date. Thereafter, Hired U.S. Business Employees will
be eligible to participate in the Buyer's severance plan recognizing
combined service with the Seller and Buyer.
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(vii) Any E.U. Business Employee whose employment
with Buyer or any of its Affiliates is involuntarily terminated prior
to the end of the twenty-four-month period following the Closing Date,
other than for Cause as defined in Section 7.5(a)(v)(1), (2), (3), (4)
or (5), shall receive a severance benefit equal to the amount such
employee would have received under the applicable severance pay plan as
of the Closing Date (the schedule of such severance benefits is
described in Schedule 7.5(a)(vii) attached hereto), taking into account
for purposes of calculating benefits due under such Schedule, all of
such employee's service with Seller or any of its Affiliates prior to
the Closing Date as set forth on Schedule 7.5(a)(ii), and all service
with the Buyer or any of its Affiliates after the Closing Date.
Thereafter, E.U. Business Employees will be eligible to participate in
the Buyer's severance plan recognizing combined service with the Seller
(and its Affiliates) and Buyer. Buyer shall be responsible for any
severance liability in connection with the E.U. Business Employees.
(viii) Buyer will continue to support current
part-time, job sharing, telecommuting and compressed work schedules
of Hired U.S. Business Employees.
(ix) Buyer will offer employment to each E.U.
Business Employee and will grant for a period not less than that
provided for by local country law (the "Vested Rights Period") the same
Terms and Conditions of Employment which relate to such E.U. Business
Employees immediately prior to such Employee's employment by Buyer.
(b) Seller Benefit Plans.
(i) Seller shall retain all liabilities with respect
to benefits accrued and claims incurred with respect to all U.S.
Business Employees and all E.U. Business Employees under any Seller
Benefit Plans (as listed on Schedule 7.5(b)(i) to this Agreement)
through the moment immediately preceding the Closing and any and all
assets set aside with respect to the funding and payment of such
liabilities. Seller shall also retain any liabilities which may accrue
after the Closing with respect to any U.S. Business Employee who is not
a Hired U.S. Business Employee or which may accrue after the Closing
Date in accordance with the terms of Seller's medical and dental
expense plans for retired employees and Seller's life insurance program
for retired employees (together, "Retirement Related Benefits") for all
U.S. Business Employees who are eligible for Retirement Related
Benefits as of the Closing Date. Seller will be responsible for all
bonuses for all U.S. Business Employees attributable to such Employees'
employment with Seller during the year 2000 up to the Closing Date.
(ii) Except as otherwise provided in this Agreement,
as of the first moment of the Closing, all Hired U.S. Business
Employees and all E.U. Business Employees will cease to participate as
active employees in or accrue benefits under the benefit plans of
Seller or any of its Affiliates. Thereafter, no Hired U.S. Business
Employee or E.U. Business Employee shall assume or be entitled to
16
participate in any Seller Benefit Plan, except to the extent such plans
provide by their terms for participation after the Closing Date or as
otherwise required by law or by the terms of this Agreement.
(c) Buyer Benefit Plans.
-------------------
(i) As of the first moment of the Closing Date and at
least through December 31, 2001, Buyer shall provide to all Hired U.S.
Business Employees pension, savings, profit sharing, and health and
welfare benefits that are substantially similar in the aggregate to
those currently provided by Seller at the Closing Date and as listed on
Schedule 7.5(b)(i), which shall contain no restrictions or limitations
with respect to pre-existing conditions, and which Buyer plans are
summarized on Schedule 7.5(c)(i).
(ii) Buyer shall recognize, from and after the
Closing Date, each Hired U.S. Business Employee's service, as set forth
on Schedule 7.5(a)(ii) to this Agreement with respect to each such
Employee, for purposes of determining eligibility to participate and
vesting in and the schedule of benefits provided by any Employee
Benefit Plan established by Buyer or any of their Affiliates on or
after the Closing Date or maintained by Buyer or any Affiliate and in
which Hired U.S. Business Employees will participate, including without
limitation all qualified pension, savings, or profit-sharing plans,
group health plans, vacation plans and policies, severance, disability
and other welfare benefit plans (including retiree health, dental and
life insurance), and, if applicable, eligibility to commence retirement
benefits (including any early retirement subsidies), but not benefit
accruals under any such qualified pension, savings, or profit-sharing
plans.
(iii) Neither Seller nor its Affiliates shall have
any liabilities or obligations with respect to benefit claims under any
plans sponsored, maintained or contributed to by Buyer or any of its
Affiliates for or in respect of any Hired U.S. Business Employee. Buyer
shall not offer any incentive to any Hired U.S. Business Employee to
"opt out" from, or otherwise elect to not participate in any group
health plan offering coverage to Hired U.S. Business Employees from and
after the Closing Date.
(iv) For purposes of determining whether any Hired
U.S. Business Employee or his or her covered dependents have satisfied
any required co-payments, annual deductibles and out-of-pocket maximums
from and after the Closing Date under the terms of Buyer's or any of
its Affiliates' group health plans for the calendar year in which the
Closing Date occurs, Hired U.S. Business Employees and their covered
dependents shall be credited with the amount of deductibles and
co-payments made by, or on behalf of, such Hired U.S. Business
Employees and their covered dependents under Seller's group health plan
for such year.
(v) For the balance of calendar year 2001, each Hired
U.S. Business Employee shall be entitled to at least the number of
vacation days, personal days and floating holidays, including unused
carryover vacation days from year 2000, for which they would be
eligible for calendar year 2001 (and which remains unused) under
Seller's vacation and paid time-off policy in effect immediately prior
17
to the Closing Date. For all subsequent years, each Hired U.S. Business
Employee shall be entitled to the amount of vacation, personal days and
floating holidays as determined under the vacation and paid time-off
policy of the Buyer based on such Hired U.S. Business Employee's
service recognized pursuant to Section 7.5(c)(ii).
7.6 Conduct of the Business; Access; Cooperation. Except as may
be otherwise contemplated by this Agreement or required by any of the documents
listed in any Schedule to this Agreement or any Transaction Agreement or as
Buyer may otherwise consent in writing (which consent shall not be unreasonably
withheld), between the Effective Date and the Closing Date, Seller shall: (a) in
all material respects operate the Business only in the ordinary course; (b) use
its reasonable efforts to preserve intact its Business organization; (c) use its
reasonable efforts, consistent with past practices, to preserve its
relationships with the material customers of the Business and others having
material business dealings with it relating to the Business such that the
Business will not be materially impaired; (d) maintain all of the Assets in
sufficient operating condition and repair, consistent with past practice, to
enable it to operate the Business in all material respects in the manner in
which the Business is currently operated; (e) maintain its books of account and
records relating to the Business in all material respects in a manner that is
consistent with prior practices; (f) upon reasonable prior notice, afford
representatives of Buyer reasonable access during normal business hours to the
facilities and operations of the Business and the opportunity to discuss the
affairs of the Business with employees of Seller familiar therewith; provided
that any disclosure whatsoever during such investigation by Buyer (i) shall be
subject to the terms and conditions of the Confidentiality Agreement, dated
February 17, 2000, between Buyer and Seller, and (ii) shall not be deemed to
enlarge the representations and warranties of Seller in any way beyond those
specifically set forth in this Agreement; and (g) Seller will cooperate
reasonably with Buyer, at Buyer's expense, to obtain such authorizations,
consents, waivers and approvals as may be reasonably required in order to enable
Seller to effect the transactions contemplated hereby.
7.7 Further Assurances. From and after the Closing Date,
Seller, on the one hand, and Buyer, on the other hand, agree to execute and
deliver such further documents and instruments and to do such other acts and
things as Buyer or Seller, as the case may be, may reasonably request in order
to effectuate the Transaction. Following the Closing, the parties will cooperate
with each other in connection with tax audits and in the defense of any legal
proceedings, consistent with the other provisions for defense of claims provided
in Article 8.
7.8 Receivables; Billing and Collections. Buyer
will ▇▇▇▇ and collect the Accounts Receivables in existence as of the Closing
and shall be entitled to any proceeds with respect thereto.
7.9 Intellectual Property Agreement. At the Closing,
Buyer and Seller shall enter into an Intellectual Property Agreement
substantially in the form annexed as Exhibit A hereto (the "Intellectual
Property Agreement").
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7.10 Transition Services Agreement. At the Closing,
Buyer and Seller shall enter into a Transition Services Agreement substantially
in the form annexed as Exhibit B hereto (the Transition Services Agreement").
7.11 Use of Telecommunications Services. At the Closing, Buyer
and Seller shall enter into a Telecommunications Services Agreement
substantially in the form annexed as Exhibit C hereto (the "Telecommunications
Services Agreement").
7.12 Outstanding Obligations. Within five Business Days after
the Effective Date, Buyer shall pay Seller $71,110.69 to satisfy certain payment
obligations of Alpha-tel with respect to services provided by Seller for
customer account number DCS - 113515; provided that such payment shall not be
deemed to waive any of Buyer's right to request service credits from Seller that
Buyer may have under any service contract or contract tariffs.
7.13 HSR Filings. The parties acknowledge and agree that the
consummation of the Transaction may be subject to the filing with the Federal
Trade Commission ("FTC") and the Antitrust Division of the Department of Justice
("DOJ") of all reports and notifications that are required under the HSR Act by
such authorities. If necessary, Buyer and Seller shall promptly file, or cause
to be filed, with the FTC and DOJ any and all such reports or notifications and
any other filings required under any other federal law or administrative
regulations in connection with the Transaction. The parties agree to take all
reasonable actions necessary to seek early termination or expiration of any
waiting or clearance periods pursuant to all such reports or notifications and
any other filings. The obligations of the parties to consummate the Transactions
shall be subject to receipt of all required approvals under the HSR Act or the
applicable waiting period and any extension thereof having expired or been
terminated.
7.14 Conditions to Closing. The obligations of the parties to
consummate the transactions contemplated hereby shall be subject to the
fulfillment on or prior to the Closing Date of the following conditions: (a) in
respect of the notifications of Buyer and Seller pursuant to the HSR Act, the
applicable waiting period and any extensions thereof shall have expired or been
terminated; and (b) consummation of the transactions contemplated hereby shall
not have been restrained, enjoined or otherwise prohibited by any Applicable
Law, including, any judgment of any court having competent jurisdiction.
7.15 Update to Schedules. The parties acknowledge that the
disclosure schedules of Seller attached to this Agreement have been prepared as
of the date of this Agreement. Within five (5) days after the Closing Date,
Seller shall provide Buyer with an updated version of Schedules 5.6 and 5.8 as
of the Closing Date in order that the representations contained in Sections 5.6
and 5.8 shall be true and correct as of the Closing Date.
7.16 Closing Balance Sheet. Within sixty (60) days after the
Closing Date, Seller shall prepare and deliver to Buyer, a consolidated pro
forma balance sheet of the Business as of the close of business on the Closing
Date. Such balance sheet (the "Closing Balance Sheet") shall be prepared
consistently with the September 30, 2000 Balance Sheet included as part of
Schedule 5.11; provided that such Closing Balance Sheet shall not include (x)
19
any accounts receivables or other rights to receive payments other than the
Accounts Receivable; or (y) any liabilities resulting from Seller's failure to
fulfill its obligations under Section 7.6 to operate the Business in the
ordinary course between the Effective Date and the Closing Date, except to the
extent that such liabilities have been disclosed in this Agreement or are
otherwise disclosed, reflected or reserved against on the Balance Sheet. The
Closing Balance Sheet shall not include any cash balance for EasyLink UK and,
notwithstanding anything contained herein to the contrary, Seller shall have the
right to remove all cash from EasyLink UK prior to the Closing; provided that
during the period from the Effective Date through the Closing, EasyLink UK shall
continue to pay its debts and obligations in all material respects in a manner
that is consistent with past practices. Buyer will have thirty (30) days to
review the Closing Balance Sheet and raise any objections that the Closing
Balance Sheet was not prepared in accordance with the requirements set forth in
this Section 7.16, by delivering a written notice to Seller of such objection,
which notice shall provide a detailed explanation of the reasons for Buyer's
objection. In the event no such notice is received by Seller within such
thirty-day-period, the Closing Balance Sheet will be deemed final. In the event
that Seller does receive such notice within such thirty-day period, Buyer and
Seller will act in good faith to resolve any differences or disputes (including,
the case of Seller, providing such information as is reasonably requested by
Buyer to document items reflected on the Closing Balance Sheet) with respect to
the Closing Balance Sheet within thirty days following Seller's receipt of
Buyer's notice of objection hereunder.
7.17 Seller Certificate. Within five (5) days after the
Closing Date, Seller shall deliver a certificate, executed by a manager who is
responsible for the Business, certifying that Seller has fulfilled its
obligations under Section 7.6 to operate the Business in all material respects
in the ordinary course during the period from the Effective Date through the
Closing.
7.18 Financing Obligations. Between the Effective Date and the
Closing Date, Buyer will use its best reasonable commercial efforts to obtain an
additional $5,000,000 in cash in order to increase the aggregate amount of the
Cash Payment under Section 3.1. In the event that Buyer obtains any additional
amounts of cash during such period, the Cash Payment due under Section 3.1 shall
be increased by such amount and the principal amount due under the Note (and
monthly installments) shall be decreased accordingly, so that the total Purchase
Price shall remain $50,000,000.
8. Indemnification.
---------------
8.1 Indemnification by Seller.
-------------------------
(a) Seller shall indemnify Buyer, its Affiliates and their
respective officers, directors, employees, permitted assigns and successors
(collectively, the "Buyer Indemnified Parties") and hold them harmless against
and in respect of any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, damages, losses, liabilities, taxes and
deficiencies and penalties and interest thereon and costs and expenses,
including reasonable attorneys' fees and expenses (collectively, "Losses") to
the extent resulting from (i) the breach of any representation or warranty, or
nonfulfillment of any covenant or agreement of Seller in this Agreement
20
(including without limitation claims raised pursuant to the Contracts prior to
the Closing Date) or the Intellectual Property Agreement, or (ii) the Excluded
Liabilities.
(b) Seller shall indemnify the Buyer Indemnified Parties and
hold them harmless against and in respect of any and all Losses to the extent
resulting from any default of Seller under any Contract occurring solely during
the period prior to the Closing Date that (i) is not disclosed in this Agreement
or disclosed, reflected or reserved against in the Balance Sheet or (ii) arises
as a result of a failure by Seller to fulfill its obligations under Section 7.6
to operate the Business in the ordinary course between the Effective Date and
the Closing Date; provided that notwithstanding the foregoing, liability with
respect to such Losses shall be allocated between Buyer and Seller as follows:
(i) Buyer shall be responsible for the first $200,000 of such Losses, (ii)
Seller shall be responsible for the next $1,000,000 of such Losses, (iii) Buyer
shall be responsible for the following $300,000 of such Losses; and (iv) Seller
shall be responsible for the remainder of such Losses subject to the aggregate
liability cap set forth in Section 8.4(b) below.
8.2 Indemnification by Buyer. Buyer shall indemnify Seller,
its Affiliates and their respective officers, directors, employees, permitted
assigns and successors (collectively, the "Seller Indemnified Parties" and,
together with the Buyer Indemnified Parties, the "Indemnified Parties") and hold
them harmless against and in respect of any and all Losses to the extent
resulting from (a) the breach of any representation or warranty or
nonfulfillment of any covenant or agreement of Buyer in this Agreement
(including without limitation claims raised pursuant to the Contracts following
the Closing Date subject to Section 8.1(b) above) or the Intellectual Property
Agreement, or (b) the Assumed Liabilities.
8.3 Period of Indemnity. All representations and warranties of
the parties contained in this Agreement and the Intellectual Property Agreement
shall survive the execution and delivery of this Agreement and the Intellectual
Property Agreement and shall continue in full force and effect for sixteen
months after the Closing Date and thereafter shall terminate; provided, however,
that if at or prior to the expiration of such period the Indemnified Party has
delivered a Claims Notice in accordance with Section 8.5 but the underlying
claim has not been fully determined, such period will be extended as to such
claim until it is finally determined. Seller's indemnification obligations under
Section 8.1(b) continue in full force and effect for 12 months after the Closing
Date and thereafter shall terminate; provided, however, that if at or prior to
the expiration of such period the Indemnified Party has delivered a Claims
Notice in accordance with Section 8.5 but the underlying claim has not been
fully determined, such period will be extended as to such claim until it is
finally determined. All covenants or agreements which by their terms are to be
performed on or after the Closing Date (including, without limitation, Buyer's
obligations with respect to Assumed Liabilities and Seller's obligations with
respect to Excluded Liabilities) shall survive until fully discharged.
8.4 Limitations.
-----------
(a) No claim for indemnity shall be asserted by, and no
liability for such indemnity shall be enforced against, a party unless a Claim's
Notice (as hereinafter defined) has been given by the Indemnified Party to the
other party(ies) (the "Indemnitor") prior to the expiration of the period for
21
asserting such claim under Section 8.3. All indemnification rights under this
Agreement are without duplication.
(b) The aggregate amount payable by Seller with respect to
claims under clauses (a)(i) and (b) of Section 8.1 or Buyer with respect to
claims under clause (a) of Section 8.2 shall not exceed fifteen percent (15%) of
the total consideration payable by Buyer to Seller pursuant to Sections 3.1 and
3.2 (excluding interest), and neither Seller nor Buyer shall have any liability
for such claims until the aggregate amount of such claim exceeds $100,000 (the
"Basket"); provided that the Basket shall not apply to Seller's indemnification
obligations with respect to Losses resulting from any breach of Section 5.6 or
Section 5.16; provided, further, that the Basket shall not apply to Seller's
indemnification obligations under Section 8.1(b) as to which a different basket
shall apply as provided in such Section 8.1(b); provided, further, however, that
none of the limitations contained in this Section 8.4(b) shall apply to (i)
Seller's indemnification obligations under Section 8.1(a)(i) with respect to
Losses resulting from any breach of Section 5.1, 5.2 or 5.3 of this Agreement;
(ii) Buyer's obligations under Section 3.8 of this Agreement and Buyer's
obligations with respect to the Assumed Liabilities; and (iii) Seller's
obligations with respect to the Excluded Liabilities.
8.5 Notice to the Indemnitor. Promptly after the assertion of
any claim by a third party or occurrence of any event which may give rise to a
claim for indemnification from an Indemnitor under this Article 8, the
Indemnified Party shall notify the Indemnitor in writing of such claim (the
"Claims Notice"). The Claims Notice shall describe the asserted liability in
reasonable detail, and shall indicate the amount (estimated, if necessary and to
the extent feasible) of the Loss that has been or may be suffered by the
Indemnified Party. Failure by the Indemnified Party to give a Claims Notice to
the Indemnitor in accordance with the provisions of this Section 8.5 shall not
relieve the Indemnitor of its obligations hereunder except to the extent that
the Indemnitor has been actually prejudiced by such failure.
8.6 Rights of Parties to Settle or Defend. The Indemnitor may
elect to compromise or defend, at its own expense, by its own counsel any
asserted liability; provided, that the Indemnitor may not settle such asserted
liability without the written consent of any Indemnified Party if such
settlement involves any admission of wrongful conduct on the part of any
Indemnified Party or imposes any restriction on any Indemnified Party. If the
Indemnitor elects to compromise or defend such asserted liability, it shall
within 30 calendar days upon being given the Claims Notice (or sooner, if the
nature of the asserted liability so requires) notify the Indemnified Party of
its intent to do so, and the Indemnified Party shall cooperate in the compromise
of, or defense against, such asserted liability. If the Indemnitor elects to
defend any claim, the Indemnified Party shall make available to the Indemnitor
any books, records or other documents within its control that are reasonably
necessary or appropriate for such defense. If the Indemnitor elects not to
defend the asserted liability or fails to notify the Indemnified Party of its
election as herein provided, the Indemnified Party may defend (at the reasonable
expense of the Indemnitor) such asserted liability as the Indemnified Party
considers appropriate; provided, that it may not settle such asserted liability
without the written consent of the Indemnitor. The parties agree to cooperate
fully with one another in the defense, settlement or compromise of any asserted
22
liability. In any event, the Indemnified Party and the Indemnitor may
participate, at their own expense, in the defense of such asserted liability.
8.7 Exclusive Remedies. The parties hereto acknowledge that
the indemnity rights set forth in this Article 8 are intended to be their
exclusive monetary remedies in connection with this Agreement and the
Transaction; provided that nothing in this Section 8.7 shall limit in any way
the availability of specific performance, injunctive relief or other equitable
remedies to which a party may otherwise be entitled, and further provided that
the remedies specified, respectively, in the Intellectual Property Agreement,
the Transition Services Agreement and the Telecommunications Services Agreement
shall be the exclusive remedies with respect to each such agreement.
9. Miscellaneous.
-------------
9.1 Termination. This Agreement may be terminated at any time
prior to the Closing Date by either Seller or Buyer by written notice to the
other party if the Closing shall not have occurred and the conditions to Closing
as specified in Section 7.14 have not been fulfilled by June 30, 2001, unless
such date shall be extended by the mutual written consent of Seller and Buyer.
9.2 Entire Agreement. This Agreement (together with the
Schedules and Exhibits hereto) contain, and are intended as, a complete
statement of all of the terms of the arrangements among the parties with respect
to the matters provided for herein and therein, and supersede any previous
agreements and understandings among the parties with respect to those matters.
9.3 Governing Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of New
York, without regard to its principles of conflicts of law.
9.4 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given when delivered
personally, mailed by registered or certified mail, return receipt requested,
sent by recognized overnight delivery service (signature of receipt requested)
or, to the extent receipt is confirmed, by telecopy or telefax (provided that
such party also sends a copy by personal delivery or registered or certified
mail, return receipt requested, or recognized overnight delivery service,
signature of receipt requested), to the following addresses (or to such other
address as a party may have specified by notice given to the other party
pursuant to this provision):
If to Seller, to:
AT&T Corp.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
General Attorney
AT&T Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Room 3235C2
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
If to Buyer, to:
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
President
Swift Telecommunications, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax Number: ▇▇▇-▇▇▇-▇▇▇▇
9.5 Severability. Any provision of this Agreement which is
invalid or unenforceable shall be ineffective to the extent of such invalidity
or unenforceability, but such invalidity or unenforceability shall not affect in
any way the remaining provisions hereof provided that such invalidity or
unenforceability does not deny any party the material benefits of the
transactions for which it has bargained.
9.6 Amendment; Waiver. No provision of this Agreement may be
amended or modified except by an instrument or instruments in writing signed by
the parties hereto. Each party may waive compliance by the other with any of the
provisions of this Agreement. No waiver of any provision hereof shall be
construed as a waiver of any other provision. Any waiver must be in writing and
signed by the party granting the waiver.
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9.7 Assignment and Binding Effect. Neither Buyer nor Seller
may assign any of its rights or delegate any of its duties under this Agreement
without the prior written consent of the other; provided that Seller may assign
any of its rights or delegate any of its duties to any entity controlled by
Seller and Buyer may assign any of its rights or delegate any of its duties to
any entity that is controlled by Buyer; provided, further, that Buyer shall
remain principally liable for all duties of Buyer so assigned and that such
assignee is not a direct competitor of Seller or any of its Affiliates. All of
the terms and provisions of this Agreement shall be binding on, and shall inure
to the benefit of, the parties and the respective successors and permitted
assigns of the parties.
9.8 No Benefit to Others. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto and their respective successors and permitted assigns and
they shall not be construed as conferring and are not intended to confer any
rights on any other persons, including the right to enforce any of the
provisions of this Agreement.
9.9 Counterparts. This Agreement may be executed in
counterparts, all of which shall be deemed an original, and each party hereto
may become a party hereto by executing a counterpart hereof. This Agreement and
any counterpart so executed shall be deemed to be one and the same instrument.
9.10 Certain Definitions. The following terms, as
used herein, have the following meanings:
"Accounts Receivable" means all claims for money or other
obligations due to Seller arising under the Customer Contracts to the extent
applicable to the Business.
"Affiliate," with respect to any Person, means any Person
directly or indirectly controlling, controlled by or under common control with
such Person.
"Balance Sheet" means the September 30, 2000 balance sheet
included as part of the Financial Statements attached hereto as Schedule 5.11.
"Business Day" means any day excluding Saturday, Sunday and
any day which is a legal holiday under the laws of the State of New York on
which banking institutions located in such State are closed.
"Cash Payment" shall have the meaning specified in Section
3.1.
"Claims Notice" shall have the meaning specified in Section
8.5.
"Closing Balance Sheet" shall have the meaning specified in
Section 7.16.
"Closing Date" shall have the meaning specified in Section
4.1.
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"Code" shall have the meaning specified in Section 3.7.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of a Person,
whether through the ownership of voting securities, as an officer or director of
such Person, by contract or credit arrangement or otherwise.
"EasyLink UK Assets" shall have the meaning specified in
Section 5.5(b).
"Effective Date" shall have the meaning specified in the
introductory paragraph to this Agreement.
"E.U. Employees" shall have the meaning specified in
Section 7.5(a)(i).
"Force Majeure Event" means fire, explosion, power blackout,
earthquake, flood, the elements, embargo, war, natural disaster or other acts of
God.
"Governmental Authority" means any government or political
subdivision thereof, whether federal, state, local or foreign, and any agency,
department, division, court, tribunal or instrumentality of any such government
or political subdivision.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Anti-trust Improvements
Act of 1976, as amended.
"Intellectual Property Agreement" shall have the meaning
specified in Section 7.9.
"Knowledge" means, with respect to Seller, the actual
knowledge of the individuals set forth on Schedule 9.10, after reasonable
inquiry by such individuals as to the matters which are so qualified by
knowledge.
"Liens" shall have the meaning specified in Section 5.5(a).
"Material Adverse Effect" or "Material Adverse Change" means
any change or effect that is, or is reasonably likely to be, materially adverse
to the Business and the Assets, taken as a whole.
"Permitted Liens" shall have the meaning specified in Section
5.5(a).
"Person" means any natural person, firm, partnership, joint
venture, association, corporation, company, trust, business trust, Governmental
Authority or other entity.
"Reasonable Commuting Distance" means a distance that is fewer
than 50 straight-line miles from the Business Employee's principal residence. In
addition, a distance that does not increase a Business Employee's commute by
more than five straight-line miles shall also be a Reasonable Commuting
Distance.
26
"Taxes" or "Tax" refers to all federal, state, local and
foreign taxes, charges, fees, levies, imposts, duties or other assessments,
including, without limitation, income, gross receipts, excise, employment,
sales, use, telecommunications, transfer, license, payroll, franchise,
severance, stamp, occupation, windfall profits, environmental (including taxes
under Code Section 59A), premium, federal highway use, commercial rent, customs
duties, capital stock, paid up capital, profits, withholding, Social Security,
single business and unemployment, disability, real property, personal property,
registration, ad valorem, value added, alternative or add-on minimum, estimated,
or other tax or governmental fee of any kind whatsoever, imposed or required to
be withheld by the United States or any state, local, foreign government or
subdivision or agency thereof, including any interest, penalties or additions
thereto.
"Transaction Agreements" mean this Agreement and the
Intellectual Property Agreement, the Transition Services Agreement, the
Telecommunications Services Agreement, the Note and the Security Agreements.
"U.S. Business Employees" shall have the meaning specified
in Section 7.5(a)(ii).
9.11 Consent to Jurisdiction and Business of Process. Any
dispute between the parties which is not resolved in the normal course of
business or as otherwise provided hereunder shall be resolved as follows:
(a) Within ten (10) days after receipt of written notice from
either party, designees (the "Designees") of each of Buyer and Seller shall meet
and attempt to resolve the dispute.
(b) If the dispute is not resolved within forty-five (45) days
after the sending of the initial written notice, then either party may commence
legal action as specified in Section 9.11(c) below.
(c) Any legal action, suit or proceeding arising out of or
relating to this Agreement, the Intellectual Property Agreement or the
Transaction may be instituted in any state or federal court located in New York
County, State of New York, and each party agrees not to assert, by way of
motion, as a defense, or otherwise, in any such action, suit or proceeding, any
claim that it is not subject personally to the jurisdiction of such courts, that
its property is exempt or immune from attachment or execution, that the action,
suit or proceeding is brought in an inconvenient forum, that the venue of the
action, suit or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such court, and hereby waives any
offsets or counterclaims in any such action, suit or proceeding. Each party
further irrevocably submits to the jurisdiction of any such court in any such
action, suit or proceeding. Any and all service of process and any other notice
in any such action, suit or proceeding shall be effective against any party if
given personally or by registered or certified mail, return receipt requested,
or by any other means of mail that requires a signed receipt, postage prepaid,
mailed to such party as herein provided, or by personal service on such party
with a copy of such process mailed to such party by registered or certified
mail, return receipt requested, postage prepaid. Nothing herein contained shall
27
be deemed to affect the right of any party to serve process in any manner
permitted by law or to commence legal proceedings or otherwise proceed against
any other party in any jurisdiction other than New York in connection with
actions initiated by third parties in such other jurisdictions.
9.12 Interpretation. Article titles, headings to sections and
any table of contents are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation hereof. The
Schedules and Exhibits referred to herein shall be construed with and as an
integral part of this Agreement to the same extent as if they were set forth
verbatim herein. As used herein, "include", "includes" and "including" are
deemed to be followed by "without limitation" whether or not they are in fact
followed by such words or words of like import; "writing", "written" and
comparable terms refer to printing, typing, lithography and other means of
reproducing words in a visible form; references to a person are also to its
successors and permitted assigns; except as the context may otherwise require,
"hereof", "herein", "hereunder" and comparable terms refer to the entirety
hereof and not to any particular article, section or other subdivision hereof or
attachment hereto; references to any gender include the other; except as the
context may otherwise require, the singular includes the plural and vice versa;
references to any agreement or other document are to such agreement or document
as amended and supplemented from time to time; references to "Article",
"Section" or another subdivision or to an "Exhibit" or "Schedule" are to an
article, section or subdivision hereof or an "Exhibit" or "Schedule" hereto.
28
IN WITNESS WHEREOF, the undersigned have executed this Asset
Purchase Agreement as of the date first above written.
AT&T CORP.
By: s/▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President AT&T Internet & Data
Services
SWIFT TELECOMMUNICATIONS INC.
By: s/▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
Title: President and CEO