Exhibit 2.3
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment") is made
and entered into as of July 27, 2001, by and between nTelecom Holdings, Inc., a
Delaware corporation ("nTelecom"), OAN Services, Inc., a Texas corporation
("OAN"), OAN Services of Florida, Inc., a Texas corporation ("OAN Florida", and
together with nTelecom and OAN, each a "Seller Party" and collectively, the
"Seller" or the "OAN Parties"), and ACI Communications, Inc., a Delaware
corporation ("ACI").
WHEREAS, the Seller and ACI have entered into that certain Asset Purchase
Agreement dated as of May 25, 2001 (the "Purchase Agreement") pursuant to which
ACI has agreed to purchase certain assets and properties of the Seller related
to the Transaction Processing Business and assume certain liabilities of the
Seller, and the Seller has agreed to sell, convey, assign and transfer to ACI,
certain assets and properties related to the Transaction Processing Business
together with certain obligations and liabilities relating thereto. Capitalized
terms used but not defined herein shall have the meanings ascribed to them in
the Purchase Agreement;
WHEREAS, each Seller Party has commenced a Chapter 11 Case by filing a
petition under the Bankruptcy Code;
WHEREAS, the Acquired Assets will be sold pursuant to a Sale Order, which
Sale Order will include the assumption and assignment of the Assigned Contracts
and liabilities thereunder under Section 365 of the Bankruptcy Code and the
terms and conditions of the Purchase Agreement;
WHEREAS, the Seller has agreed to perform for ACI certain services in
connection with ACI's operation of the Transaction Processing Business
commencing as of the Closing Date;
WHEREAS, the Seller and ACI have agreed to extend the time for ACI to
determine whether the Deferred Contracts (as defined herein) will be assumed and
assigned to ACI or will be deemed to be Excluded Contracts; and
WHEREAS, the Seller and ACI have agreed to amend the Purchase Agreement to
(i) set forth the terms and conditions of the Post-closing Services (as defined
herein), (ii) extend the time in which ACI and the Seller must determine whether
the Deferred Contracts shall be deemed to be Assigned Contracts or Excluded
Contracts, and (iii) provide for such additional terms and conditions as set
forth in this Amendment.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements set forth herein, the parties hereto agree as follows:
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1. Post-closing Services.
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1.1. Post-closing Services. Commencing as of the Closing Date, the Seller
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will provide to ACI the services set forth below in this Section 1.1
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(collectively, the "Post-closing Services"). Seller shall cause its employees
and officers to devote such time and efforts to the performance of the
Post-closing Services as reasonably may be required to serve ACI effectively and
diligently. ACI may make reasonable changes in the Post-closing Services from
time to time.
(a) Employees. The Seller shall cause the employees set forth on the
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attached Exhibit A to perform for the benefit of ACI all services necessary to
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operate the Transaction Processing Business, including the operation of the call
center, as may be reasonably required by ACI.
(b) Officers. The Seller shall cause the officers and executives set forth
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on the attached Exhibit A to perform for the benefit of ACI all services
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necessary to operate and to preserve intact the Transaction Processing Business,
including but not limited to, maintaining and managing relationships with
employees and third parties, as may reasonably be required by ACI.
1.2. Payment for Post-closing Services.
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(a) Payroll. Commencing as of the Closing Date and for each payroll period
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through August 31, 2001, ACI shall pay to the Seller, on or before the last
business day prior to each payroll date, an amount equal to 65% of the amount
necessary to fund the Seller's payroll, excluding call center personnel (the
"OAN Payroll"). For the payroll period commencing on September 1, 2001 and for
each payroll period through December 31, 2001, ACI shall pay to the Seller, on
or before the last business day prior to each payroll date, an amount equal to
83% of the amount necessary to fund the OAN Payroll. The parties agree that they
shall renegotiate the percentages noted in this Section 1.2(a) if the actual
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percentages of the employees' allocation of time between Seller and ACI deviate
substantially from the above.
(b) Employee Benefits. Commencing as of the Closing Date and continuing
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until August 31, 2001, ACI shall pay to the Seller on or before the last
business day prior to payment by the Seller, an amount equal to 65% of the
amount necessary to fund the Employee Plans, workers compensation premiums, and
withholding taxes as necessary for the Seller's employees and officers,
excluding call center personnel (the "OAN Employee Benefits"). Commencing on
September 1, 2001 and continuing until December 31, 2001, ACI shall pay to the
Seller on or before the last business day prior to payment by the Seller, an
amount equal to 83% of the amount necessary to fund the OAN Employee Benefits.
The parties agree that they shall renegotiate the percentages noted in this
Section 1.2(b) if the actual percentages of the employees' allocation of time
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between Seller and ACI deviate substantially from the above.
(c) Call Center Personnel. Commencing as of the Closing Date and
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continuing until December 31, 2001, ACI shall pay to the Seller on or before the
last
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business day prior to the payment by the Seller, an amount equal to 100% of the
amount necessary to fund for the Seller's call center personnel (i) the payroll,
and (ii) Employee Plans, workers compensation premiums, and withholding taxes as
necessary.
(d) Failure To Pay. In the event that the Seller fails to pay to ACI any
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amounts due under Section 5 of this Amendment, ACI shall withhold all amounts
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due under this Section 1.2 until Seller delivers to ACI all such overdue amounts
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which are overdue.
2. Transferred Employees Issues.
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2.1. Transferred Employees. Section 7.05(c)(ii) of the Purchase Agreement
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is hereby amended to read in its entirety as follows:
ACI intends to offer employment effective as of January 1, 2002 to
certain of Seller's active officers and employees engaged in the
Transaction Processing Business; provided, that ACI may terminate at
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any time after January 1, 2002 the employment of any employee who
accepts such offer. The officers and employees engaged in the
Transaction Processing Business who accept and commence employment
with ACI as of January 1, 2002 are hereinafter collectively referred
to as the "Transferred Employees." The Seller will not take, and will
cause each of its subsidiaries not to take, any action which would
impede, hinder, interfere or otherwise compete with ACI's efforts to
hire any of Seller's employees as of January 1, 2002.
2.2. Amendment of Section 10.06 of Purchase Agreement. Section 10.06 of the
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Purchase Agreement is hereby amended to read in its entirety as follows:
"Section 10.06. Intentionally omitted."
2.3. Identification of Transferred Employees. On or before November 25,
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2001, ACI shall identify in writing to Seller which of Seller's officers and
employees ACI intends to offer employment as of January 1, 2002.
2.4. Amendment of Section 2.04(b) of the Purchase Agreement. Section
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2.04(b) of the Purchase Agreement is hereby amended to read in its entirety as
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follows:
any of Seller's Employee Liabilities (except as provided in Section
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7.05(d) of the Purchase Agreement and Section 2.6 of the First
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Amendment to Asset Purchase Agreement dated as of July 27, 2001 by and
between Seller and ACI), any liability or obligation under or with
respect to any Employee Plan or Benefit Arrangement, or any other
liability or obligation related to employees of the Seller, whether
written or oral;
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2.5. Seller's Employee Liabilities and Benefit Plans. Section 7.05(d) of
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the Purchase Agreement is hereby amended to read in its entirety as follows:
Seller's Employee Liabilities and Benefit Plans. All (i) Seller's
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Employee Liabilities, and (ii) obligations under and with respect to
the Employee Plans and Benefit Arrangements, shall not be ACI Assumed
Liabilities and shall be satisfied by, and at the expense of, Seller;
provided, however, that ACI shall assume unpaid vacation benefits and
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vacation pay for the Transferred Employees which accrued while such
Transferred Employees were employed by the Seller. No assets of any
Employee Plan or Benefit Arrangement shall be an Acquired Asset
transferred to ACI or any of its Affiliates or to any plan of ACI or
any of its Affiliates. Seller shall, at its own expense, take such
actions as may be necessary to cause the termination of each Employee
Plan and file all required forms in connection therewith as soon as
practicable after January 1, 2002. Effective as of January 1, 2002,
the Transferred Employees shall cease participation in the Seller's
Employee Plans and Benefit Arrangements, in each case except to the
extent that any rights under such Employee Plans and Benefit
Arrangements shall have vested, or may vest upon fulfillment of
certain conditions, in accordance with the terms contained therein.
Effective as of January 1, 2002, the Transferred Employees shall be
eligible to participate in Employee Plans and Benefit Arrangements to
be established by ACI for the Transferred Employees. ACI will
establish a 401(k) Plan (the "ACI 401(k) Plan") qualified under
Section 401(a) of the Code as soon as administratively practicable
after January 1, 2002. The ACI 401(k) Plan will accept rollover
conrtibutions from each Transferred Employee of amounts from such
Transferred Employee's account with the Seller's 401(k) Plan to the
extent permitted by applicable law. The Seller and ACI shall cooperate
with each other in all respects relating to any actions to be taken
pursuant to this Section 7.05(d). With respect to such plans,
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programs, or arrangements under which a Transferred Employee's benefit
depends, in whole or in part, on length of service, credit for
eligibility and vesting (but not for benefit accrual) shall be given
for service with the Seller prior to January 1, 2002 to the extent
that such crediting of service does not result in duplication of
benefits. To the extent administratively practicable, ACI shall make a
good faith effort to cause each ACI Employee Plan or Benefit
Arrangement in which a Transferred Employee begins
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participating on January 1, 2002 to (i) waive for a Transferred
Employee any preexisting condition restriction that was waived under
the terms of any analogous Seller Employee Plan or Benefit Arrangement
immediately prior to January 1, 2002 and any waiting period limitation
that would otherwise be applicable to a Transferred Employee to the
extent such Transferred Employee had satisfied any similar waiting
period limitation under an analogous Seller Employee Plan or Benefit
Arrangement prior to January 1, 2002, and (ii) give credit for amounts
paid under any analogous Employee Plan or Benefit Arrangement for
purposes of applying deductibles, co-payments, and out-of-pocket
maximums as though such amounts had been paid in accordance with the
terms and conditions of such ACI plans for the same period.
2.6. Reimbursement of Seller's Employee Liabilities. On or before January
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1, 2002, ACI shall pay to the Seller an amount of cash equal to the unpaid
vacation benefits and vacation pay for each of the Seller's employees who is not
offered employment by ACI and therefore does not become a Transferred Employee,
provided that the Seller provides to ACI the amount of such vacation benefits
and pay on or before December 31, 2001.
2.7. Services for the Seller. In the event that the Seller desires to
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utilize the services of any Transferred Employee after January 1, 2002, the
Seller shall identify in writing (a "Services Request") to ACI which the
Transferred Employee ACI seeks to utilize and what services are to be provided.
The Seller shall deliver to ACI a Services Request not less than twenty-four
(24) hours prior to the time at which such services are to be provided. The
Seller shall pay to ACI within five (5) business days after the performance of
such services an amount equal to ACI's cost for such services, which cost shall
be equal to the sum of (i) the pro-rata share of such Transferred Employees
salary and/or wages for such period, plus (ii) 20% of such amount for fringe
benefits paid to such Transferred Employee, plus (iii) 10% of such amount for
general overhead expenses allocable to such Transferred Employee.
3. Amendment of Purchase Price
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3.1. Amendment of Section 2.05 of Purchase Agreement ("Purchase Price").
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Section 2.05 of the Purchase Agreement is hereby amended to read in its entirety
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as follows:
Section 2.05 Purchase Price. The purchase price (the "Purchase Price")
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for the purchase, sale, assignment and conveyance of Seller's right,
title and interest in and to the Acquired Assets shall be (a) the
cancellation by ACI of all indebtedness owed by Seller to ACI under
the Management Agreement, (b) ACI's assumption and guarantee of any
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liability for Post-Petition defaults under the Assigned Contracts (as
provided in the Management Agreement), (c) ACI's assumption and
performance of Seller's obligations after the Closing under the
Assigned Contracts (including, (i) the Customer Contracts, and (ii)
the LEC Contracts), (d) ACI's payment of the Contingent Payout
referred to in Section 2.07, (e) cash in an amount equal to the sum of
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(i) the difference between $1,000,000 and the amount of the DIP Loan
provided under the Management Agreement, plus (ii) the amount of all
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prepaid LEC Fees related to the assigned Customer Contracts that will
be recovered by ACI pursuant to post-closing disbursements, minus
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(iii) the amount of all bad debt reserves held by the Seller (in
excess of amounts withheld by the LECs) which relate to the assigned
Customer Contracts, minus (iv) the amount of liabilities assumed by
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ACI under Section 7.05(d), as amended, minus (v) the amount of all
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"termination reserves" held by the Seller pursuant to Customer
Contracts with Alliance Group Services, Inc., Asset Recovery Services,
Inc. and all other Customers whose Customer Contracts are assigned to
ACI, and (f) cash in an amount equal to the sum of the difference
between (i) the LEC Deposit for each LEC, minus (ii) the amount
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assumed by ACI under Section 2.03(c) for such LEC (the "ACI LEC
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Payment").
3.2. Amendment of Section 2.01(b) of the Purchase Agreement. Section
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2.01(b) of the Purchase Agreement is hereby amended to read in its entirety as
follows:
(b) LEC Contracts. The parties acknowledge that the LEC Contracts must
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be cured by payment of the Cure Costs prior to the assignment and
assumption under Section 365 of the Bankruptcy Code. Seller hereby
covenants and agrees to pay the Cure Costs for the LEC Contracts prior
to the Closing and to assume the LEC Contracts and assign the LEC
Contracts to ACI under Section 365 of the Bankruptcy Code pursuant to
Bankruptcy Court Approval. After Closing and after assignment of the
LEC Contracts to ACI, ACI shall own all of the deposits held by the
LECs at the Closing (the "LEC Deposits"). The parties further
acknowledge the potential for dispute between the Seller and each LEC
with respect to (x) the total amount of all pre-petition unpaid
amounts due under such LEC's LEC Contract, and (y) the amount, if any,
due to such LEC for the failure of the Seller to achieve the volume
minimums under such LEC's LEC Contract (collectively, the "LEC Consent
Fee"). Accordingly, for purposes of this
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Agreement, each LEC's "LEC Payment Date" shall be the earlier of (i)
the date on which such LEC delivers to the Seller and ACI an executed
LEC Consent which finally sets forth the LEC Consent Fee for such LEC
Contract, (ii) the entry of an order of the Bankruptcy Court fixing
the amount of such LEC's LEC Consent Fee, or (iii) 120 days after the
Closing Date (the "Outside Date"), provided that ACI shall be
permitted to unilaterally extend the Outside Date for consecutive 30
day periods if the Seller has not used commercially reasonable efforts
to obtain the consent or order under clauses (i) or (ii) respectively.
3.3. Amendment of Section 3.03(g) of the Purchase Agreement. Section
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3.03(g) of the Purchase Agreement is hereby amended to read in its entirety as
follows:
The portion of the Cash Payment payable pursuant to Section 2.05(e),
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plus the ACI LEC Payment for each LEC whose LEC Payment Date is on or
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before the Closing Date.
3.4. Section 3.04 of the Purchase Agreement. Section 3.04 of the Purchase
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Agreement shall be inserted to read in its entirety as follows:
Post-closing ACI LEC Payments. On the last business day of each
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calendar week commencing after the Closing Date, ACI shall deliver to
the Seller cash in an amount equal to the ACI LEC Payment for each LEC
for which the LEC Payment Date occurred during such calendar week.
3.5. Section 3.05 of the Purchase Agreement. Section 3.05 of the Purchase
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Agreement shall be inserted to read in its entirety as follows:
Post-closing Rebates. Within 10 (ten) business days after the final
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LEC Payment Date, the Seller shall deliver to ACI cash in an amount
equal to the difference between (i) the amounts assumed by ACI under
Section 2.03(c) of the Purchase Agreement, and (ii) the aggregate
amount of the LEC Deposits.
4. Deferred Contracts.
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4.1. Deferred Contracts. For purposes of this Amendment, "Deferred
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Contracts" shall mean, collectively, (i) the Sublease of the premises located at
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Sublease"), (ii) the
Agreement for Information Technology Services dated May 1, 2001 between
Electronic Data Systems Corporation and OAN (the "EDS Agreement"), (iii) the
Data Network Services Agreement between Transaction Network Services, Inc. and
nTelecom Holdings, Inc. dated July 31, 1997 (the "TNS Agreement"), (iv) the
Special Customer Arrangement for MCI WorldCom On-Net Services between MCI
Telecommunications Corporation and
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OAN Services, Inc. dated April 1, 1999 (the "MCI Agreement"), (v) the Master
Support Agreement between OAN Services, Inc. and Data General Corporation dated
October 1, 1999 (the "DGC Agreement"), (vi) the two Lease Agreements between OAN
Services, Inc. and Dell Financial Services, L.P. dated June, 2000 and December
2000 respectively (the "Dell Agreements"), and (vii) the Direct Billing
Agreement dated February 10, 1998 between OAN Services, Inc. and TransAction
Networks, Inc. (the "TXN Agreement").
4.2. Amendment to Assigned Contract and Excluded Contracts.
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Notwithstanding any provision of the Purchase Agreement to the contrary, the
Deferred Contracts shall not be included in the Assigned Contracts or the
Excluded Contracts as of the Closing Date.
4.3. Deferred Assumption or Rejection. Within ninety (90) days after the
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Closing Date, ACI shall inform the Seller in writing (the "Deferred Notice")
whether the Deferred Contracts shall be assumed by Seller and assigned to ACI
pursuant to Section 365 of the Bankruptcy Code. If ACI elects to have the
Deferred Contracts assumed by the Seller and assigned to ACI, immediately upon
delivery to the Seller of the Deferred Notice, the parties shall use their
commercially reasonable best efforts to obtain an order from the Bankruptcy
Court approving the assumption and assignment of the Deferred Contracts (the
"Deferred Contracts Order"). If, within ninety (90) days after the Closing Date,
ACI has not delivered to Seller the Deferred Notice or ACI has earlier
instructed the Seller that ACI does not intend to acquire and assume the
Deferred Contracts (a "Rejection Notice"), then such Deferred Contracts shall be
deemed to be included in the Excluded Contracts.
4.4. Performance of Deferred Contracts. Commencing on the Closing Date and
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continuing until (A) entry of a Deferred Contracts Order applicable to each of
the Deferred Contracts to be assumed and assigned to ACI, or (B) the earlier of
(i) ninety (90) days after the Closing Date or (ii) delivery to Seller of a
Rejection Notice for each Deferred Contract which will not be assumed and
assigned to ACI (the "Exclusion Date"), ACI shall guarantee for the benefit of
each the parties to the Deferred Contracts, the Seller's complete and
unconditional performance under each of the Deferred Contracts. Commencing on
the Closing Date and continuing until entry of a Deferred Contract Order or the
Exclusion Date (the "Deferred Contract Payment Date") for each of the Deferred
Contracts, ACI shall pay to the Seller on or before the last business day prior
to payment by the Seller, the amount of Seller's cost incurred in performing
each Deferred Contract, as set forth below:
(a) Sublease: For the period commencing on the Closing Date and ending on
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the Deferred Contract Payment Date, ACI shall pay 100% of the Seller's cost of
performing the Sublease.
(b) EDS Agreement: For the period commencing on the Closing Date and
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ending September 30, 2001, ACI shall pay 93% of the Seller's cost of performing
the EDS Agreement. For the period commencing October 1, 2001 and ending on the
Deferred Contract Payment Date, ACI shall pay 95% of the Seller's cost of
performing the EDS Agreement.
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(c) TNS Agreement: For the period commencing on the Closing Date and
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ending September 30, 2001, ACI shall pay 93% of the Seller's cost of performing
the TNS Agreement. For the period commencing October 1, 2001 and ending on the
Deferred Contract Payment Date, ACI shall pay 95% of the Seller's cost of
performing the TNS Agreement.
(d) MCI Agreement: For the period commencing on the Closing Date and
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ending September 30, 2001, ACI shall pay 85% of the Seller's cost of performing
the MCI Agreement. For the period commencing October 1, 2001 and ending on the
Deferred Contract Payment Date, ACI shall pay 93% of the Seller's cost of
performing the MCI Agreement.
(e) DGC Agreement: For the period commencing on the Closing Date and
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ending on the Deferred Contract Payment Date, ACI shall pay 100% of the Seller's
cost of performing the DGC Agreement.
(f) Dell Agreements: For the period commencing on the Closing Date and
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ending September 30, 2001, ACI shall pay 85% of the Seller's cost of performing
the Dell Agreements. For the period commencing October 1, 2001 and ending on the
Deferred Contract Payment Date, ACI shall pay 93% of the Seller's cost of
performing the Dell Agreements.
(g) TXN Agreement: For the period commencing on the Closing Date and
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ending on the Deferred Contract Payment Date, ACI shall pay 100% of the Seller's
cost of performing the TXN Agreement.
5. Assignment of Concentration Account.
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5.1. Concentration Account. For purposes of this Amendment, "Concentration
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Account" shall mean that certain bank account number ▇▇▇-▇▇▇▇-▇▇▇ at ▇▇▇▇▇ Fargo
Bank, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and bank
account number ▇▇▇-▇▇▇▇-▇▇▇ at Fleet Bank, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Prior to and after the Closing Date, all remittances to be
delivered by the LECs under the LEC Contracts (including pre-petition
receivables owned by the Seller and post-petition receivables owned by ACI)
shall be delivered into and maintained in the Concentration Account.
5.2. Custody and Control of Concentration Account. Prior to the Closing
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Date, the Seller shall maintain complete custody and control of the
Concentration Account. Within ninety (90) days after the Closing Date or on such
other date which is mutually agreed by the Seller and ACI (the "Account Transfer
Date"), the Seller shall assign and transfer to ACI all of its right, title and
interest in and to, and complete custody and control of, the Concentration
Account.
5.3. Obligation to Account.
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(a) Commencing as of the Closing Date and ending on the Account Transfer
Date, on a daily basis, the Seller shall transfer to an account designated by
ACI eighty
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five percent (85%) of all amounts received in the Concentration Account. In
addition, within each five to seven day period after the Closing Date, (each an
"Accounting Period"), the Seller shall deliver to ACI a detailed report which
sets forth the calculation of the amounts owed to ACI including such supporting
documents as may be reasonably approved by ACI, together with any additional
funds which should have been transferred to ACI during such Accounting Period.
In the event that Seller's report for any Accounting Period establishes that
Seller transferred to ACI fees in excess of those owed to ACI, Seller shall be
entitled to withhold fees in the amount of such excess from the transfers to be
made to ACI during the following Accounting Period, provided that such reduction
is clearly set forth in the report for such following Accounting Period. ACI
shall have the right to review and/or audit the Seller's books and records at
its own cost on three (3) business days' prior notice.
(b) After the Account Transfer Date, ACI shall be obligated to regularly
account to the Seller for all monies deposited into the Concentration Account
and shall make daily transfers of all monies received in the Concentration
Account which are owed to the Seller.
6. Multiple Counterparts. This Amendment may be executed in two or more
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counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same Amendment. This Amendment shall become
effective when each party hereto shall have received counterparts thereof signed
by all other parties thereto.
7. No Other Modifications. Except as expressly modified by this First
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Amendment, the Purchase Agreement shall be unmodified and remain in full force
and effect.
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IN WITNESS WHEREOF, the parties have executed this First Amendment to Asset
Purchase Agreement as of the date first set forth hereinabove.
OAN SERVICES, INC, ACI Communications, Inc.,
a Texas corporation a Delaware corporation
By: ___________________________ By: ___________________________
Name: ___________________________ Name: ___________________________
Title: ___________________________ Title: ___________________________
OAN SERVICES OF FLORIDA, INC, nTelecom Holdings, Inc.,
a Texas corporation a Delaware corporation
By: ___________________________ By: ___________________________
Name: ___________________________ Name: ___________________________
Title: ___________________________ Title: ___________________________
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