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EXHIBIT 2.2
CLOSING AGREEMENT
Reference is made to the Asset Purchase Agreement dated as of January 5,
1999 by and between MindSpring Enterprises, Inc., a Delaware corporation
("MindSpring"), and NETCOM On-Line Communication Services, Inc. ("NETCOM"), a
Delaware corporation (the "Purchase Agreement"). Capitalized terms used herein
that have been defined in the Purchase Agreement shall have the same meanings
as in the Purchase Agreement.
In consideration of the mutual promises set forth in this Closing
Agreement and in the Purchase Agreement, the parties agree as follows with
respect to the following matters:
1. NETCOM and MindSpring agree to prorate and allocate, for periods
before and after the Closing, all property taxes, special taxes and assessments
attributable to the calendar year in which the Closing occurs and amounts
payable under equipment leases, outsourcing contracts and other contracts to be
transferred and assumed by MindSpring as of the Closing. Thus, in furtherance
thereof, for purposes of prorating and allocating, as between NETCOM and
MindSpring, all property taxes, ad valorem taxes and special taxes or
assessments attributable to the Assets for periods prior to and after the
Closing that are identified on SCHEDULE A, and other amounts identified on
SCHEDULE A that are payable in connection with obligations to be assumed by
MindSpring as of the Closing (together, the "Expenses") MindSpring will remit
to NETCOM in cash the amount of the net Expenses as set forth on the attached
SCHEDULE A within ten days after the Closing. If the amounts actually paid
with respect to the amounts identified as estimates on SCHEDULE A differ from
the amounts of such estimates, MindSpring or NETCOM, as the case may be, as
appropriate, will promptly pay the difference to the other.
2. For purposes of allocating the monthly subscriber payments actually
received by NETCOM during the month of February 1999 on account of dial-up,
dedicated and Web-hosting services billed by NETCOM in February 1999 prior to
the Closing and to be provided to Subscribers by NETCOM during February 1999
prior to the Closing and by MindSpring during February 1999 after the Closing,
other than amounts received from Subscribers for prepaid services (the
"Subscriber Payments"), NETCOM will remit to MindSpring in cash the amount of
the Subscriber Payments set forth on SCHEDULE A within ten days after the
Closing. Such amount will be determined in accordance with the methodology
described in SCHEDULE B and shall represent that portion of the Subscriber
Payments that is applicable to the period in February following the Closing
Date as determined on a ratable daily basis, but shall not include any amounts
paid to or previously received by NETCOM pursuant to any prepaid contracts.
NETCOM represents and warrants to MindSpring that the amount set forth on
SCHEDULE A as the total Subscriber Payments received during the month of
February 1999 was calculated based on the methodology set forth in SCHEDULE B
and is a reasonable estimate of the Subscriber Payments collected by NETCOM as
of February 15. Within 10 days after the Closing, NETCOM will confirm to
MindSpring, based on the methodology set forth in SCHEDULE B, the amount of
Subscriber Payments received prior to the Closing. If the amount of such
confirmed Subscriber Payments differs from the total amount of Subscriber
Payments set forth on SCHEDULE A, the amount payable by NETCOM to MindSpring
will be adjusted appropriately. The amount payable by NETCOM to MindSpring
under this paragraph 2 shall be reduced by the amount of the Severance Estimate
as set forth in paragraph 6.
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3. Attached hereto as SCHEDULE C are the final schedules to the Purchase
Agreement as contemplated by Section 2.1(c) of the Purchase Agreement. These
schedules include the master list of all NETCOM contracts previously provided
to MindSpring and the list of contracts the status of which is to be determined
after the Closing, the final schedule of intellectual property, the final
master employee list (the "Employee Schedule") and the final schedule of the
inventory of tangible personal property.
4. SCHEDULE D sets forth two lists of contracts. The contracts
identified in the "Accept" column of the attached SCHEDULE D as "No" are the
contracts described on Schedule 1.1(iii) to the Purchase Agreement that are (i)
contracts involving bounty payments of $50 or more per Subscriber, (ii)
contracts involving the payment of monthly recurring revenue, or (iii)
contracts involving annual payments, in cash or in kind, in excess of One
Hundred Thousand Dollars ($100,000) per annum, that Buyer elects pursuant to
the Purchase Agreement to exclude from the definition of "Assets." The contracts
identified in the "Accept" column of the attached Schedule D as "TBD" or
otherwise designated in Schedule D as "to be determined" are contracts the
status of which are not yet agreed by MindSpring and NETCOM. MindSpring and
NETCOM will cooperate on a reasonable basis after the Closing to determine,
such determination to be made within 30 days after the Closing, whether such
"to be determined" contracts are to be included in the definition of Assets
under the Asset Purchase Agreement and transferred to MindSpring as of the
Closing.
5. Attached hereto as SCHEDULE E pursuant to Section 2.4(b)(ii) of the
Purchase Agreement is a list of executive officers of NETCOM that will not be
employed by MindSpring after the Closing.
6. NETCOM agrees to pay in connection with the Closing, accrued and
previously unpaid bonuses and vacation pay (including a one-day floating
holiday for non-California employees, in the approximate amount of $31,625 plus
applicable payroll taxes) to the NETCOM employees listed on the Employee
Schedule as employees to be laid off (the "Laid Off Employees") or employed by
MindSpring, provided that MindSpring will reimburse NETCOM, in cash within 10
days after the Closing, all amounts attributable to the one-day floating
holiday for non-California employees included as part of such employees. As an
accommodation to MindSpring, in lieu of MindSpring offering employment in
accordance with Section 2.4(b)(i) of the Purchase Agreement, NETCOM, at
MindSpring's expense, will terminate the employment of the Laid Off Employees
and pay to or on behalf of such Persons wages and salaries for the period after
the Closing and severance pay (including, without duplication, payroll taxes
required to be withheld and/or paid on behalf of the employee and the employer
and other required amounts with respect to such wages and salaries). After the
Closing, NETCOM will have no obligation to or with respect to the Laid Off
Employees (including with respect to or furtherance of such termination) except
as required in writing by MindSpring and at MindSpring's sole expense. If the
total amount payable by NETCOM to MindSpring pursuant to paragraph 2 (as such
amount is determined without regard to the last sentence of such paragraph 2)
is less than One Million Six Hundred Seventy-Four Thousand Dollars ($1,674,000)
(the "Severance Estimate"), MindSpring will pay to NETCOM in cash within 10
days of the Closing the amount of the difference. If the amount actually
payable by NETCOM to the Laid Off Employees pursuant to this Section 6 differs
from the Severance Estimate, NETCOM or MindSpring, as the case may be, as
appropriate, promptly will pay to the other in cash an amount equal to such
difference. MindSpring will indemnify, defend and hold harmless NETCOM from and
against any Adverse Consequences NETCOM may suffer, including those arising
under the WARN Act, arising out of or resulting from the termination of the
employment of the Laid Off Employees regardless of whether
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such Adverse Consequences are suffered during or after the Survival Period. As
a further accommodation to MindSpring, NETCOM agrees that for a reasonable
period after the Closing as agreed by the parties it will maintain on its
payroll the employees that are employed under H-1 Visas as of the Closing that
are listed on SCHEDULE F (the "Visa Employees"). MindSpring agrees to promptly
reimburse NETCOM for all salary and benefits (including payroll taxes) and
reasonable out-of-pocket costs incurred by NETCOM following the Closing with
respect to the Visa Employees. Upon the payment by NETCOM of the vacation pay
and bonuses as required under this paragraph 6, NETCOM shall have no obligation
to pay to MindSpring the Five Hundred Thousand Dollar ($500,000) payment for
vacation pay under Section 2.4(b)(iii) of the Purchase Agreement or to make any
other reimbursement or payment to MindSpring under Section 2.4(b)(iii) on
account of any vacation pay or bonuses, including the One Million Two Hundred
Thousand Dollar ($1,200,000) reimbursement for bonuses.
7. MindSpring agrees that it will compensate NETCOM under the Network
Services Agreement to be entered into by the Parties as of the Closing in
accordance with the terms thereof for the period in February 1999 following the
Closing, and thus MindSpring will pay to NETCOM the fees payable under Section 3
of the Network Services Agreement in an amount equal to 12/28ths of the fees
that would have been payable under such Section 3 if the Closing had occurred
at 12:01 a.m. Pacific Standard Time on February 1, 1999 and the Network
Services Agreement had come into effect as of such time.
8. This Closing Agreement shall constitute an amendment to the Purchase
Agreement to the extent of the foregoing matters addressed herein. The Purchase
Agreement as so amended by this Closing Agreement shall remain in full force
and effect.
9. This Closing Agreement may be executed in couterparts. Each of such
counterparts shall be deemed to be an original, but all of such counterparts
together shall constitute one and the same agreement. This Closing Agreement
may be delivered by facsimile.
10. MindSpring will cooperate with NETCOM on a reasonable basis to
minimize NETCOM's liability to third parties with respect to the contracts
described on SCHEDULE D that are not included within the definition of
"Assets." In furtherance thereof, in addition to other actions that may be
reasonably requested by NETCOM, upon the receipt by MindSpring from NETCOM of
applicable registration codes and the names of the applicable third party
contracts, MindSpring will turn off or disconnect such registration codes.
MindSpring will assist NETCOM on a reasonable basis in identifying the
applicable registration codes for such contracts.
11. The Assets will not include, and MindSpring will obtain no benefit or
assume any liability thereunder, for the following contracts: (i) Systems Union
Maintenance; (2) ASAP: Support for Lotus Notes; and (3) Qualcomm Eudora License
(in retail boxes). These contracts will constitute part of the Retained Assets.
12. MindSpring and NETCOM acknowledge that as of the date of this Closing
Agreement, consent from the landlord to the assignment of NETCOM's office lease
(the "Lease") with Horizon Center LLC (the "Consent") has not been received.
Pursuant to Section 2.1(d) of the Asset Purchase Agreement, until such time as
the Consent is received NETCOM shall make the benefits of the Lease available
to MindSpring, and MindSpring shall perform all obligations of the tenant under
the Lease (but not including any obligations arising as a result of the failure
to obtain the Consent). All costs incurred by NETCOM in
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performing its obligations under this Section 12 shall be borne by NETCOM to
the extent that those costs exceed the costs which would have been incurred by
tenant under the Lease had the Consent been received. As of and from the
Closing and until the time the Consent is received, MindSpring will reimburse
NETCOM for the costs it incurs in connection with the Lease to the extent that
such costs do not exceed the costs which would have been incurred by tenant
under the Lease had the Consent been received. NETCOM's obligations under this
Section 12 shall not be deemed to limit NETCOM's other obligations with
respect to the Consent under Section 2.1(d) of the Asset Purchase Agreement.
[Signature Page Follows]
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We acknowledge our agreement to the above by signing where indicated below.
MINDSPRING ENTERPRISES, INC.
/s/ XXXXXX X. XxXXXXXX, XX.
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February 17, 1999 By: Xxxxxx X. XxXxxxxx, Xx.
Title: Executive Vice President and General Counsel
NETCOM ON-LINE COMMUNICATION SERVICES,
INC.
/s/ H. XXX XXXXXX
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February 17, 1999 By: H. Xxx Xxxxxx
Title: Executive Vice President
