<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
SCHEDULE 13D
(Rule 13d-101)
Under the Securities Exchange Act of 1934
COMPUSERVE CORPORATION
--------------------------------------------------
(Name of Issuer)
Common Stock, $.01 par value
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(Title of Class of Securities)
20482G10
(CUSIP Number)
Charles T. Cannada
Senior Vice President - Corporate Development
WorldCom, Inc.
515 East Amite Street
Jackson, Mississippi 39201-2702
(601) 360-8600
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
September 7, 1997
(Date of Event which Requires Filing this Statement)
If the filing person has previously filed a Statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box: [_]
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
(Continued on following pages)
Page 1 of 12 Pages
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CUSIP NO. 20482G10 13D Page 2 of 12 Pages
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- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
WorldCom, Inc.
58-1521612
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
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SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
00
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEAGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e) [_]
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
Georgia
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SOLE VOTING POWER
7
NUMBER OF NONE
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
74,200,000
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING NONE
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
74,200,000
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
74,200,000
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES*
11
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
12
80.1%
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TYPE OF REPORTING PERSON*
13
CO
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CUSIP NO. 20482G10 13D Page 3 of 12 Pages
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- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Walnut Acquisition Company, L.L.C.
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [X]
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SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
00
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e) [_]
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CITIZENSHIP OR PLACE OF ORGANIZATION
6
Delaware
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SOLE VOTING POWER
7
NUMBER OF NONE
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
74,200,000
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING NONE
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
74,200,000
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
74,200,000
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
13
80.1%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
00
- ------------------------------------------------------------------------------
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CUSIP NO. 20482G10 13D Page 4 of 12 Pages
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Explanatory Note:
As a result of executing (i) an Agreement and Plan of Merger (the
"Merger Agreement") dated as of September 7, 1997, by and among H&R Block, Inc.,
a Missouri corporation ("H&R Block"), H&R Block Group, Inc., a Delaware
corporation and a wholly owned subsidiary of H&R Block ("Block Group"),
CompuServe Corporation, a Delaware corporation and a majority owned subsidiary
of the Block Group (the "Issuer"), WorldCom, Inc., a Georgia corporation
("WorldCom"), and Walnut Acquisition Company, L.L.C., a Delaware limited
liability company which is wholly owned by WorldCom ("WAC"), and (ii) a
Stockholders Agreement (the "Stockholders Agreement") dated as of September 7,
1997, by and among H&R Block, the Block Group and WorldCom, WorldCom and WAC may
be deemed, for the purposes of Section 13(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), to have formed a "group" with H&R Block
and/or the Block Group. WorldCom and WAC understand that H&R Block has
previously filed a separate Statement on Schedule 13G with respect to its
beneficial ownership of the Issuer's securities.
The information regarding H&R Block and the Block Group contained in
this Statement on Schedule 13D is provided to the best knowledge of WorldCom and
WAC.
Item 1. Security and Issuer
This Statement on Schedule 13D relates to shares of Common Stock, $.01
par value per share (the "Shares"), of the Issuer. The address of the principal
executive offices of the Issuer is 5000 Arlington Center Boulevard, Columbus,
Ohio 43220.
Item 2. Identity and Background
(a) - (c) and (f). This Statement is being filed by WorldCom and WAC
(the "Reporting Persons"). WorldCom is organized as a corporation under the laws
of the State of Georgia, and its principal business address is 515 East Amite
Street, Jackson, Mississippi 39201-2702. WorldCom provides telecommunications
services to business, government, telecommunications companies and consumer
customers, through its network of fiber optic cables, digital microwave, and
fixed and transportable satellite earth stations.
WAC is organized as a limited liability company under the laws of the
State of Delaware, and its principal business address is 515 East Amite Street,
Jackson, Mississippi 39201-2702. WAC was organized for the purpose of
consummating the transactions contemplated by the Merger Agreement.
The names, business addresses, principal occupations and citizenship of
the directors and executive officers of WorldCom are set forth in Annex A hereto
and are incorporated herein by reference. The sole member of WAC is WorldCom
and, as such, the information set forth on Annex A with respect to the directors
and executive officers of WorldCom is also applicable to WAC. For purposes of
this Schedule 13D, because the sole member of WAC is WorldCom, any disclosures
that are made with respect to the directors and executive officers of WorldCom
are intended to be made with respect to both WorldCom and WAC.
(d) and (e). During the last five years, neither WorldCom nor WAC and,
to the best knowledge of WorldCom and WAC, none of the executive officers or
directors of WorldCom has
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CUSIP NO. 20482G10 13D Page 5 of 12 Pages
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(i) been convicted in a criminal proceeding (excluding traffic violations and
similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, Federal
or state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
WorldCom has the option (the "Option"), exercisable only in certain
circumstances which have not yet occurred and subject to the satisfaction or
waiver of certain conditions, to acquire from the Block Group all of the Shares
owned by it at the time of exercise) (as of September 7, 1997, approximately
80.1% of the Shares outstanding, in consideration for the issuance of
certain fully paid and nonassessable shares of the common stock, par value $.01
of WorldCom (the "WorldCom Common Stock") and the payment of certain cash
consideration described below, pursuant to the Stockholders Agreement, a copy of
which is attached as Exhibit 1 hereto, and is incorporated herein by reference.
Pursuant to the Stockholders Agreement, the per Share price for each Share that
may be acquired by WorldCom pursuant to the Option equals a fraction of a share
of WorldCom Common Stock equal to the Exchange Ratio, except that (a) WorldCom
will pay cash in lieu of any fractional shares and (b) in order for the
transaction that would result from the exercise of the Option to qualify for
certain desired tax treatment, WorldCom would pay the Block Group $1,000,000 in
cash in lieu of issuing shares of WorldCom Common Stock valued at $1,100,000
(such consideration in the aggregate, being the "Purchase Price"). The "Exchange
Ratio" is determined as follows: (i) if the Average Trading Price (as defined in
the Stockholders Agreement) of a share of WorldCom Common Stock is greater than
or equal to $29.54, the Exchange Ratio shall equal 0.40625; (ii) if the Average
Trading Price of a share of WorldCom Common Stock is greater than or equal to
$24.00 but less than $29.54, the Exchange Ratio shall equal a fraction (rounded
to the nearest hundred-thousandth) determined by dividing $12.00 by the Average
Trading Price of a share of WorldCom Common Stock; and (iii) if the Average
Trading Price of a share of WorldCom Common Stock is less than $24.00, the
Exchange Ratio shall equal 0.5.
Execution and delivery of the Stockholders Agreement by H&R Block and
the Block Group was a condition to the execution of the Merger Agreement, a copy
of which is attached as Exhibit 2 hereto and incorporated herein by reference.
Item 4. Purpose of Transaction
On September 7, 1997, WorldCom, H&R Block, the Block Group, the Issuer
and WAC entered into the Merger Agreement and WorldCom, H&R Block and the Block
Group entered into the Stockholders Agreement.
Pursuant to the terms of both the Merger Agreement and the Stockholders
Agreement, H&R Block and the Block Group have jointly and severally agreed that
at any meeting of stockholders of the Issuer, however called, the Block Group
will vote, and H&R Block will cause the Block Group to vote, all of the Block
Group's Shares (i) in favor of the adoption and approval of the Merger Agreement
and the transactions contemplated by the Merger Agreement by the stockholders of
the Issuer (the "Merger Proposal"), (ii) against any proposal for any
recapitalization, merger (other than the merger contemplated by the Merger
Agreement (the "Merger")), share exchange, exchange offer, tender offer, sale of
assets, sale of stock or other business combination between or among the Issuer
or certain entities affiliated with the Issuer, on the one hand, and any other
person other than WorldCom or certain entities affiliated with
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CUSIP NO. 20482G10 13D Page 6 of 12 Pages
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WorldCom, on the other hand, or any liquidation, dissolution or other action or
agreement, that would result in a breach of any representation, warranty,
covenant or other obligation or agreement of H&R Block, the Block Group or the
Issuer under the Merger Agreement or that would result in any of the conditions
to the obligations of any party under the Merger Agreement not being fulfilled
("Proposals Against WorldCom's Interest"), and (iii) in favor of any other
matter necessary for the consummation of the transactions contemplated by the
Merger Agreement with respect to which the Block Group may be entitled to vote
("Other Proposals In WorldCom's Interest").
In addition, pursuant to the Stockholders Agreement, H&R Block and the
Block Group have irrevocably appointed WorldCom, or any nominee of WorldCom, as
the true and lawful attorney, agent and proxy (the "Proxy") to vote the Shares
at any shareholder meeting or otherwise in favor of the Merger Proposal and
Other Proposals In WorldCom's Interest and against Proposals Against WorldCom's
Interest and, upon exercise of the Option referred to herein, on any other
matter.
Also, pursuant to the terms of both the Merger Agreement and the
Stockholders Agreement, H&R Block and the Block Group have agreed that they
shall not, and shall not offer or agree to, directly or indirectly, sell,
transfer, tender, assign, hypothecate or otherwise dispose of the Shares, or any
interest in the Shares, at any time prior to the consummation of the Merger or
the expiration of the Stockholders Agreement.
Pursuant to the terms of the Stockholders Agreement, H&R Block and the
Block Group granted WorldCom the Option to purchase all of the Shares held by
Block Group on the date of exercise of the Option (74,200,000 shares as of the
date of the Stockholders Agreement, representing approximately 80.1% of the
Shares outstanding as of the date of the Stockholders Agreement) for the
Purchase Price described above under Item 3 hereof and on the other terms and
conditions contained in the Stockholders Agreement.
The purpose of the transactions under the Stockholders Agreement is to
enable WorldCom to consummate the transactions contemplated under the Merger
Agreement. Pursuant to and subject to the terms and conditions of the Merger
Agreement, WAC will merge with and into the Issuer, and the Issuer will be the
surviving corporation.
Pursuant to the Merger Agreement, all of the Issuer's Shares, upon the
terms and conditions contained therein, would be converted into the right to
receive a fraction of a share of WorldCom Common Stock equal to the Exchange
Ratio, except that WorldCom will pay cash in lieu of any fractional shares and,
in order for the transaction to qualify for certain desired tax treatment,
WorldCom will pay the Block Group $1,000,000 in cash in lieu of issuing shares
of WorldCom Common Stock valued at $1,100,000.
Upon consummation of the Merger, the Shares would cease to be
authorized to be quoted on the Nasdaq National Market and would become eligible
for termination of registration pursuant to Section 12(g)(4) of the Exchange
Act.
Following the consummation of the Merger, WorldCom intends to cause the
Issuer to transfer certain assets related to the Issuer's online services
business to America Online, Inc., a Delaware corporation ("AOL"), pursuant to a
Purchase and Sale Agreement (the "Purchase and Sale Agreement") dated as of
September 7, 1997 by and among AOL, WorldCom, and ANS Communications, Inc., a
copy of which is attached as Exhibit 3 hereto and incorporated herein by
reference.
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CUSIP NO. 20482G10 13D Page 7 of 12 Pages
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Consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including, among others, the expiration or termination of
any applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and any foreign
competition law or similar law with respect to the Merger, the receipt of other
required regulatory approvals, the absence of certain material adverse changes,
and the expiration or termination of any applicable waiting periods under the
HSR Act with respect to the transactions contemplated by the Purchase and Sale
Agreement.
Except as otherwise set forth in this Item 4, neither WorldCom nor WAC
has any present plans or proposals which relate to or would result in (i) the
acquisition by any person of additional securities of the Issuer, or the
disposition of securities of the Issuer; (ii) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Issuer or any of its subsidiaries; (iii) a sale or transfer of a material amount
of assets of the Issuer or any of its subsidiaries; (iv) any change in the
present Board of Directors or management of the Issuer; (v) any material change
in the present capitalization or dividend policy of the Issuer or any other
material change in the Issuer's business or corporate structure; (vi) any other
material change in the Issuer's charter, by-laws or instruments corresponding
thereto or other actions which may impede the acquisition of control of the
Issuer by any person; (vii) causing the Shares to cease to be authorized to be
quoted or the National Market System of the National Association of Securities
Dealers Automated Quotation System; (viii) the Shares becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Exchange Act; or
(ix) any action similar to any of those actions set forth in this Paragraph
involving the Issuer or the Shares.
Item 5. Interest in Securities of the Issuer
(a) and (b). WorldCom has an Option, exercisable only in certain
circumstances and subject to the satisfaction or waiver of certain conditions,
to acquire from the Block Group all of the Shares owned by it at the time of
exercise. Based upon the representations of the Issuer, H&R Block and the Block
Group contained in the Merger Agreement, there were 92,600,000 Shares
outstanding as of September 7, 1997. Based on such representations, the Option
is exercisable for 74,200,000 Shares, or approximately 80.1% of the outstanding
Shares. When and if WorldCom acquires such Shares, it will have sole voting and
investment power with respect thereto.
Pursuant to the terms of both the Merger Agreement and the Stockholders
Agreement, H&R Block and the Block Group have jointly and severally agreed that
at any meeting of stockholders of the Issuer, however called, the Block Group
will vote, and H&R Block will cause the Block Group to vote, all of the Block
Group's Shares (which, based on the representations of the Issuer, H&R Block and
the Block Group contained in the Merger Agreement and described above, equaled
74,200,000 Shares, or 80.1% of the then issued and outstanding Shares) in favor
of the Merger Proposal and the Other Proposals In WorldCom's Interest and
against any Proposals Against WorldCom's Interest. In addition, pursuant to the
Stockholders Agreement, H&R Block and the Block Group have irrevocably appointed
WorldCom, or any nominee of WorldCom, as Proxy to vote the Shares in such manner
at any shareholder meeting or otherwise and, upon exercise of the Option, on any
other matter.
Pursuant to the terms of both the Merger Agreement and the Stockholders
Agreement, H&R Block and the Block Group have agreed that they shall not, and
shall not offer or agree to, directly or indirectly, sell, transfer, tender,
assign, hypothecate or otherwise dispose of the Shares, or any interest in the
Shares, at any time prior to the consummation of the Merger or the expiration of
the Stockholders Agreement.
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CUSIP NO. 20482G10 13D Page 8 of 12 Pages
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Other than as a result of the Option, the Proxy, the obligations of H&R
Block and the Block Group to vote in a certain manner, or the restrictions on
disposition, all as described above, neither WorldCom nor any of its
subsidiaries beneficially owns any Shares. To the knowledge of WorldCom and WAC,
none of the executive officers and directors of WorldCom beneficially own any
Shares. WorldCom and WAC disclaim beneficial ownership of such Shares and,
notwithstanding anything to the contrary contained in this Schedule 13D, and in
accordance with Rule 13d-4 promulgated under the Exchange Act, the filing of
this Schedule 13D shall not be construed as an admission that WorldCom or WAC is
the beneficial owner of such Shares.
(c) Other than the Merger Agreement described in response to Item 4
(which response is incorporated herein by reference) and the Stockholders
Agreement described in response to Items 3 and 4 (which responses are
incorporated herein by reference), there have been no transactions in Shares or,
to the knowledge of WorldCom and WAC, by any of WorldCom's executive officers
and directors, during the past 60 days.
(d) To the knowledge of WorldCom and WAC, the right to receive
dividends with respect to the Shares to which this Schedule 13D relates, and the
power to direct the receipt of dividends from, or the proceeds of the sale of,
such Shares held by the Block Group are held by the Block Group.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer
Other than the Merger Agreement described in response to Item 4 (which
response is incorporated herein by reference) and the Stockholders Agreement
described in response to Items 3 and 4 (which responses are incorporated herein
by reference) and the transactions contemplated thereby, there are no contracts,
arrangements, understandings or relationships between WorldCom or WAC and any
other person, or, to the best knowledge of WorldCom and WAC, among any of
WorldCom's executive officers and directors or between any of WorldCom's
executive officers and directors and any other person, with respect to the
Shares.
Item 7. Material to be Filed as Exhibits
Exhibit 1 Stockholders Agreement dated as of September 7, 1997.
Exhibit 2 Agreement and Plan of Merger dated as of September 7, 1997.
Exhibit 3 Purchase and Sale Agreement dated as of September 7, 1997.
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CUSIP NO. 20482G10 13D Page 9 of 12 Pages
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The undersigned hereby agree that this statement is filed on behalf of
each of the Reporting Persons.
Signature
After reasonable inquiry and to the best of the knowledge and belief of
the undersigned, each of the undersigned certifies that the information set
forth in this statement is true, complete and correct.
Dated: September 15, 1997
WORLDCOM, INC.
By: /s/ Charles T. Cannada
----------------------------------------
Name: Charles T. Cannada
Title: Senior Vice President
WALNUT ACQUISITION COMPANY, L.L.C.
By: WORLDCOM, INC., its sole member
By: /s/ Charles T. Cannada
----------------------------------------
Name: Charles T. Cannada
Title: Senior Vice President
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CUSIP NO. 20482G10 13D Page 10 of 12 Pages
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ANNEX A
Listed below are the names, addresses, positions held with the
Company and principal occupations of the directors and executive officers of
WorldCom, Inc. Each of the persons listed below is a United States citizen.
<TABLE>
<CAPTION>
Directors and Executive Officers of WorldCom, Inc.
- --------------------------------------------------
Name Address Position with Principal
---- ------- ------------- ---------
Company Occupation
------- ----------
<S> <C> <C> <C>
Carl J. Aycock Master Corporation Director Self-employed as a
123 South Railroad Avenue financial administrator
Brookhaven, Massachusetts 39601
Max E. Bobbitt Metromedia Asia Services, Inc. 110 Director President and Chief
E. 42nd Street, Suite 1501 New Executive Officer,
York, New York 10017 Metromedia Asia
Corporation
Bernard J. Ebbers 515 East Amite Street Director, President and President and Chief
Jackson, Mississippi 39201-2702 Chief Executive Officer Executive Officer,
WorldCom, Inc.
Francesco Galesi The Galesi Group Director Chairman and Chief
435 East 52nd Street Executive Officer, The
New York, New York 10022 Galesi Group
Richard R. Jaros Kiewit Diversified Group, Inc. Director President, Kiewit
3555 Farnam Street Diversified Group, Inc.
Omaha, Nebraska 68131
Stiles A. Kellett, Jr. Kellett Investment Corp. Director Chairman, Kellett
200 Galleria Parkway, Investment Corp.
Suite 1800
Atlanta, Georgia 30339
David C. McCourt C-TEC Corporation Director Chairman of the Board
105 Carnegie Center and Chief Executive
Princeton, New Jersey 08540 Officer, C-TEC
Corporation
John A. Porter Hidden Bridge Farm Director Chairman of the Board of
1809 Chancellor Point Road Directors and Chief
Trappe, Maryland 21673 Executive Officer,
Industrial Electric
Manufacturing, Inc.
</TABLE>
<PAGE>
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CUSIP NO. 20482G10 13D Page 11 of 12 Pages
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<TABLE>
<CAPTION>
Name Address Position with Principal
---- ------- ------------- ---------
Company Occupation
------- ----------
<S> <C> <C> <C>
John W. Sidgmore UUNET Technologies, Inc. Director, Vice Chairman Vice Chairman of the
3060 Williams Drive of the Board and Chief Board and Chief
Fairfax,Virginia 22031 Operations Officer Operations Officer,
WorldCom, Inc.
Scott D. Sullivan 515 East Amite Street Director, Chief Chief Financial Officer
Jackson, Mississippi 39201-2702 Financial Officer and and Secretary, WorldCom,
Secretary Inc.
Lawrence C. Tucker Brown Brothers Harriman & Co. Director General Partner, Brown
59 Wall Street Brothers Harriman & Co.
New York, New York 10005
</TABLE>
<PAGE>
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CUSIP NO. 20482G10 13D Page 12 of 12 Pages
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EXHIBIT INDEX
Item 7. Material to be Filed as Exhibits
Exhibit 99.1 Stockholders Agreement dated as of September 7, 1997.
Exhibit 99.2 Agreement and Plan of Merger dated as of September 7, 1997.
Exhibit 99.3 Purchase and Sale Agreement dated as of September 7, 1997.
<PAGE>
EXHIBIT 10.1
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") dated as of September
7, 1997, by and among H&R BLOCK, INC., a Missouri corporation ("H&R Block"),
H&R BLOCK GROUP, INC., a Delaware corporation ("Block Group"), and WORLDCOM,
INC., a Georgia corporation ("WorldCom"),
WITNESSETH:
WHEREAS, H&R Block owns all of the issued and outstanding shares of
capital stock of Block Group;
WHEREAS, as of the date hereof, H&R Block beneficially owns and Block
Group directly owns approximately 80.13% of the shares of common stock, par
value $0.01 per share (the "Common Shares"), of CompuServe Corporation, a
Delaware corporation ("CompuServe") (all such CompuServe Common Shares which are
now owned by Block Group, together with all shares of capital stock of
CompuServe which are hereafter acquired by Block Group or any of its Affiliates,
are referred to herein as the "Shares");
WHEREAS, WorldCom, Walnut Acquisition Company, L.L.C., a Delaware
limited liability company which is wholly owned by WorldCom ("WAC"), CompuServe,
H&R Block and Block Group have entered into an Agreement and Plan of Merger
dated as of the date hereof (as amended from time to time, the "Merger
Agreement") (capitalized terms used but not otherwise defined in this Agreement
having the meanings assigned to such terms in the Merger Agreement), which
provides for the merger of WAC with and into CompuServe (the "Merger") in
accordance with the laws of the State of Delaware and the provisions of the
Merger Agreement; and
WHEREAS, the parties intend that WorldCom's acquisition of the Shares
shall constitute a qualified stock purchase within the meaning of Section 338
(d)(3) of the Code;
WHEREAS, as a condition to the willingness of WorldCom and WAC to
enter into the Merger Agreement and incur the obligations set forth therein,
WorldCom has required that H&R Block and Block Group agree, and in order to
induce WorldCom to enter into the Merger Agreement, H&R Block and Block Group
have agreed, to enter into this Agreement and undertake the obligations set out
herein.
NOW, THEREFORE, in consideration of the foregoing premises and
agreements contained herein, the parties hereto agree as follows:
<PAGE>
ARTICLE I
VOTING OF SHARES AND APPOINTMENT AS PROXY
1.1. Voting Agreement. H&R Block and Block Group hereby agree that
during the term hereof, at any meeting of the stockholders of CompuServe,
however called, and in any action by consent of the stockholders of CompuServe,
Block Group shall vote, and H&R Block shall cause Block Group to vote, the
Shares: (A) in favor of the Merger, the Merger Agreement and this Agreement and
the transactions contemplated by the Merger Agreement and this Agreement, (B)
against any proposal for any recapitalization, merger (other than the Merger),
share exchange, exchange offer, tender offer, sale of assets or other business
combination between CompuServe or any CompuServe Entity and any person or entity
(other than WorldCom or WAC) or any liquidation, dissolution or any other action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of CompuServe, H&R Block or Block
Group under the Merger Agreement or this Agreement or which would result in any
of the conditions to the Merger Agreement or this Agreement not being fulfilled;
and (C) in favor of any other matter necessary for the transactions contemplated
hereby or the Merger Agreement with respect to which Block Group may be entitled
to vote.
1.2. No Disposition or Encumbrance of Shares. H&R Block and Block
Group, jointly and severally, hereby covenant and agree that, from the date
hereof until the termination of this Agreement, they shall not, and shall not
offer or agree to, directly or indirectly, sell, transfer, tender, assign,
hypothecate or otherwise dispose of, or create or permit to exist any
Encumbrance (as hereinafter defined) on, the Shares, or any interest in the
Shares, at any time prior to the expiration of the term of this Agreement.
1.3. Voting of Shares; Further Assurances.
(a) H&R Block and Block Group, by this Agreement, with respect
to the Shares, do hereby constitute and appoint WorldCom, or any nominee of
WorldCom, with full power of substitution, from the date hereof until the
termination of this Agreement, as its true and lawful attorney, agent and proxy
(its "Proxy"), for and in its name, place and stead, to vote the Shares in such
manner as it or its nominee shall in its sole discretion deem proper, and
otherwise act with respect to the Shares, at any meeting (whether annual or
special and whether or not an adjourned meeting) of CompuServe's stockholders,
including the right to sign its name (as stockholder) to any consent,
certificate or other document relating to CompuServe that the law of the State
of Delaware may permit or require, regardless of the subject matter of such vote
or other action:
(i) in favor of the Merger, the Merger Agreement and this
Agreement and the transactions contemplated by the Merger Agreement and this
Agreement;
(ii) against any proposal for any recapitalization, merger
(other than the Merger), share exchange, exchange offer, tender offer, sale of
assets or other business combination between CompuServe or any CompuServe Entity
and any person or
2
<PAGE>
entity (other than WorldCom or WAC) or any liquidation, dissolution or
any other action or agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or
agreement of CompuServe, H&R Block or Block Group under the Merger
Agreement or this Agreement or which could result in any of the
conditions to the Merger Agreement or this Agreement not being
fulfilled; and
(iii) in favor of any other matter necessary for
the transactions contemplated hereby or by the Merger Agreement with
respect to which Block Group may be entitled to vote.
(b) In addition, upon WorldCom's exercise of the Option in accordance
with the terms hereof, the power of attorney and proxy granted in Section 1.3(a)
shall automatically and without the necessity of any additional action, consent,
other writing or agreement on the part of WorldCom, H&R Block or Block Group be
expanded in scope to permit WorldCom or its nominee to act for Block Group as
its Proxy, for and in its name, place and stead, with full power of
substitution, to vote the Shares in such manner as it or its nominee shall in
its sole discretion deem proper, and otherwise act with respect to the Shares,
at any meeting and to exercise the full rights of the owner or holder of the
Shares, including the right to request or call and attend any and all meetings
(whether annual or special and whether or not an adjourned meeting) of
CompuServe's stockholders, including the right to sign its name (as stockholder)
to any consent, certificate or other document relating to CompuServe that the
law of the State of Delaware may permit or require, regardless of the subject
matter of such vote or other action .
(c) SUBJECT ONLY TO THE EXPIRATION OF THE TERM OF THIS AGREEMENT, THE
FOREGOING PROXY AND POWER OF ATTORNEY IS IRREVOCABLE, IS GRANTED IN
CONSIDERATION OF WORLDCOM AND WAC ENTERING INTO THE MERGER AGREEMENT AND THIS
AGREEMENT AND IS COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN
IRREVOCABLE POWER. This appointment shall revoke all prior powers of attorney
and proxies appointed by H&R Block or Block Group at any time with respect to
the Shares and no subsequent powers of attorney or proxies will be appointed by
H&R Block or Block Group, or be effective with respect thereto, during the term
of this Agreement.
(d) H&R Block and Block Group shall each perform such further acts and
execute such further documents and instruments as may reasonably be required to
vest in WorldCom the power to carry out and give effect to the provisions of
this Article I, including applying a legend reasonably satisfactory to WorldCom
promptly after the date hereof to the certificates evidencing the Shares
reflecting the provisions of this Agreement and, at the request of WorldCom, to
deliver such certificates to WorldCom to hold in custody.
ARTICLE II
GRANT OF OPTION
2.1 Grant of Option.
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(a) Subject to the terms and conditions hereof, H&R Block and Block
Group hereby grant to WorldCom an irrevocable option (the "Option") to purchase
(the "Purchase") all (but not less than all) of the Shares, whether before or
after any transfer of such Shares, for and in consideration of the payment of
the Purchase Price described below to Block Group. WorldCom shall not be under
any obligation to elect to purchase the Shares and may allow this Agreement to
terminate without effecting the purchase of Shares hereunder.
(b) The per Share price for each Share shall equal a fraction of a
share of WorldCom Common Stock equal to the Exchange Ratio (defined below),
subject to the payment of cash in lieu of any fractional share as provided in
paragraph (d) below (the aggregate of such shares of WorldCom Common Stock,
together with such cash payment in lieu of fractional shares, is referred to
herein as the "Purchase Price"). The "Exchange Ratio" shall be determined as
follows: (i) if the Average Trading Price of a WorldCom Common Share is greater
than or equal to $29.54, the Exchange Ratio shall equal 0.40625; (ii) if the
Average Trading Price of a WorldCom Common Share is greater than or equal to
$24.00 but less than $29.54, the Exchange Ratio shall equal a fraction (rounded
to the nearest hundred-thousandth) determined by dividing $12.00 by the Average
Trading Price of a WorldCom Common Share; and (iii) if the Average Trading Price
of a WorldCom Common Share is less than $24.00, the Exchange Ratio shall equal
0.5. The Exchange Ratio shall be subject to appropriate adjustment in the event
of a stock split, stock dividend or recapitalization after the date of this
Agreement applicable to shares of the WorldCom Common Stock or the CompuServe
Common Stock.
(c) In order to allow the transaction that would result from the
exercise of the Option to constitute a qualified stock purchase under Section
338 of the Code and not a tax-free reorganization, Block Group shall have the
right to elect to (1) reduce the aggregate Purchase Price otherwise payable to
Block Group hereunder by such number of shares of WorldCom Common Stock the
aggregate value of which, based on the Average Trading Price, is equal to
$1,100,000, subject to appropriate adjustment in the event of a stock split,
stock dividend or recapitalization after the date of this Agreement applicable
to shares of the WorldCom Common Stock and not reflected in the Average Trading
Price, and (2) in lieu of such shares, receive $1,000,000 in cash.
(d) No fractional shares of WorldCom Common Stock shall be issued
hereunder nor will any fractional share interest involved entitle the holder
thereof to vote, to receive dividends or to exercise any other rights of a
shareholder of WorldCom. In lieu thereof, if Block Group would otherwise be
entitled to a fractional share of WorldCom Common Stock pursuant to the
provisions hereof, it shall receive in lieu of such fractional share an amount
in cash equal to the value of such fractional share. The value of such
fractional share shall be the product of such fraction multiplied by the Average
Trading Price, subject to appropriate adjustment in the event of a stock split,
stock dividend or recapitalization after the date of this Agreement applicable
to shares of the WorldCom Common Stock and not reflected in the Average Trading
Price.
(e) For purposes of this Agreement, the "Average Trading Price" shall
mean the average of the daily closing prices per WorldCom Common Share, as
quoted by NASDAQ as reported in The Wall Street Journal, Eastern Edition, or if
-----------------------
not reported thereby, The
---
4
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New York Times, for the twenty consecutive full NASDAQ trading days ending on
- --------------
the date immediately prior to the third full NASDAQ trading day immediately
preceding the day on which the Closing (as defined below) occurs.
2.2 Exercise of Option. Upon the occurrence of one or more of the
events set forth below (the "Triggering Events"), WorldCom may exercise the
Option, in whole but not in part, at any time during the term of this Agreement
as set forth in Section 7.2 hereof:
(a) the Board of Directors of CompuServe or any committee thereof
shall have withdrawn or modified in a manner adverse to WorldCom its approval or
recommendation of the CompuServe Proposal, or failed to reconfirm its
recommendation within fifteen business days after a written request to do so, or
the Board of Directors of CompuServe or any committee thereof shall have
resolved to take any of the foregoing actions;
(b) CompuServe shall fail to call, give notice of, convene and
hold the CompuServe Stockholders Meeting as soon as practicable pursuant to
Section 8.6 of the Merger Agreement; or
(c) Any party to the Merger Agreement shall have terminated such
agreement pursuant to Section 11.1(b) thereof or WorldCom shall have terminated
the Merger Agreement pursuant to Section 11.1(c), (d) or (f) thereof and, in any
such case, H&R Block, Block Group or CompuServe shall have breached one of its
covenants or agreements thereunder or a condition to WorldCom's obligations
thereunder that is within the control of H&R Block, Block Group or CompuServe
shall not have been satisfied at the time of such termination, including,
without limitation, the failure of the CompuServe stockholders to approve the
CompuServe Proposal.
H&R Block and Block Group shall notify WorldCom promptly in writing of the
occurrence of any Triggering Event, it being understood that the giving of such
notice by H&R Block or Block Group shall not be a condition to the right of
WorldCom to exercise its Option or obtain the expanded proxy rights described in
Section 1.3(b).
2.3. Notice of Exercise; Conditions to Closing. If WorldCom desires to
exercise the Option, it shall notify Block Group in writing of its election.
Once WorldCom has delivered its notice of exercise of the Option, it shall be
obligated to consummate the Purchase, except that, notwithstanding the delivery
of any such notice:
(a) WorldCom's obligation to close the Purchase shall be subject to the
following conditions being fulfilled on or prior to the date of Closing,
any of which may be waived by WorldCom, in its discretion:
(i) Representations and Warranties of H&R Block. The
-------------------------------------------
representations and warranties of H&R Block, Block Group and CompuServe set
forth in this Agreement that are qualified by Material Adverse Effect or
otherwise as to materiality shall be true and correct, and those that are not
so qualified shall be true and correct except for failures to be true and
correct as would not have a Material Adverse
5
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Effect on CompuServe, as of the date of this Agreement and as of the Closing as
though made at and as of the Closing, except to the extent that such
representations and warranties expressly relate to a specific earlier date (in
which case such representations and warranties that are qualified by a Material
Adverse Effect shall be true and correct, and those that are not so qualified
shall be true and correct except for failures to be true and correct as would
not, individually or in the aggregate, have a Material Adverse Effect on
CompuServe, on and as of such earlier date). None of the representations or
warranties regarding CompuServe or any of the CompuServe Entities incorporated
herein from Article III of the Merger Agreement, disregarding any qualifications
regarding materiality (including any reference to Material, Material Adverse
Change or Material Adverse Effect), shall be untrue or incorrect, except for
such untrue or incorrect representations or warranties that, when taken together
as a whole, do not constitute a Material Adverse Effect .
(ii) Performance of this Agreement. Each of the covenants and
-----------------------------
agreements of H&R Block and Block Group to be performed or observed at or prior
to the Closing pursuant to the terms hereof shall have been duly performed or
observed, except where such failure would not have a Material Adverse Effect on
CompuServe or would not materially impair the ability of H&R Block, Block Group
or CompuServe to consummate the Purchase and the other transactions
contemplated hereby.
(iii) No Material Adverse Change. Neither CompuServe nor any
--------------------------
CompuServe Entity shall have suffered a Material Adverse Change from the date of
the CompuServe Balance Sheet to the Closing.
(b) Block Group's obligation to close the Purchase shall be subject to
the following conditions being fulfilled on or prior to the date of Closing, any
of which may be waived by WorldCom, in its discretion:
(i) Representations and Warranties of WorldCom. The representations and
------------------------------------------
warranties of WorldCom set forth in this Agreement that are qualified by
Material Adverse Effect or otherwise as to materiality shall be true and
correct, and those that are not so qualified shall be true and correct except
for failures to be true and correct as would not have a Material Adverse Effect
on WorldCom as of the date of this Agreement and as of the Closing as though
made at and as of the Closing, except to the extent that such representations
and warranties expressly relate to a specific earlier date (in which case such
representations and warranties that are qualified by a Material Adverse Effect
shall be true and correct, and those that are not so qualified shall be true and
correct except for failures to be true and correct as would not, individually or
in the aggregate, have a Material Adverse Effect on WorldCom, on and as of such
earlier date).
(ii) Performance of this Agreement. Each of the covenants and
-----------------------------
agreements of WorldCom to be performed or observed at or prior to the Closing
pursuant to the terms hereof shall have been duly performed or observed except
where such failure would not have a Material Adverse Effect on WorldCom or would
not materially impair the ability of WorldCom to consummate the Merger and the
other transactions
6
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contemplated hereby.
(iii) Minimum Average Trading Price. The Average Trading Price
-----------------------------
shall be no less than $24.00, after appropriate adjustment in the event of a
stock split, stock dividend or recapitalization after the date of this Agreement
applicable to shares of the WorldCom Common Stock.
(c) WorldCom's and Block Group's obligations to close the Purchase
shall be subject to the following conditions being fulfilled on the date of
Closing, to the extent applicable to such party:
(i) No Injunction or Action. No Governmental Entity shall have
-----------------------
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order, whether temporary, preliminary or permanent, which is
in effect and which has or would have the effect of making the transactions
contemplated by this Agreement illegal or restraining or prohibiting
consummation of such transactions.
(ii) Hart-Scott-Rodino Act. Any mandatory waiting period (and any
---------------------
extension thereof) applicable to the consummation of the Purchase under the HSR
Act, any foreign competition law or similar law shall have expired or been
terminated .
(d) WorldCom and H&R Block and Block Group will cooperate in
filing any notifications or applications required and shall otherwise cooperate
promptly in taking any actions necessary to satisfy the conditions referred to
in this Section.
(e) Upon the giving by WorldCom to Block Group of the written
notice of exercise of the Option provided for under this Section 2.3 and the
tender of the applicable Purchase Price, WorldCom shall be deemed to be the
holder of record of the Shares issuable upon such exercise, notwithstanding that
the stock transfer books of CompuServe shall then be closed or that certificates
representing such Shares shall not then have actually been delivered to
WorldCom. H&R Block shall pay all expenses, and any and all United States
federal, state, and local taxes and other charges that may be payable in
connection with the preparation, issuance and delivery of stock certificates
under this Section in the name of WorldCom or its assignee, transferee, or
designee.
2.4. Closing.
(a) Date of Closing. Subject to the terms and conditions hereof,
---------------
the closing (the "Closing") for the purchase of Shares hereunder shall occur on
the date designated by WorldCom in its written notice to Block Group of its
desire to purchase its Shares as provided in Section 2.2 above, subject to the
fulfillment or waiver of the conditions to the parties obligations hereunder,
provided that the Closing shall take place no earlier than two Business Days
after and no later than five Business Days after the satisfaction or waiver of
such conditions. Unless otherwise agreed by the parties, the Closing shall take
place at the offices of Bryan Cave LLP, Washington, D.C. at 10:00 a.m. local
time.
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(b) Closing Procedure. At the Closing, (i) H&R Block and Block Group
-----------------
shall deliver or cause to be delivered to WorldCom all of the certificates
evidencing the Shares to be sold hereunder, with appropriate stock powers
attached, properly signed, with any necessary documentary or transfer tax stamps
duly affixed and (ii) WorldCom shall deliver, or cause to be delivered such
certificates evidencing such number of shares of WorldCom Common Stock (and such
cash to be paid in lieu of fractional shares of such WorldCom Common Stock and
to be paid pursuant to Block Group's election to receive cash, if any, under
Section 2.1(c)) in order to satisfy its obligation to pay the Purchase Price to
Block Group.
(c) Closing Deliveries. H&R Block and Block Group, on the one hand,
------------------
and WorldCom, on the other hand, will use reasonable efforts to deliver or cause
to be delivered to the other at or prior to the Closing hereunder the
certificates, opinions and other documents contemplated by Article X of the
Merger Agreement, provided that references therein to the Merger, the Merger
Agreement, the Closing Date or the Effective Time shall be deemed modified as
contemplated by Section 3.4, Section 5.2 and Article VI hereof; and provided
further that H&R Block and Group agree to execute and deliver the Standstill
Agreement and the Noncompete/Nonsolicitation Agreement, the Registration Rights
Letter, and a Registration Rights Letter for the benefit of WorldCom with
respect to the Shares purchased hereunder in substantially the form contemplated
by the Merger Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF H&R BLOCK AND BLOCK GROUP
H&R Block and Block Group, jointly and severally, hereby make the
following representations and warranties to WorldCom, each of which shall be
true and correct on the date hereof, on the date on which WorldCom delivers
notice of its exercise of the Option, if it does so, and on the date of the
Closing, if any.
3.1. Representations and Warranties Under the Merger Agreement
Restated. Subject to the Schedules to the Merger Agreement, H&R Block and Block
Group, jointly and severally, hereby make the representations and warranties to
WorldCom contained in Articles III, IV and V of the Merger Agreement, except
that (a) any such representation and/or warranty as to the effect of the Merger
Agreement or the Merger on any of H&R Block, Block Group or CompuServe (or any
of their associated Entities) shall be considered a representation and/or
warranty as to the effect of this Agreement or the Purchase, as the case may be,
on any such entity or entities, as appropriate, and (b) the following
representations and warranties are not hereby repeated: Sections 3.19 and 4.11.
H&R Block and Block Group further jointly and severally represent and warrant
that Block Group has, and the transfer of the Shares upon exercise of the Option
will pass to WorldCom, good and marketable title to the Shares, free and clear
as provided in Section 5.2 of the Merger Agreement.
3.2 Rights Agreement . CompuServe has effected an amendment to the
CompuServe Rights Agreement with the effect that (a) (i) WorldCom will not be
deemed to be an "Acquiring Person" (as defined in the CompuServe Rights
Agreement), (ii) neither the
8
<PAGE>
"Shares Acquisition Date" nor the "Distribution Date" (each as defined in the
CompuServe Rights Agreement) will be deemed to occur, and (iii) the "Rights" (as
defined in the CompuServe Rights Agreement) will not separate from the
CompuServe Common Shares, in any such event as a result of the execution,
delivery or performance of this Agreement or any other agreement provided for
herein or the taking of any action provided for herein.
3.3 Takeover Statutes. The Board of Directors of CompuServe has
taken all necessary actions so that the restrictions contained in Section 203 of
the DGCL will not apply to the execution, delivery or performance of this
Agreement by CompuServe, H&R Block or WorldCom or the consummation of the
transactions contemplated hereby.
ARTICLE IV
SECURITIES LAWS MATTERS
Each of WorldCom and Block Group hereby makes the following
representations and warranties to the other, solely with respect to matters
relating to itself, each of which shall be true and correct on the date hereof,
on the date on which WorldCom delivers notice of its exercise of the Option, if
it does so, and on the date of the Closing, if any:
4.1 Qualification. Each of WorldCom and Block Group has such knowledge
-------------
and experience in financial and business matters that it is capable of
evaluating the merits and risks of the agreements and obligations entered into
by them hereunder and bearing the economic risks associated therewith. The
information provided by WorldCom and Block Group to the other concerning its
knowledge and experience is correct in all material respects. Each of WorldCom
and Block Group has received and reviewed such information concerning the
securities which may be issued to it hereunder (the "Securities") as it has
deemed appropriate, including the filings with the Securities and Exchange
Commission made by CompuServe and WorldCom, respectively, since January 1, 1995,
and has had the opportunity to ask questions and receive answers thereto
concerning CompuServe, WorldCom and the Merger and the transactions contemplated
hereby, and to obtain such further information as it has determined desirable.
Each of WorldCom and Block Group has been advised by counsel and financial
advisors with respect to this Agreement and the agreements and obligations
contained herein. Each of WorldCom and Block Group is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act of 1933, as amended (the "Securities Act").
4.2 Not Registered Under Securities Act. Each of WorldCom and Block
-----------------------------------
Group understands that the Securities will not, when delivered hereunder, be
registered under the Securities Act, in reliance on an exemption thereunder for
transactions not involving a public offering and that the Securities have not
been approved or disapproved by the Securities and Exchange Commission or any
other federal or state agency. Each of WorldCom and Block Group acknowledges
that the other has relied upon its representations and warranties contained in
this Agreement as a basis for such exemption.
9
<PAGE>
4.3 Investment Purpose. Each of WorldCom and Block Group will be
------------------
acquiring any Securities which it may acquire hereunder for its own account, for
investment purposes only, and not with a view to the sale or other distribution,
in whole or in part, except as permitted by law.
4.4 Restrictions on Transfers. Each of WorldCom and Block Group
-------------------------
understands that the Securities may not be assigned, pledged, hypothecated,
sold, made subject to a security interest, or otherwise transferred without (i)
an effective registration statement for such Securities under the Securities Act
and such applicable state securities laws, or (ii) delivery to the issuer of
such Securities of an opinion of counsel prepared at the expense of the holder
thereof, which form of opinion and counsel shall be reasonably satisfactory to
the issuer and its counsel, that an exemption from registration is available
under the Securities Act or under any applicable state securities laws. Each of
WorldCom and Block Group further understands that there will be placed on the
certificate(s) representing the Securities a legend stating in substance:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED
UNTIL A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD
THERETO, OR, IN THE OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER OF THESE
SHARES, REGISTRATION UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORLDCOM
WorldCom hereby makes the following representations and warranties to
H&R Block and Block Group, each of which shall be true and correct on the date
hereof, on the date on which WorldCom delivers notice of its exercise of the
Option, if it does so, and on the date of the Closing, if any:
5.1. Representations and Warranties Under the Merger Agreement
Restated. Subject to the Schedules to the Merger Agreement, WorldCom hereby
makes the representations and warranties to H&R Block and Block Group contained
in Article VI of the Merger Agreement, except that any such representation
and/or warranty as to the effect of the Merger Agreement or the Merger on
WorldCom or any WorldCom Entity shall be considered a representation and/or
warranty as to the effect of this Agreement or the Purchase on any such entity
or entities, as appropriate.
ARTICLE VI
COVENANTS
10
<PAGE>
The parties hereto each hereby agree to their respective covenants
contained in Articles II, VIII (other than Sections 8.17, 8.24 and 8.25) and IX
and the first sentence of Section 11.5(a) of the Merger Agreement as independent
obligations of such parties under this Agreement, it being agreed that H&R Block
and Block Group further agree to cause CompuServe and the CompuServe Entities to
perform their covenants under the Merger Agreement, which covenant of H&R Block
and Block Group shall be considered a separate obligation under this Agreement,
provided that (a) no such covenant is repeated herein to the extent it relates
solely to the mechanics required to effectuate a merger, (b) any covenant that
refers to the Merger Agreement shall be deemed to refer to this Agreement, as
appropriate, and (c) any covenant that refers to the "Closing Date" or the
"Effective Time" shall be deemed to refer to the Closing hereunder, as
appropriate. Without limiting the foregoing, the parties agree that (a) the
indemnification covenants under Section 8.4 of the Merger Agreement are hereby
agreed to as applicable to breaches of representations, warranties and covenants
under this Agreement, and (b) Section 9.1(a)(i) of the Merger Agreement is
hereby agreed to as applicable to the Purchase. The parties agree to make the
Elections described in Article IX of the Merger Agreement, as they apply to the
Purchase, if the Purchase is consummated.
ARTICLE VII
TERM OF AGREEMENT
7.1 Commencement of Agreement. The rights and obligations of the
parties under this Agreement are effective as of the date hereof.
7.2 Term.
(a) This Agreement and the rights granted hereunder shall remain in
effect until the earlier of (i) the Closing hereunder, (ii) the Closing under
the Merger Agreement, and (iii) thirty (30) business days following the
termination of the Merger Agreement pursuant to Section 11.1 thereof.
(b) Notwithstanding the foregoing paragraph (a), upon exercise of the
Option, the rights and obligations of the parties shall remain in effect
following termination of the Merger Agreement, provided that, after exercise,
the Option and this Agreement shall terminate if the Closing does not take place
within one year following the date of termination of the Merger Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 Representations and Warranties; Survival"""". The
representations, warranties, covenants and agreements contained in this
Agreement, including those referenced from the Merger Agreement, or in any
instrument delivered pursuant to this Agreement shall
11
<PAGE>
survive the termination of the Merger Agreement and the Option and the Closing
hereunder.
8.2 Notices"""". Any notices or other communications required or
desired to be given hereunder shall be deemed to have been properly given if
sent by hand delivery, facsimile and overnight courier, registered or certified
mail, return receipt requested, postage prepaid, to the parties hereto at the
following addresses, or at such other address as such party may advise the
others in writing from time to time by like notice:
If to WorldCom:
WorldCom, Inc.
515 East Amite Street
Jackson, Mississippi 39201
Attention: Charles T. Cannada
Facsimile: (601) 360-
with copies to:
WorldCom, Inc.
10777 Sunset Office Drive
Suite 330
St. Louis, Missouri 63127
Attention: P. Bruce Borghardt
Facsimile: (314) 909-4101
and
Bryan Cave LLP
One Metropolitan Square, Suite 3600
St. Louis, Missouri 63102-2750
Attention: R. Randall Wang
Facsimile: (314) 259-2020
If to H&R Block or Block Group:
H&R Block, Inc.
World Headquarters
4400 Main Street
Kansas City, MO 64111
Attention: Frank L. Salizzoni
12
<PAGE>
with a copy to:
H&R Block, Inc.
World Headquarters
4400 Main Street
Kansas City, MO 64111
Attention: James Ingraham
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Benjamin F. Stapleton
Facsimile: (212) 558-3588
All such notices or other communications shall be deemed to have been duly given
on the date of hand delivery or telecopy or facsimile, if receipt is confirmed,
or on the next Business Day following timely deposit of such communications with
overnight courier or on the third Business Day following the date of mailing, if
delivered by registered or certified mail.
8.3 Governing Law and Dispute Resolution. This Agreement shall
be interpreted, construed and enforced in accordance with the law of the State
of Delaware, applied without giving effect to any conflicts-of-law principles,
except to the extent that Missouri law is applicable to the internal affairs of
H&R Block or Georgia law is applicable to the internal affairs of WorldCom. Any
dispute relating to this Agreement or the transactions contemplated hereby shall
be resolved in the state courts of general jurisdiction, or the Chancery Court
if it has subject matter jurisdiction, of the State of Delaware or in the United
States District Court for the District of Delaware. Each party irrevocably
submits to such courts' exclusive jurisdiction and acknowledges that such courts
are a convenient forum and consents to service of process at the address for
such party set forth in Section 8.2.
8.4 Specific Performance. Each party acknowledges and agrees
that, in the event of an actual or threatened breach of any of the provisions of
this Agreement by such party, the harm to the others will be immediate,
substantial and irreparable and that monetary damages will be inadequate.
Accordingly, each party agrees that, in such an event, the others will be
entitled to equitable relief, including an injunction and an order of specific
performance, in addition to any and all other remedies at law or in equity.
8.5 Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If
any provision of this Agreement or the application thereof to any Person or any
circumstance is invalid or unenforceable, (a) a suitable and equitable provision
shall be substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such provision to
other persons, entities or
13
<PAGE>
circumstances shall not be affected by such ginvalidity or unenforceability, nor
shall such invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other jurisdiction.
8.6 Captions. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
8.7 Entire Agreement. This Agreement, together with the Merger
Agreement and the Standstill Agreement, and any documents delivered by the
parties in connection therewith and herewith, constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
8.8 Counterparts. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
8.9 Binding Effect; Assignability. This Agreement shall be binding
on, and shall inure to the benefit of, only the parties hereto, and their
respective successors and assigns, and nothing in this Agreement, express or
implied is intended to or shall confer upon any Person any right, benefit or
remedy of nature whatsoever under or by virtue of this Agreement. No party may
assign or delegate any right or obligation hereunder without the prior written
consent of the other party; provided, however, that WorldCom may assign any or
all of its rights to a direct or indirect subsidiary of WorldCom or, with the
prior written consent of Block Group, which shall not be unreasonably withheld,
to any other Person. Any assignment of rights or delegation of obligations not
in compliance herewith shall be null and void.
8.10 No Rule of Construction. The parties acknowledge that all
parties have read and negotiated the language used in this Agreement. The
parties agree that, because all parties participated in negotiating and drafting
this Agreement, no rule of construction shall apply to this Agreement which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting this Agreement.
8.11 Adjustment upon Changes in Capitalization.
(a) In the event of any change in capitalization of CompuServe prior to
purchase of the Shares by reason of any stock dividend, split-up, merger,
recapitalization, combination, exchange of shares or the like, the price and the
number and kind of securities subject to the Option and the Purchase Price
therefor shall be appropriately adjusted and proper provision shall be made in
the agreements governing such transaction so that WorldCom shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that WorldCom would have received in respect of the Shares if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable. If, on or after the date hereof, CompuServe should
declare or pay any cash or stock dividend or other
14
<PAGE>
distribution or issue any rights with respect to the Shares, payable or
distributable to shareholders of record on a date prior to the transfer to the
name of WorldCom or its nominee on the stock transfer records of CompuServe of
any Shares or other securities purchased hereunder, then the amount of any such
cash dividend or cash distribution, and the whole of any such non-cash dividend
distribution or right which would have been payable with respect to each Share
purchased by WorldCom, will be promptly remitted and transferred by Block Group
to WorldCom. Upon the purchase of the Shares, to the extent consistent with law,
pending remittance, WorldCom will be entitled to all rights and privileges as
owner of any such non-cash dividend, distribution or right.
(b) In the event that CompuServe shall enter into an agreement (i) to
consolidate with or merge into any person, other than WorldCom or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than WorldCom or one
of its subsidiaries, to merge into CompuServe and CompuServe shall be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding Common Shares shall be changed into or exchanged for stock or
other securities of CompuServe or any other person or cash or any other property
or the outstanding Common Shares immediately prior to such merger shall after
such merger represent less than 50% of the outstanding Common Shares and share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than WorldCom or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option to acquire the number and
class of shares or other securities or property that WorldCom would have
received in respect of Shares if the Option had been exercised immediately prior
to such consolidation, merger, sale or transfer, or the record date therefor, as
applicable. Notwithstanding the foregoing, H&R Block and Block Group covenant
and agree to take any and all actions within their power to prevent any such
agreement from being entered into by CompuServe during the term of this
Agreement.
(c) If any event described in paragraph (a) or (b) above shall occur in
respect of WorldCom or the WorldCom Common Stock to be issued to Block Group on
exercise of the Option, corresponding adjustments to the rights of Block Group
and the obligations of WorldCom shall be made on terms corresponding to those
set forth in such paragraphs.
[The remainder of this page intentionally left blank]
15
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to
be executed by its officer thereunto duly authorized as of the date first
written above.
H&R BLOCK, INC.
By /s/Frank L. Salizzoni
------------------------------
Name: Frank L. Salizzoni
Title: President and Chief
Execuitve Officer
H&R BLOCK GROUP, INC.
By /s/Frank L. Salizzoni
------------------------------
Name: Frank L. Salizzoni
Title: President
WORLDCOM, INC.
By /s/Charles T. Cannada
------------------------------
Name: Charles T. Cannada
Title: Senior Vice President
16
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
By and Among
H&R BLOCK, INC.,
H&R BLOCK GROUP, INC.,
COMPUSERVE CORPORATION,
WORLDCOM, INC.
AND
WALNUT ACQUISITION COMPANY, L.L.C.
Dated as of
September 7, 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE I TERMS OF THE MERGER...............................................2
1.1 The Merger............................................................2
1.2 Effective Time........................................................2
1.3 Merger Consideration..................................................3
1.4 Stockholders' Rights upon Merger......................................4
1.5 Surrender and Exchange of Shares......................................4
1.6 Certificate of Incorporation..........................................5
1.7 Bylaws................................................................5
1.8 Other Effects of Merger...............................................5
1.9 No Dissenters' Rights.................................................5
1.10 Additional Actions...................................................5
ARTICLE II ASSET TRANSFER; SETTLEMENT OF INTERCOMPANY ACCOUNTS;
RELEASE OF CLAIMS.........................................................6
2.1 Transfer of Assets....................................................6
2.2 Intercompany Accounts.................................................6
2.3 Release of Claims.....................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING COMPUSERVE..............7
3.1 Organization, Existence and Good Standing.............................7
3.2 CompuServe Capital Stock..............................................8
3.3 Ownership of CompuServe Entities' Capital Stock; Investments..........8
3.4 Power and Authority; Non-Contravention; Filing and Consents...........9
3.5 CompuServe SEC Documents; Financial Information......................10
3.6 Subsequent Events....................................................11
3.7 Legal Proceedings....................................................13
3.8 Contracts............................................................13
3.9 Accounts Receivable..................................................15
3.10 Taxes...............................................................15
3.11 Employee Benefit Plans; Employment Matters..........................16
3.12 Compliance with Laws; Permits.......................................18
3.13 Patents, Trademarks, Etc............................................19
3.14 Labor Matters.......................................................20
3.15 Insurance...........................................................20
3.16 Rights Agreement....................................................20
3.17 Commissions and Fees................................................21
3.18 Vote Required.......................................................21
3.19 Opinion of Financial Advisor........................................21
3.20 Takeover Statutes...................................................21
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING H&R BLOCK...............21
4.1 Organization, Existence and Good Standing............................21
4.2 H&R Block Ownership of Capital Stock.................................22
4.3 Power and Authority; Non-Contravention; Filings and Consents.........22
4.4 Taxes................................................................23
4.5 Assets and Employees Used in CompuServe's Business...................24
4.6 Legal Proceedings....................................................24
4.7 Rights Agreement.....................................................24
4.8 Commissions and Fees.................................................24
4.9 Opinion of Financial Advisor.........................................25
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ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING BLOCK GROUP..............25
5.1 Organization, Existence and Good Standing............................25
5.2 Block Group Ownership of CompuServe Entities' Capital Stock..........25
5.3 Power and Authority; Non-Contravention; Filings and Consents.........25
5.4 Legal Proceedings....................................................27
ARTICLE VI REPRESENTATIONS AND WARRANTIES REGARDING WORLDCOM................27
6.1 Organization, Existence and Good Standing............................27
6.2 WorldCom Capital Stock...............................................27
6.3 Power and Authority; Non-Contravention; Filings and Consents.........28
6.4 WorldCom SEC Documents; Financial Information........................29
6.5 Subsequent Material Adverse Change...................................30
6.6 Legal Proceedings....................................................30
6.7 Taxes................................................................31
6.8 Compliance with Laws in General......................................31
6.9 Vote Required........................................................31
6.10 Commissions and Fees................................................31
ARTICLE VII REPRESENTATIONS AND WARRANTIES REGARDING WAC....................31
7.1 Organization, Existence, Good Standing and Ownership Interest........31
7.2 Power and Authority; Non-Contravention...............................32
7.3 Consents and Approvals...............................................32
7.4 Legal Proceedings....................................................33
7.5 No Contracts or Liabilities..........................................33
7.6 Commissions and Fees.................................................33
ARTICLE VIII COVENANTS......................................................33
8.1 Interim Conduct of CompuServe and the CompuServe Entities............33
8.2 Voting of Shares.....................................................36
8.3 No Transfers.........................................................37
8.4 Indemnification......................................................37
8.5 No Contribution......................................................40
8.6 Meeting of CompuServe Stockholders...................................41
8.7 Registration Statement; Proxy Statement..............................41
8.8 Access to Information................................................43
8.9 Confidentiality......................................................44
8.10 HSR Act Compliance, Etc.............................................44
8.11 Public Disclosures..................................................44
8.12 Resignation of Directors and Officers...............................45
8.13 Notification of Certain Matters.....................................45
8.14 No Solicitation.....................................................45
8.15 Other Actions.......................................................47
8.16 Cooperation.........................................................47
8.17 CompuServe and CompuServe Entity Employees..........................48
8.18 CompuServe Name.....................................................49
8.19 Affiliate Letters...................................................49
8.20 Noncompete and Nonsolicitation Agreement............................50
8.21 Facilities Agreements...............................................50
8.22 SEC and Stockholder Filings.........................................50
8.23 Takeover Statutes...................................................50
8.24 Comfort Letters.....................................................50
8.25 Interim Conduct of WorldCom.........................................51
8.26 Stock Options.......................................................51
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ARTICLE IX TAX MATTERS......................................................52
9.1 Section 338 Election.................................................52
9.2 Tax Indemnification..................................................54
9.3 Tax Related Adjustments..............................................59
9.4 Transfer Taxes.......................................................60
ARTICLE X CONDITIONS TO CLOSING.............................................60
10.1 Mutual Conditions...................................................60
10.2 Conditions to Obligations of WorldCom and WAC.......................61
10.3 Conditions to Obligations of H&R Block, Block Group and CompuServe..62
ARTICLE XI TERMINATION, AMENDMENT AND WAIVER................................63
11.1 Termination.........................................................63
11.2 Effect of Termination...............................................64
11.3 Amendment...........................................................64
11.4 Waiver..............................................................65
11.5 Expenses............................................................65
ARTICLE XII MISCELLANEOUS...................................................66
12.1 Representations and Warranties; Survival............................66
12.2 Notices.............................................................66
12.3 Governing Law and Dispute Resolution................................68
12.4 Specific Performance................................................68
12.5 Severability........................................................68
12.6 Captions............................................................68
12.7 Entire Agreement....................................................68
12.8 Counterparts........................................................68
12.9 Binding Effect; Assignability.......................................69
12.10 Director and Officer Indemnification...............................69
12.11 No Rule of Construction............................................69
12.12 Schedules..........................................................69
ARTICLE XIII DEFINITIONS....................................................70
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Exhibits
Exhibit A Form of Stockholders Agreement
Exhibit B Form of Standstill Agreement
Exhibit C Form of Affiliate Letter
Exhibit D Form of Noncompete/Nonsolicitation Agreement
Exhibit E Form of Opinions of counsel to H&R Block, Block Group and
CompuServe
Exhibit F Form of Opinion of Counsel to H&R Block
Exhibit G Form of Opinions of Counsel to WorldCom
Exhibit H Form of Opinion of Counsel to WorldCom
Exhibit I Form of Registration Rights Letter
Schedules of CompuServe
Schedule 3.1 Organization, Existence and Good Standing
Schedule 3.2 CompuServe Capital Stock
Schedule 3.3(a) CompuServe Entities' Capital Stock; Investments
Schedule 3.3(b) CompuServe Entities' Capital Stock; Investments
Schedule 3.5 CompuServe SEC Documents; Financial Information
Schedule 3.6 Subsequent Events
Schedule 3.7 Legal Proceedings
Schedule 3.8(a) Contracts
Schedule 3.8(b) Contracts
Schedule 3.8(c) Contracts (International Distribution Agreements)
Schedule 3.8(d) Contracts (Network Services Agreements)
Schedule 3.8(e) Contracts (Government Contracts)
Schedule 3.8(f) Consents (Waivers and Approvals)
Schedule 3.10 Tax Disclosure
Schedule 3.10(g) Tax Disclosure (Tax Sharing Agreements)
Schedule 3.11(a) Employee Benefit Plans; Employment Matters (employee benefit
plans)
Schedule 3.11(b) Employee Benefit Plans; Employment Matters (unions;
employment agreements or plans affected by the Agreement)
Schedule 3.12 Compliance with Laws; Permits
Schedule 3.13 Patents, Trademarks, Etc.
Schedule 8.1(c) Interim Conduct of CompuServe and the CompuServe Entities
Schedule 8.4(b) General Indemnification by CompuServe and H&R Block
Schedule 8.17 CompuServe Entity Employees
Schedule 8.26 CompuServe Stock Option Payments
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Schedules of H&R Block
Schedule 2.2 Amounts Owed From CompuServe to H&R Block
Schedule 4.2 H&R Block Ownership of CompuServe Entities Capital Stock
Schedule 4.4 H&R Block Tax Returns
Schedule 4.5(a) Assets Used Principally in CompuServe's Business
Schedule 4.5(b) Other Assets Used in CompuServe's Business
Schedule 4.6 Legal Proceedings
Schedules of Block Group
Schedule 5.2 Block Group Capital Stock
Schedule 5.4 Legal Proceedings
Schedules of WorldCom
Schedule 6.2 WorldCom Common Shares Agreements
Schedule 6.7 Taxes
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), made and entered into
as of the 7th day of September, 1997, by and among H&R BLOCK, INC., a Missouri
corporation ("H&R Block"), H&R BLOCK GROUP, INC., a Delaware corporation and a
wholly-owned subsidiary of H&R Block ("Block Group"), COMPUSERVE CORPORATION, a
Delaware corporation and a majority-owned subsidiary of Block Group
("CompuServe"), WORLDCOM, INC., a Georgia corporation ("WorldCom"), and WALNUT
ACQUISITION COMPANY, L.L.C., a Delaware limited liability company which is
wholly-owned by WorldCom ("WAC"). All capitalized terms used in this Agreement
and not defined in the text hereof have the meanings set forth in Article XIII.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of H&R Block, Block Group, CompuServe and
WorldCom, and the sole member (WorldCom) of WAC each have determined that it is
in the best interests of their respective stockholders or member that they enter
into this Agreement, which provides for the merger of WAC with and into
CompuServe (the "Merger") in accordance with the laws of the State of Delaware
and the provisions of this Agreement, and have authorized their respective
officers to execute and deliver this Agreement on their behalf;
WHEREAS, the Board of Directors of CompuServe has determined it is in the
best interests of its stockholders to consummate the Merger and has adopted a
resolution approving and adopting this Agreement, subject to authorization by
resolution of the stockholders of CompuServe;
WHEREAS, the Board of Directors of H&R Block, as sole stockholder of Block
Group, has determined it is in the best interests of its shareholders to
consummate the transactions contemplated by this Agreement and has adopted a
resolution approving and adopting the Agreement;
WHEREAS, WorldCom, as the sole member of WAC, has approved this Agreement;
WHEREAS, as a condition and inducement to WorldCom's and WAC's entering
into this Agreement and incurring the obligations set forth herein, concurrently
with the execution and delivery of this Agreement, H&R Block and Block Group are
entering into a stockholder's agreement with WorldCom in the form attached
hereto as Exhibit A (the "Stockholders Agreement"), pursuant to which, among
other things, Block Group has agreed to grant WorldCom an irrevocable option to
purchase all of the capital stock of CompuServe held by Block Group, agreed to
vote all of its CompuServe Common Shares in favor of the Merger and granted
WorldCom an irrevocable proxy to vote such shares;
WHEREAS, as a condition and inducement to WorldCom's and WAC's entering
into this Agreement and incurring the obligations set forth herein, concurrently
with the execution and delivery of this Agreement, H&R Block and Block Group are
entering into a standstill agreement
<PAGE>
in the form attached hereto as Exhibit B (the "Standstill Agreement"), pursuant
to which, among other things, H&R Block and Block Group agree to restrictions
with respect to the acquisition of WorldCom Common Shares;
WHEREAS, the parties intend that WorldCom's acquisition of CompuServe
through the Merger shall constitute a qualified stock purchase within the
meaning of Section 338(d)(3) of the Code; and
WHEREAS, H&R Block, Block Group, CompuServe, WorldCom and WAC desire to
make certain representations, warranties, covenants and agreements in connection
with the transactions contemplated by this Agreement and also to prescribe
various conditions to the consummation thereof;
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto do hereby agree as follows:
ARTICLE I
Terms of the Merger
1.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, the Merger shall be consummated in accordance with the DGCL
and the DLLCA. At the Effective Time (as defined in Section 1.2 below), upon
the terms and subject to the conditions of this Agreement, WAC shall be merged
with and into CompuServe in accordance with the DGCL and the DLLCA and the
separate existence of WAC shall thereupon cease, and CompuServe, as the
surviving corporation in the Merger (the "Surviving Corporation"), shall
continue its corporate existence under the laws of the State of Delaware as a
subsidiary of WorldCom. The parties shall prepare and execute a certificate of
merger (the "Certificate of Merger") in order to comply in all respects with
the applicable requirements of the DGCL and the DLLCA and with the provisions of
this Agreement.
1.2 Effective Time. The Merger shall become effective at the time of
the filing of the Certificate of Merger with the Secretary of State of Delaware
in accordance with the applicable provisions of the DGCL and the DLLCA or at
such later time as may be specified in the Certificate of Merger. The
Certificate of Merger shall be filed as soon as practicable after all of the
conditions set forth in this Agreement have been satisfied or waived by the
party or parties entitled to the benefit of the same. WorldCom and CompuServe
shall mutually determine the time of such filing and the place where the closing
of the Merger (the "Closing") shall occur. The time when the Merger shall
become effective is herein referred to as the "Effective Time" and the date on
which the Effective Time occurs is herein referred to as the "Closing Date."
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1.3 Merger Consideration.
(a) (i) Subject to the provisions of this Agreement and any
applicable backup or other withholding requirements, each of the CompuServe
Common Shares outstanding as of the Effective Time shall be converted into the
right to receive, and there shall be paid and issued as hereinafter provided in
exchange for each of the CompuServe Common Shares, a fraction of a share of
WorldCom Common Stock equal to the Exchange Ratio (defined below), subject to
the payment of cash in lieu of any fractional share as provided in Section
1.3(b) (such share of WorldCom Common Stock, together with such cash payment,
the """Merger Consideration"). The "Exchange Ratio" shall be determined as
follows: (i) if the Average Trading Price of a WorldCom Common Share is greater
than or equal to $29.54, the Exchange Ratio shall equal 0.40625; (ii) if the
Average Trading Price of a WorldCom Common Share is greater than or equal to
$24.00 but less than $29.54, the Exchange Ratio shall equal a fraction (rounded
to the nearest hundred-thousandth) determined by dividing $12.00 by the Average
Trading Price of a WorldCom Common Share; and (iii) if the Average Trading Price
of a WorldCom Common Share is less than $24.00, the Exchange Ratio shall equal
0.5. The Exchange Ratio shall be subject to appropriate adjustment in the event
of a stock split, stock dividend or recapitalization after the date of this
Agreement applicable to shares of the WorldCom Common Stock or the CompuServe
Common Stock.
(ii) In order to allow the transaction contemplated by this Agreement
to constitute a qualified stock purchase under Section 338 of the Code and not a
tax-free reorganization, Block Group shall have the right to elect to (x) reduce
the aggregate Merger Consideration otherwise payable to Block Group pursuant to
the Merger by such number of shares of WorldCom Common Stock the aggregate value
of which, based on the Average Trading Price, is equal to $1,100,000, subject to
appropriate adjustment in the event of a stock split, stock dividend or
recapitalization after the date of this Agreement applicable to shares of the
WorldCom Common Stock and not reflected in the Average Trading Price, and (y) in
lieu of such shares, receive $1,000,000 in cash.
(b) No fractional shares of WorldCom Common Stock shall be issued
pursuant to the Merger nor will any fractional share interest involved entitle
the holder thereof to vote, to receive dividends or to exercise any other rights
of a shareholder of WorldCom. In lieu thereof, any Person who would otherwise
be entitled to a fractional share of WorldCom Common Stock pursuant to the
provisions hereof shall receive an amount in cash equal to the value of such
fractional share. The value of such fractional share shall be the product of
such fraction multiplied by the Average Trading Price, subject to appropriate
adjustment in the event of a stock split, stock dividend or recapitalization
after the date of this Agreement applicable to shares of the WorldCom Common
Stock and not reflected in the Average Trading Price.
(c) Each share of CompuServe Common Stock held in the treasury of
CompuServe or by a wholly owned subsidiary of CompuServe shall be canceled as of
the Effective Time and no Merger Consideration shall be payable with respect
thereto.
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(d) Subject to the provisions of this Agreement, at the Effective
Time, the interest of WorldCom in WAC outstanding immediately prior to the
Merger shall be converted, by virtue of the Merger and without any action on the
part of the holder thereof, into one share of the common stock, par value $.01
per share, of the Surviving Corporation (the """Surviving Corporation Common
Stock"), which one share of the Surviving Corporation Common Stock shall
constitute all of the issued and outstanding capital stock of the Surviving
Corporation and shall be owned by WorldCom.
1.4 Stockholders' Rights upon Merger. Upon consummation of the Merger,
the certificates which theretofore represented CompuServe Common Shares (the
"""Certificates") shall cease to represent any rights with respect thereto, and,
subject to applicable law and this Agreement, shall only represent the right to
receive the Merger Consideration.
1.5 Surrender and Exchange of Shares. (a) Prior to the Closing Date,
WorldCom shall appoint The Bank of New York or such other entity as may be
serving as WorldCom's transfer agent to act as exchange agent (the """Exchange
Agent") for the Merger. Promptly after the Effective Time, WorldCom shall make
available, or cause to be made available, to the Exchange Agent such
certificates evidencing such number of shares of WorldCom Common Stock and such
amount of cash, as and when necessary, in order to enable the Exchange Agent to
effect the exchange of certificates and make the cash payment required pursuant
to Section 1.3(a)(ii) above if elected by Block Group, and the cash payments in
respect of fractional shares contemplated by Section 1.3(b) above.
(b) On the Closing Date, WorldCom shall instruct the Exchange Agent to mail
to each holder of record of a Certificate within five Business Days of receiving
from CompuServe a list of such holders of record, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
WorldCom may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing the
Merger Consideration.
(c) After the Effective Time, each holder of a CompuServe Common Share
shall surrender and deliver the Certificates to the Exchange Agent together with
a duly completed and executed transmittal letter. Upon such surrender and
delivery, the holder shall receive a certificate representing the number of
whole shares of WorldCom Common Stock into which such holder's CompuServe Common
Shares have been converted pursuant to this Agreement, subject to the cash
payment required pursuant to Section 1.3(a)(ii) above if elected by Block Group
and the cash payment in lieu of any fractional share contemplated by Section
1.3(b) above. Until so surrendered and exchanged, each outstanding Certificate
after the Effective Time shall be deemed for all purposes to evidence only the
right to receive that number of whole shares of WorldCom Common Stock into which
the CompuServe Common Shares have been converted pursuant to this Agreement,
subject to the cash payment required pursuant to Section 1.3(a)(ii) above if
elected by Block Group and the cash payment in lieu of any fractional share
contemplated by Section 1.3(b) above; provided, however, that no dividends or
-------- -------
other distributions, if any, in respect of the shares of WorldCom Common Stock,
declared after the
4
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Effective Time and payable to holders of record after the Effective Time, shall
be paid to the holders of any unsurrendered Certificates until such Certificates
are exchanged as provided herein. Subject to applicable law, after the surrender
and exchange of Certificates, the record holders thereof will be entitled to
receive any such unpaid dividends or other distributions, without interest
thereon, which have become payable after the Effective Time with respect to the
number of shares of WorldCom Common Stock for which such Certificates were
exchangeable. Holders of any unsurrendered Certificates shall not be entitled to
vote WorldCom Common Stock or exercise other rights of the holders of WorldCom
Common Stock until such Certificates are exchanged pursuant to this Agreement.
(d) At the Effective Time, the stock transfer books of CompuServe shall be
closed, and no transfer of CompuServe Common Shares shall be made thereafter.
In the event that, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for shares of
WorldCom Common Stock and cash as provided in Section 1.3(a)(ii) if so elected
by Block Group and Section 1.3(b) above.
(e) Neither CompuServe nor WorldCom nor the Exchange Agent shall be liable
to any holder of CompuServe Common Shares for any such shares of WorldCom Common
Stock (or dividends or distributions with respect thereto) or cash delivered to
a public official pursuant to any abandoned property, escheat or similar law,
rule, regulation, statute, order, judgment or decree.
1.6 Certificate of Incorporation. At and after the Effective Time, the
Certificate of Incorporation of the Surviving Corporation shall be identical to
the Certificate of Incorporation of CompuServe in effect at the Effective Time
(subject to any subsequent amendment).
1.7 Bylaws. At and after the Effective Time, the Bylaws of CompuServe
in effect at the Effective Time shall be the Bylaws of the Surviving Corporation
(subject to any subsequent amendment).
1.8 Other Effects of Merger. The Merger shall have all further effects
as specified in the applicable provisions of the DGCL and the DLLCA.
1.9 No Dissenters' Rights. The holders of the CompuServe Common
Shares are not entitled to appraisal rights under the DGCL. H&R Block and
CompuServe jointly and severally represent and warrant that the holders of the
CompuServe Common Shares are not entitled to appraisal rights under the
Certificate of Incorporation of CompuServe.
1.10 Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of WAC or CompuServe or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of WAC or
CompuServe, all such deeds, bills of sale, assignments and assurances and to
take and do, in the name and on behalf of WAC or CompuServe, all such other
5
<PAGE>
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II
ASSET TRANSFER; SETTLEMENT OF INTERCOMPANY ACCOUNTS; RELEASE OF CLAIMS
2.1 Transfer of Assets. H&R Block, Block Group and CompuServe
agree that, prior to the Closing, any interests, assets or rights owned, leased
or held by or in the possession or control of H&R Block or any H&R Block Entity
which are principally used in or principally related to the business of
CompuServe or any of the CompuServe Entities, whether tangible or intangible,
and whether fixed, contingent or otherwise, including contracts, contractual
rights, licenses and intellectual property rights, will be transferred and
contributed for no additional consideration to CompuServe or such CompuServe
Entity as directed by WorldCom; provided, however, that such interests, assets
or rights shall not include (x) assets held under any H&R Block employee benefit
plans, such as life insurance policies and deferred compensation plans for the
benefit of CompuServe Employees, or (y) any other H&R Block insurance policy
(except, in the case of clauses (x) and (y), any pre-paid benefits or coverage
under insurance policies which inure to CompuServe or any of the CompuServe
Entities and coverage with respect to such policies for accrued or past claims
or losses). In connection therewith, H&R Block, Block Group and CompuServe
agree to use all reasonable efforts to obtain any required consents, approvals
or waivers. To the extent that any such interests, assets or rights have not
been so contributed to CompuServe or a CompuServe Entity prior to or at the
Closing, H&R Block and Block Group shall, and shall cause the other H&R Block
Entities to, use all reasonable efforts, including acting after the Closing and
to the maximum extent permitted by law as CompuServe's agent, to effectuate such
transfer and contribution to CompuServe or such other CompuServe Entity as soon
as practicable after the Closing for no additional consideration.
2.2 Intercompany Accounts. Immediately prior to the Closing, H&R Block
and each other H&R Block Entity shall pay CompuServe and each CompuServe Entity
all amounts then owing from H&R Block and each other H&R Block Entity to
CompuServe and each CompuServe Entity, respectively (including all amounts owed
to CompuServe and each CompuServe Entity pursuant to the Tax Sharing Agreement
or any other Tax sharing agreement), if any, less all amounts then owing, if
any, from CompuServe and such CompuServe Entity to H&R Block and/or a H&R Block
Entity. Such payment shall be accomplished without incurrence of any liability
for Taxes by CompuServe or any CompuServe Entity (other than Taxes with respect
to which H&R Block and Block Group have agreed to and do fully indemnify
WorldCom). To the extent that any such amounts have not been paid prior to or
at the Closing, H&R Block and any other H&R Block Entity shall, as soon as
practicable following the Closing, pay to CompuServe and each CompuServe Entity
all such unpaid amounts together with interest thereon as provided by the terms
of such obligations. H&R Block and Block Group jointly and severally represent
and warrant that, as of July 31, 1997, the aggregate net amount owed by H&R
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Block and the H&R Block Entities to CompuServe and the CompuServe Entities is
set forth on Schedule 2.2 hereto.
------------
2.3 Release of Claims. Effective as of the Effective Time, H&R Block,
for itself and on behalf of each of the H&R Block Entities, releases and forever
discharges CompuServe and the CompuServe Entities from any and all claims,
demands, proceedings, causes of action, orders, obligations, contracts,
agreements, debts, and liabilities whatsoever, that H&R Block or any H&R Block
Entity now has, has ever had, or may hereafter have against CompuServe or the
CompuServe Entities arising at or prior to the Effective Time or on account of
or arising out of any matter, cause, or event occurring at or prior to the
Effective Time, including, but not limited to, any rights to indemnification,
contribution or reimbursement from CompuServe or any of the CompuServe Entities,
and whether or not relating to matters pending on, or asserted after, the
Effective Time. Further, H&R Block and each of the H&R Block Entities, as of
the Effective Time, irrevocably covenants to refrain from, directly or
indirectly, asserting any claim or demand, or commencing, instituting, or
causing to be commenced, any proceeding of any kind against CompuServe or any of
the CompuServe Entities, based upon any matter purported to be released hereby.
ARTICLE III
Representations and Warranties Regarding CompuServe
H&R Block, Block Group and CompuServe, jointly and severally, hereby
make the following representations and warranties to WorldCom and WAC:
3.1 Organization, Existence and Good Standing. CompuServe is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. CompuServe has all necessary corporate power and
authority to own, lease, operate and transfer its properties and to conduct its
business as currently conducted. Each CompuServe Entity is duly organized,
validly existing and, to the extent such concept is applicable under the laws of
such jurisdiction, in good standing in its respective jurisdiction of
organization, and has all necessary corporate power to own, lease, operate and
transfer its properties and carry on its business as currently conducted, except
where the failure to be so organized, existing and in good standing or to have
such power and authority would not have a Material Adverse Effect. CompuServe
and each CompuServe Entity is duly qualified to do business and, to the extent
such concept is applicable in such jurisdictions, is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so duly qualified and in good standing would not
have a Material Adverse Effect. CompuServe has made available to WorldCom
complete and correct copies of its Certificate of Incorporation and Bylaws and
other comparable charter or organizational documents of each CompuServe Entity,
in each case as amended to the date of this Agreement. Schedule 3.1 sets forth
------------
a complete and accurate list of all CompuServe Entities and their jurisdiction
of incorporation or organization and qualification or license, and a description
of the interest of CompuServe and any other holder in each such entity.
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3.2 CompuServe Capital Stock. The authorized capital stock of
CompuServe consists of (i) 250,000,000 CompuServe Common Shares, of which as of
September 3, 1997, 92,600,000 shares were issued and outstanding and no shares
were issued and held as treasury shares and (ii) 10,000,000 shares of preferred
stock, par value $.01 per share, of which, as of the date of this Agreement, no
shares are issued and outstanding and no shares are issued and held as treasury
shares. All of the issued and outstanding CompuServe Common Shares are duly
authorized, validly issued, fully paid and non-assessable. As of September 5,
1997, options (the "CompuServe Stock Options") to purchase an aggregate of
1,712,411 CompuServe Common Shares (subject to adjustment on the terms set forth
in the CompuServe Stock Plans) were outstanding under the 1996 CompuServe
Corporation Long-Term Incentive Plan, the CompuServe Corporation 1996 Employee
Stock Purchase Plan, the CompuServe 1996 Outside Directors Plan, and the Crystal
Club Plan (the "CompuServe Stock Plans"), which are the only existing stock
option, purchase or other plans, arrangements or agreements relating to
CompuServe Common Shares. Schedule 3.2 sets forth a complete and accurate list
------------
of all outstanding CompuServe Stock Options held by current or former CompuServe
Employees and directors of CompuServe (including a vesting schedule and the
exercise price of each option grant) as of September 5, 1997, and no additional
CompuServe Stock Options have been issued or granted since such date. Except as
provided in the preceding sentences of this Section 3.2 and except for
CompuServe Common Shares issued after September 5, 1997 pursuant to the exercise
of CompuServe Stock Options in accordance with their terms, there are no
options, preemptive rights, warrants, or similar rights granted by CompuServe in
respect of shares of CompuServe capital stock or any other agreements to which
CompuServe is a party providing for the issuance or sale by it of any additional
securities. Except as set forth on Schedule 3.2 or in the CompuServe SEC
------------
Documents, there are no outstanding CompuServe debt securities or other
agreements or instruments issued by CompuServe or to which H&R Block, any H&R
Block Entity, CompuServe or any CompuServe Entity or, to the knowledge of
CompuServe, any other Person is a party, entitling the holders thereof or
parties thereto to vote or to direct or otherwise restrict the vote of the
holders of CompuServe Common Shares or which are convertible into or
exchangeable for capital stock of CompuServe. Except as set forth on Schedule
--------
3.2 or as otherwise provided in this Agreement, neither CompuServe nor any
- ---
CompuServe Entity, nor to the knowledge of H&R Block, Block Group or CompuServe,
any stockholder of CompuServe, is a party to any voting trust, voting agreement,
proxy or similar agreement. As of the date of this Agreement, except for an
aggregate of 4,000,000 CompuServe Common Shares reserved for issuance upon the
exercise of CompuServe Stock Options granted or which may be granted under the
CompuServe Stock Plans and an aggregate of 2,500,000 shares of Series A Junior
Participating Preferred Stock reserved for issuance under the CompuServe Rights
Agreement, there are no shares of authorized capital stock of CompuServe
reserved for issuance. There is no liability for or obligations with respect to
any dividends, distributions or similar participation interests declared or
accumulated but unpaid with respect to any shares of CompuServe capital stock.
The CompuServe Common Shares held by Block Group entitle Block Group to exercise
80.13% of the voting power of all of the outstanding CompuServe Common Shares.
3.3 Ownership of CompuServe Entities' Capital Stock; Investments. (a)
CompuServe owns (directly or through one or more CompuServe Entities as set
forth on Schedule 3.3(a)),
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beneficially and (except for de minimis numbers of shares held by nominees as
required by the laws of certain foreign jurisdictions) of record, the issued and
outstanding shares of capital stock or other securities of or interests in the
CompuServe Entities as set forth on Schedule 3.3(a), all of which shares or
---------------
other securities or interests are duly authorized, validly issued and
outstanding, fully paid and non-assessable, and free and clear of all Liens or
Other Encumbrances. As of the date of this Agreement, except as set forth on
Schedule 3.3(a), there are no preemptive rights, options, warrants or similar
- ---------------
rights granted by CompuServe or any CompuServe Entity in respect of shares of
capital stock or other securities of or interests in the CompuServe Entities or
any agreements to which CompuServe or any CompuServe Entity is a party providing
for the issuance or sale by CompuServe or any CompuServe Entity of capital stock
or other securities of or interests in any CompuServe Entity. There are no
outstanding debt securities, agreements or interests of any CompuServe Entity,
or other instruments issued by or to which CompuServe, or any CompuServe Entity
or, to the knowledge of H&R Block, Block Group or CompuServe, any other Person
is a party, entitling the holders thereof or parties thereto to vote or to
direct or otherwise restrict the vote of the holders of the capital stock or
other securities of or interests in any CompuServe Entity or which are
convertible into or exchangeable for capital stock or other securities of or
interests in any CompuServe Entity. No capital stock or other securities of or
interests in any CompuServe Entity are reserved for issuance under any stock
plans or otherwise, and there is no liability for or obligations with respect to
any dividends, distributions or similar participation rights declared or
accumulated but unpaid with respect to any securities or interests of any
CompuServe Entity.
(b) Except for the CompuServe Entities or as set forth on Schedule
--------
3.3(b), CompuServe and the CompuServe Entities do not own, beneficially or
- ------
otherwise, any shares of capital stock or other securities of or interests in,
or any direct or indirect interest of any nature in, any other corporation,
partnership, limited liability company, joint venture or other entity.
3.4 Power and Authority; Non-Contravention; Filings and Consents.
(a) CompuServe has full corporate power and authority to execute, deliver and
perform its obligations under this Agreement and all agreements and other
documents executed and delivered, or to be executed and delivered, by it
pursuant to this Agreement and, except for the calling of the CompuServe
Stockholders Meeting and the vote of Block Group as the majority stockholder of
CompuServe to approve this Agreement, has taken all action required by its
Certificate of Incorporation, its Bylaws or otherwise, to duly and validly
authorize the execution, delivery and the performance of its obligations under
this Agreement and such related documents and the consummation of the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement by CompuServe do not and, subject to the receipt of the requisite
vote of CompuServe's stockholders as aforesaid, the consummation of the
transactions contemplated by this Agreement and such related documents by
CompuServe will not (i) conflict with or violate any provisions of its
Certificate of Incorporation or its Bylaws, or (ii) constitute a breach of or
default under or result in the creation of any Liens or Other Encumbrances or
Tax on or against, any assets, rights or property of CompuServe or any
CompuServe Entity or give rise, with or without notice or lapse of time (other
than under any of the CompuServe Stock Plans as set forth on Schedule 3.2), to
-------------
any third-party right of termination, cancellation, material modification or
acceleration under any note, bond, mortgage, pledge, lien, lease, agreement,
9
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license, commitment or instrument, applicable to CompuServe or any CompuServe
Entity, or to which CompuServe or any CompuServe Entity is a party or by which
CompuServe or any CompuServe Entity, or any of their respective assets is or are
bound, or conflict with or violate any restrictions of any kind to which they
are subject, which breach, default, lien, encumbrance, Tax, termination,
cancellation, modification or acceleration would have a Material Adverse Effect
or which would prevent or materially delay the consummation of the transactions
contemplated by this Agreement or otherwise prevent CompuServe from performing
its obligations hereunder in any material respect, or (iii) subject to obtaining
the consents, approvals, orders, authorizations and registrations, and making
the filings described in Section 3.4(b) below, violate any law, order, writ,
judgment, award, statute, rule, regulation or decree of any Governmental Entity
or arbitrator, which, if violated or accelerated, would have a Material Adverse
Effect or which would prevent or materially delay the consummation of the
transactions contemplated by this Agreement or otherwise prevent CompuServe from
performing its obligations hereunder in any material respect. The execution,
delivery and performance of this Agreement have been approved by the Board of
Directors of CompuServe. This Agreement has been duly executed and delivered by
CompuServe and, assuming this Agreement constitutes a valid and binding
obligation of WorldCom and WAC enforceable against such parties in accordance
with its terms, constitutes a valid and binding obligation of CompuServe
enforceable against CompuServe in accordance with its terms.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required to be obtained,
made or filed by CompuServe or any CompuServe Entity in connection with the
execution and delivery of this Agreement by CompuServe, the consummation by
CompuServe of the transactions contemplated by this Agreement, except for (i)
filings with and, where required, approval by one or more non-U.S. competition
or antitrust regulatory bodies, (ii) the filing with the SEC of (x) the
Registration Statement and the CompuServe Proxy Statement and (y) such reports
under the Exchange Act as may be required in connection with this Agreement and
the transactions contemplated by this Agreement, (iii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of states in which
CompuServe is qualified to do business, and (iv) such consents, approvals,
orders, authorizations, registrations, declarations, or filings the failure of
which to be obtained, made or filed would not (A) impair in any material respect
the ability of CompuServe to perform its obligations hereunder, (B) prevent or
impede, in any material respect, the consummation of the transactions
contemplated by this Agreement, or (C) have a Material Adverse Effect.
3.5 CompuServe SEC Documents; Financial Information. CompuServe
has filed with the SEC all reports, proxy statements, forms, and other documents
required to be filed therewith (the "CompuServe SEC Documents") prior to the
date of this Agreement, and, as of the Closing Date, CompuServe shall have filed
with the SEC all CompuServe SEC Documents required to be filed prior thereto.
As of their respective dates, (i) the CompuServe SEC Documents complied, and all
similar documents filed with the SEC after the date of this Agreement but prior
to the Closing will comply, in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such CompuServe SEC
Documents and similar
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documents and (ii) none of the CompuServe SEC Documents contained, nor will any
similar documents filed after the date of this Agreement but prior to the
Closing contain, any untrue statement of a material fact and none of the
CompuServe SEC Documents omitted, nor will any similar document filed after the
date of this Agreement but prior to the Closing omit, to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements (including any related notes
and schedules) of CompuServe included in the CompuServe SEC Documents (including
any similar documents filed with the SEC after the date of this Agreement but
prior to the Closing) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto and have been or will be prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q under
the Exchange Act) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position of CompuServe and its
consolidated subsidiaries (including all applicable CompuServe Entities) as of
the dates thereof and the consolidated results of their operations and cash
flows for the periods then-ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments consistent with prior years). Nothing in
this Section 3.5 shall constitute a representation or warranty by H&R Block,
Block Group or CompuServe to the extent that any untrue statement, omission or
failure to comply results from information supplied by WorldCom to CompuServe
for inclusion in any documents filed by CompuServe with the SEC. Except as set
forth on Schedule 3.5 or as disclosed in the CompuServe SEC Documents and the
------------
April 30, 1997 consolidated balance sheet included in the CompuServe SEC
Documents (the "CompuServe Balance Sheet"), and except for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice since the date of the CompuServe Balance Sheet, neither CompuServe nor
any of CompuServe's consolidated subsidiaries has any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise) which would
be required by GAAP to be set forth on a consolidated balance sheet of
CompuServe and its consolidated subsidiaries or in the notes thereto that are
not so included or disclosed and which would reasonably be expected to have a
Material Adverse Effect.
3.6 Subsequent Events. Except as set forth on Schedule 3.6 or
------------
disclosed in the CompuServe SEC Documents or as otherwise contemplated
hereunder, neither CompuServe nor any CompuServe Entity has since the date of
the CompuServe Balance Sheet to the date hereof:
(a) Suffered any Material Adverse Change;
(b) Discharged or satisfied any Material Liens or Other Encumbrances,
or paid, satisfied or incurred any Material obligation or liability (absolute,
accrued, contingent or otherwise) other than (i) liabilities shown or reflected
on the CompuServe Balance Sheet or (ii) liabilities incurred since the date of
the CompuServe Balance Sheet in the ordinary course of business, the discharge,
satisfaction or incurrence of which would not have a Material Adverse Effect;
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(c) Increased or established any reserve for Taxes or any other
liability on its books or otherwise provided therefor which, if paid in full,
would have a Material Adverse Effect;
(d) Mortgaged, pledged or subjected to any Liens or Other
Encumbrances, any of their assets, tangible or intangible, which event would,
individually or in the aggregate, cause a Material Adverse Effect;
(e) Sold or transferred any of the assets of CompuServe or any
CompuServe Entity other than in the ordinary course of business and consistent
with past practice or canceled any debts or claims or waived any rights Material
to CompuServe or any CompuServe Entity;
(f) Granted any general or uniform increase in the rates of pay of
employees or any increase in compensation payable or to become payable by
CompuServe or any CompuServe Entity to any director, officer or employee,
consultant or agent of CompuServe or any CompuServe Entity (other than increases
in the ordinary course consistent with past practice), or by means of any bonus
or pension plan, or similar contract or agreement, increased the compensation of
any director, officer or employee (other than increases in the ordinary course
consistent with past practice);
(g) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any Material transaction
other than in the ordinary course of business or expressly permitted under other
provisions hereof;
(h) Issued, sold, transferred, pledged, disposed of or encumbered any
shares of, or securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of
capital stock of any class or interest in or securities of any kind to acquire,
any shares of capital stock of any class of or interest in or securities of
CompuServe or any CompuServe Entity, other than shares issued upon the exercise
of CompuServe Stock Options in accordance with the terms of such CompuServe
Stock Options existing on the date of exercise;
(i) Made capital commitments which in the aggregate were in excess of
the amounts contemplated in CompuServe's May 23, 1997 business plan for fiscal
1998 as furnished to WorldCom;
(j) Taken any action to (a) amend its Articles of Incorporation or
Certificate of Incorporation, as the case may be, or Bylaws or similar
organizational documents; (b) declare, set aside or pay any dividend or other
distribution with respect to capital stock payable in cash, stock, securities or
property other than dividends paid by CompuServe's wholly owned subsidiaries to
CompuServe or another of CompuServe's wholly owned subsidiaries; or (c) except
pursuant to the Employee Stock Purchase Plan and the Crystal Club Plan, redeem,
purchase or otherwise acquire, directly or indirectly, any of the capital stock
or any interest in or securities of CompuServe or any CompuServe Entity;
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(k) Adopted a plan of complete or partial liquidation, dissolution,
merger, consolidation, share exchange, restructuring, recapitalization or other
reorganization of CompuServe or any CompuServe Entity;
(l) Changed in any material respect its Tax or accounting methods,
principles or practices (including any changes in depreciation or amortization
policies or rates or any changes in any assumptions underlying any method of
calculating reserves), other than as required by a change in GAAP or other
applicable law; or
(m) Entered into any agreement, contract, commitment or arrangement to
take any of the actions contemplated in the foregoing clauses (a) through (l),
or authorized, recommended, proposed or announced an intention to take any such
action.
3.7 Legal Proceedings. Except as set forth on Schedule 3.7, or
------------
disclosed in the CompuServe SEC Documents, there is no action, suit, claim,
demand, proceeding or investigation pending, or to the knowledge of CompuServe,
threatened against CompuServe or any of the CompuServe Entities or affecting the
consummation of the transactions contemplated by this Agreement which, if
resolved adversely to CompuServe or any of the CompuServe Entities, would have a
Material Adverse Effect or which could prevent or materially delay the
consummation of the transactions contemplated by this Agreement. Except as set
forth on Schedule 3.7, there are no Material judgments, decrees, injunctions or
------------
orders of any Governmental Entity or arbitrator against CompuServe or any of the
CompuServe Entities.
3.8 Contracts. (a) CompuServe and the CompuServe Entities have
made available to WorldCom or, in the case of certain customer contracts,
WorldCom's counsel true and complete copies of all outstanding contracts,
intellectual property licenses, leases, agreements and arrangements which are
Material. Except as otherwise disclosed on Schedule 3.8(a), all of such
---------------
contracts, leases, intellectual property licenses, agreements and arrangements
are valid, binding and enforceable in accordance with their terms (assuming the
other parties thereto are bound, as to which none of H&R Block, Block Group or
CompuServe has any reasonable basis to believe otherwise) and in full force and
effect, except where any such invalidity or failure to be binding, enforceable
or in full force and effect would not have a Material Adverse Effect. Except as
otherwise indicated on Schedule 3.8(a), neither CompuServe nor any CompuServe
---------------
Entity is, and to the knowledge of CompuServe, no other party to such contracts,
leases, licenses, agreements and arrangements is in default thereunder, and no
event has occurred which, with or without the lapse of time or the giving of
notice or both, would constitute a default thereunder, except in each case for
defaults as would not have, individually, or in the aggregate, a Material
Adverse Effect.
(b) Except as set forth on Schedule 3.8(b) and except for contracts
---------------
which may be canceled by CompuServe or any CompuServe Entity party thereto
within 30 days without penalty, there are no contracts to which CompuServe or
any of the CompuServe Entities is a party or by which CompuServe or any of the
CompuServe Entities is bound which: (i) provide for ongoing obligations with
respect to any or all of the Online Services Business or the network services
business or any other business of CompuServe and the CompuServe Entities after
December 31, 2000; (ii) are network services customer, lease or other agreements
containing
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change of control or anti-assignment provisions granting to another
party or other parties thereto the right to terminate such agreements or take
other action adverse to CompuServe or any of the CompuServe Entities upon or
following the transactions contemplated by this Agreement which termination or
adverse action would have a Material Adverse Effect; or (iii) purport to limit
CompuServe or any of the CompuServe Entities from providing any service in any
jurisdiction, whether under the CompuServe name or otherwise, or grant any
exclusive geographic, segment or other rights to any third-party, except where
the existence of which after the Closing would not have a Material Adverse
Effect on CompuServe.
(c) CompuServe and the CompuServe Entities have made available to
WorldCom true and complete copies of all agreements material to the relationship
of CompuServe or any of the CompuServe Entities with international distributors,
including those certain license and distributorship agreements with
international distributors into which CompuServe, a CompuServe Entity or, to the
knowledge of CompuServe, licensees thereof, have entered (collectively, the
"International Distribution Agreements"). Each International Distribution
Agreement is valid, binding and enforceable in accordance with its terms
(assuming the other parties thereto are bound, as to which none of H&R Block,
Block Group or CompuServe has any reasonable basis to believe otherwise) and in
full force and effect, except where any such invalidity or failure to be
binding, enforceable or in full force and effect would not have a Material
Adverse Effect. Except as set forth on Schedule 3.8(c), to the knowledge of
---------------
CompuServe, no party to any International Distribution Agreement is in violation
of the terms and provisions of any such agreement, except for violations which
would not have a Material Adverse Effect.
(d) CompuServe and the CompuServe Entities have made available to
WorldCom true and complete copies of the 40 largest (based upon annualized
revenue as estimated by CompuServe) contracts and agreements with customers of
the network services business of CompuServe and the CompuServe Entities (the
"Network Services Agreements"). To the knowledge of CompuServe, each Network
Services Agreement is valid, binding and enforceable in accordance with its
terms (assuming the other parties thereto are bound, as to which none of
CompuServe, Block Group or H&R Block has any reasonable basis to believe
otherwise) and in full force and effect, except where any such invalidity or
failure to be binding, enforceable or in full force and effect would not have a
Material Adverse Effect. To the knowledge of CompuServe, and except as set forth
in Schedule 3.8(d), no party to any such Network Services Agreement is in
---------------
violation of the terms and provisions thereof, except for violations which would
not have a Material Adverse Effect.
(e) Schedule 3.8(e) contains a list of each contract between
---------------
CompuServe or any of the CompuServe Entities and a Governmental Entity which is
to be performed by or through CompuServe or a CompuServe Entity and which
accounted for at least 5% of the network services revenues of CompuServe during
the 12-month period ended April 30, 1997 (the "Government Contracts"), true and
complete copies of which have been made available to WorldCom. To the knowledge
of CompuServe, Block Group or H&R Block, all Government Contracts have been
legally awarded and are binding on the parties thereto and are not currently the
subject of protest proceedings, except as would not have a Material Adverse
Effect.
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(f) Except as set forth on Schedule 3.8(f), no notice, consent,
---------------
waiver or approval is contemplated by or required to or from any party to the
contracts, intellectual property licenses, leases, agreements and arrangements
listed on Schedules 3.8(a) through 3.8(e) in connection with the execution and
---------------- ------
delivery of this Agreement or the consummation of the transactions contemplated
hereby.
3.9 Accounts Receivable. Since the date of the CompuServe Balance
Sheet, neither CompuServe nor any CompuServe Entity has materially changed any
principle or practice with respect to the recordation of accounts receivable or
the calculation of reserves therefor, or any material collection, discount or
write-off policy or procedure except as required by GAAP or statutory accounting
principles.
3.10 Taxes. Except as disclosed in the CompuServe SEC Documents or as
set forth on Schedule 3.10:
-------------
(a) All federal, state, local and foreign Tax Returns required to be filed
by or on behalf of CompuServe or any CompuServe Entity have been timely filed or
requests for extension have been timely filed and any such extension has been
granted and has not expired, and all such filed Tax Returns are accurate and
complete in all material respects, except for such failures to be complete and
accurate as would not, individually or in the aggregate, have a Material Adverse
Effect;
(b) All Taxes required to be paid (including all required estimated Tax
payments and with respect to Taxes required to be withheld) by CompuServe and
any CompuServe Entity have been paid in full or adequately reserved in
accordance with GAAP on the consolidated financial statements of CompuServe,
other than any failure to pay or reserve for as would not have a Material
Adverse Effect;
(c) As of the date hereof, there is no outstanding Tax audit, inquiry or
assessment (and no written notice of any such audit or inquiry has been
received) with respect to CompuServe or any CompuServe Entity that would have a
Material Adverse Effect;
(d) There are no waivers of the statute of limitations for the assessment
or payment of any Tax by CompuServe or any CompuServe Entity that would be
material to CompuServe and the CompuServe Entities, taken as a whole, their
Online Services Business or their network services business;
(e) Neither CompuServe nor any CompuServe Entity has made any payment(s),
is obligated to make any payment(s) or is a party to any agreement that could
obligate it to make any payment(s) that, whether as a result of the Merger or
otherwise, would not be deductible under Code Section 280G or would constitute
compensation in excess of the limitation set forth in Code Section 162(m);
15
<PAGE>
(f) Neither CompuServe nor any CompuServe Entity has executed or entered
into any closing agreement under Code Section 7121 (or any similar provision of
state, local or foreign law) or has agreed to make any adjustment to its income
or deductions pursuant to Code Section 481(a) (or similar provision of state,
local or foreign law), in either case that could affect its Tax liability after
the Closing Date to any material extent;
(g) Except as disclosed in Schedule 3.10(g), neither CompuServe nor any
----------------
CompuServe Entity is a party to a tax sharing, tax indemnity or similar
agreement (whether or not in writing);
(h) There are no Liens or Other Encumbrances with respect to Taxes upon any
of the assets or properties of CompuServe or any of the CompuServe Entities,
other than with respect to Taxes not yet due and payable;
(i) Neither CompuServe nor any CompuServe Entity has been a member of an
affiliated group (within the meaning of the Code) filing a consolidated federal
income Tax Return other than a group the common parent of which is H&R Block;
and
(j) CompuServe is and will be as of the Closing Date a member of H&R
Block's selling consolidated group as defined in Treasury Regulation Section
1.338(h)(10)-1(c)(3) and upon making a Section 338(h)(10) election will be a
Section 338(h)(10) target within Treasury Regulation Section 1.338(h)(10)-
1(c)(1).
3.11 Employee Benefit Plans; Employment Matters. (a) Except as
set forth on Schedule 3.11(a), neither CompuServe nor any CompuServe Entity has
----------------
established or maintains or is obligated to make contributions to or under or
otherwise participates in with respect to any current or former employee,
director, officer or agent of CompuServe or any of the CompuServe Entities: (i)
any stock option, restricted stock, stock appreciation rights, bonus or other
type of incentive compensation plan, program, agreement or arrangement; (ii) any
severance, pension, profit-sharing, thrift or savings, retirement, deferred
compensation, employee stock ownership, employee stock purchase or supplemental
executive retirement plan, agreement or arrangement, including, but not limited
to, those described in Section 3(2) of the ERISA; (iii) any life insurance,
death benefit, health and hospitalization, disability, cafeteria or Section 125,
employee assistance, education or tuition assistance, vacation benefit or fringe
benefit plan, or other employee benefit plan, program, agreement or arrangement,
including, but not limited to, those described in Section 3(1) of ERISA; or (iv)
any grantor trust to provide funding for non-tax-qualified employee benefits or
compensation. Except as disclosed on Schedule 3.11(a), all such plans listed on
----------------
Schedule 3.11(a) in which United States-based employees participate
- ----------------
(collectively, the "CompuServe Benefit Plans") have been operated and
administered in all material respects in accordance with all applicable laws,
rules and regulations, including, but not limited to ERISA and the Code (and any
similar statute of a state or other jurisdiction, domestic or foreign, if
applicable). With respect to each CompuServe Benefit Plan, CompuServe and the
CompuServe Entities have made available to WorldCom the following (to the extent
they exist with respect to such CompuServe Benefit Plan): (i) the document(s)
governing such plan, including, if applicable, the plan document, the trust
agreement, any insurance contract,
16
<PAGE>
administrative services agreement, investment manager agreement, and any
amendments thereto; (ii) the two most recent annual reports of such plan on the
appropriate IRS Form 5500-series form; (iii) the financial statements of the
plan for the two most recent plan years, and if applicable, actuarial valuation
or other actuarial reports for the plan for the two most recent plan years; (iv)
the most recent summary plan description for the plan and any subsequent summary
of material modifications; (v) the most recent ruling letter with respect to the
tax-exempt status of any voluntary employee's beneficiary association under
Section 501(c)(9) of the Code which is implementing such plan; and (vi) for each
plan that is intended to be qualified under Section 401(a) of the Code, a copy
of the most recent IRS determination or opinion letter. Except as disclosed on
Schedule 3.11(a), and except as would not have a Material Adverse Effect, no act
- ----------------
or failure to act by CompuServe or any of the CompuServe Entities (i) has
resulted in a "prohibited transaction" (as defined in ERISA) with respect to the
CompuServe Benefit Plans that is not subject to a statutory or regulatory
exception; or (ii) has resulted or could reasonably be expected to result in the
imposition of any Tax, penalty or other liability in any material amount on
CompuServe or any of the CompuServe Entities pursuant to any provision of the
Code or ERISA or any other applicable law. No CompuServe Benefit Plan is subject
to Title IV of ERISA; and no circumstance exists or will exist as a result of
the consummation of the transactions contemplated by this Agreement that could
result in the existence of any Liens or Other Encumbrances on the property of
CompuServe or any of the CompuServe Entities under the provisions of Title IV of
ERISA (other than one or more Liens or Other Encumbrances that are disclosed in
Schedule 3.11(a) and would not have a Material Adverse Effect). Neither
- ----------------
CompuServe nor any CompuServe Entity has previously made, is currently making,
or is obligated in any way to make, any contributions to any multi-employer plan
within the meaning of Section 3(37) of ERISA. CompuServe and each CompuServe
Entity has made all contributions or payments required under the terms of or in
connection with all CompuServe Benefit Plans or has properly reserved for such
amounts on the CompuServe Balance Sheet. Except as disclosed on Schedule 3.11(a)
----------------
no CompuServe Benefit Plan provides health and hospitalization or other medical
or life insurance benefits to terminated or retired employees or independent
contractors (other than benefits mandated by applicable law). Except as set
forth on Schedule 3.11(a), neither CompuServe nor any CompuServe Entity has any
----------------
obligation or commitment (formal or informal) to create any new benefit plan or
program, or to amend any existing CompuServe Benefit Plan to increase the
benefits thereunder. CompuServe and each CompuServe Entity is in compliance with
all requirements applicable to any retirement or other employee benefit plan
maintained for its non-United States employees other than any failures to comply
that would not individually or in the aggregate have a Material Adverse Effect,
and there is no material unfunded liability with respect to any such plan which
is not properly reflected in or reserved for in the CompuServe Balance Sheet.
(b) Except as set forth on Schedule 3.11(b) or Schedule 8.17, neither
---------------- -------------
CompuServe nor any CompuServe Entity is a party to any oral or written (i)
union, guild or collective bargaining agreement which covers employees in the
United States (nor is CompuServe or H&R Block aware of any union organizing
activity currently being conducted in respect to any of CompuServe's or any
CompuServe Entity's employees), (ii) agreement with any director, officer,
employee or agent the material benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of a transaction of the nature
contemplated by this
17
<PAGE>
Agreement or which provides for any payment or payments (including any
severance, unemployment compensation, golden parachute, bonus or otherwise) of
more than an aggregate of $50,000 to such officer or employee upon such
occurrence, or (iii) agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or with respect to vesting, will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement.
(c) Neither any of the companies with which CompuServe is a member of
a "controlled group" within the meaning of Section 1563(a) of the Code nor any
administrator or fiduciary of any employee benefit plan adopted by a member of
such controlled group (or any agent of any of the foregoing) has engaged in any
transaction or acted or failed to act in a manner which is reasonably likely to
subject WorldCom to any material liability (to individuals, the IRS, the Pension
Benefit Guaranty Corporation, or any other party) for breach of fiduciary
duties, accumulated funding deficiencies, termination or other liability under
ERISA, the Code, or any other applicable laws.
3.12 Compliance with Laws; Permits. (a) Except as disclosed in
the CompuServe SEC Documents or on Schedule 3.12, neither CompuServe nor any
-------------
CompuServe Entity has violated, failed to comply with or acted or failed to act
in any material respect so as to incur liability under any federal, state, local
or foreign law, regulation or ordinance, judgment, decree or order relating to
its business, operations, properties or assets including the Occupational Safety
and Health Act, the Americans with Disabilities Act, export control laws, and
any Environmental Laws, except where a violation, action or failure to act would
not have a Material Adverse Effect, and no notice of any pending investigation
or violation of, non-compliance with or alleged liability under, any such law,
regulation, ordinance, judgment, decree or order has been received by H&R Block,
any H&R Block Entity, CompuServe or any CompuServe Entity which, if it were
determined that a violation had occurred, would have a Material Adverse Effect.
(b) CompuServe and each CompuServe Entity possess all Governmental
Authorizations necessary to enable it to conduct its business as presently
conducted, except for those Governmental Authorizations the failure to possess
which would not have a Material Adverse Effect. All such Governmental
Authorizations are valid and in full force and effect, except for those
authorizations the failure of which to be valid and in full force and effect
would not have a Material Adverse Effect. CompuServe and each CompuServe Entity
is, and at all times since May 1, 1995 has been, in compliance with the terms
and requirements of each such Governmental Authorization, except where the
failure to be so in compliance would not have a Material Adverse Effect. Since
May 1, 1995, neither CompuServe nor any CompuServe Entity has received any
notice or other communication from any Governmental Entity asserting (a) any
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (b) any revocation, withdrawal, suspension,
cancellation, termination or modification of any Governmental Authorization,
except where any such violation, failure to comply, revocation, withdrawal,
suspension, cancellation, termination or modification would not have a Material
Adverse Effect.
18
<PAGE>
3.13 Patents, Trademarks, Etc. (a) Except as disclosed on
Schedule 3.13 hereto, CompuServe and the CompuServe Entities own, free and clear
- -------------
of all Liens or Other Encumbrances, and have the exclusive right to use, sell,
license or dispose of or otherwise has rights to use, such patents, copyrights,
trademarks, service marks, and applications and registrations therefor, and
trade names, trade secrets, customer lists, proprietary technology processes and
formulae, source code, object code, know-how, inventions, other confidential and
proprietary information, and other intellectual property rights as are necessary
to permit CompuServe and the CompuServe Entities to carry on their business as
currently conducted (the "CompuServe Rights"), except for failures to own free
and clear, license to use or otherwise have sufficient rights to use as would
not have a Material Adverse Effect. Schedule 3.13 sets forth all registered
-------------
patents, copyrights, trademarks and service marks of CompuServe and the
CompuServe Entities included in the CompuServe Rights, all of which are in full
force and effect and are not subject to any Taxes or maintenance fees, except as
set forth on Schedule 3.13 or except where the failure to be in full force or
-------------
effect or to be so subject would not have a Material Adverse Effect. Except as
set forth on Schedule 3.13, neither CompuServe nor any of the CompuServe
-------------
Entities has licensed or granted to anyone the right to use the name
"CompuServe" or any other name associated with or used by CompuServe or the
CompuServe Entities. Except as set forth on Schedule 3.13, (i) neither
-------------
CompuServe nor any of the CompuServe Entities has licensed or granted to anyone
rights of any nature to use any CompuServe Rights that would limit the exercise
of such CompuServe Rights by CompuServe or any of the CompuServe Entities
against such licensee or grantee if such licensee or grantee were to use the
property protected by such CompuServe Rights in direct or potential competition
with CompuServe or the CompuServe Entities or that would limit CompuServe or any
of the CompuServe Entities from using, selling, licensing or disposing of the
CompuServe Rights in any market or geographic region, including in direct
competition with any licensee of such CompuServe Rights in such geographic
region; and (ii) neither CompuServe nor any of the CompuServe Entities is
obligated or pays royalties, fees or other payments to anyone for use of any
individual CompuServe Right in an amount exceeding $2,000,000 annually; and
(iii) neither CompuServe nor any of the CompuServe Entities has received notice
from any third party, to the knowledge of CompuServe, that any of the CompuServe
Rights or any services or products marketed or sold by CompuServe or any of the
CompuServe Entities violates any intellectual property right of a third party,
except for such violations as would not have a Material Adverse Effect; and (iv)
to the knowledge of CompuServe, none of the CompuServe Rights or any services or
products marketed or sold by CompuServe or any of the CompuServe Entities
violates any intellectual property rights of any third parties, except for such
violations as would not have a Material Adverse Effect. To the knowledge of
CompuServe, there exists no infringement by any third party of any of the
CompuServe Rights that would have a Material Adverse Effect and there is no
pending or, to the knowledge of CompuServe threatened claim or litigation
against CompuServe or any of the CompuServe Entities contesting its use of any
of the CompuServe Rights, asserting the misuse of any of the CompuServe Rights,
or asserting the infringement or other violation of any rights of a third party,
nor, to the knowledge of CompuServe, is there any reasonable basis for any such
claim, where, in any such case, individually or in the aggregate, such
infringement, claim or litigation would have a Material Adverse Effect.
19
<PAGE>
(b) All copyrightable works, inventions and know-how conceived by
employees or independent contractors of CompuServe or any CompuServe Entity
within the scope of their employment or retention, as the case may be, and
related to the business of CompuServe or any CompuServe Entity were and are
"works for hire" or if they were or are not, then all right, title, and interest
therein were transferred and assigned to, or vested in, CompuServe or any
CompuServe Entity, except where the failure to be "works for hire" or to have
been so transferred assigned or vested would not have a Material Adverse Effect.
(c) Except as set forth on Schedule 3.13, the consummation of the
-------------
transactions contemplated by this Agreement will not alter, impair or extinguish
any of the CompuServe Rights, the alteration, impairment or extinguishing of
which would have a Material Adverse Effect. Except as set forth on Schedule
--------
3.13, upon the consummation of the transactions contemplated hereby, CompuServe
- ----
or a CompuServe Entity will own, free and clear of all Liens or Other
Encumbrances, and have the exclusive right to use, sell, license or dispose of
or otherwise will have rights to use, the CompuServe Rights, except for such
exceptions as would not have a Material Adverse Effect and except for such
CompuServe Rights that will expire or terminate by their terms prior to the
consummation of the transactions contemplated by this Agreement.
3.14 Labor Matters. Neither CompuServe nor any CompuServe Entity
is the subject of any proceeding (a) asserting that CompuServe or a CompuServe
Entity has committed an unfair labor practice or (b) seeking to compel
CompuServe or any of the CompuServe Entities to bargain with a labor union or
labor organization, and there are no pending or, to the knowledge of CompuServe,
threatened, nor has there been for the past five (5) years any, labor strike,
dispute, walkout, work stoppage, slow-down or lockout involving CompuServe or
any of the CompuServe Entities, except in each case as did not or would not have
a Material Adverse Effect.
3.15 Insurance. Each of CompuServe and the CompuServe Entities has
obtained and maintains in full force and effect insurance with responsible and
reputable insurance companies or associations in such amounts, on such terms and
covering such risks, including fire and other risks insured against by extended
coverage, as is reasonably deemed necessary by CompuServe, and each has
maintained in full force and effect public liability insurance, insurance
against claims for personal injury or death or property damage occurring in
connection with the activities of CompuServe or the CompuServe Entities or any
properties owned, occupied or controlled by CompuServe, or the CompuServe
Entities, except for failures to obtain or maintain as would not have a Material
Adverse Effect.
3.16 Rights Agreement. CompuServe has effected an amendment to the
CompuServe Rights Agreement with the effect that (a) (i) neither WorldCom nor
WAC will be deemed to be an "Acquiring Person" (as defined in the CompuServe
Rights Agreement), (ii) neither the "Shares Acquisition Date" nor the
"Distribution Date" (each as defined in the CompuServe Rights Agreement) will be
deemed to occur, and (iii) the "Rights" (as defined in the CompuServe Rights
Agreement) will not separate from the CompuServe Common Shares, in any such
event as a result of the execution, delivery or performance of this Agreement,
the Stockholders
20
<PAGE>
Agreement or any other agreement provided for herein or therein or the taking of
any action provided for herein or therein; and (b) effective upon the Effective
Time, the CompuServe Rights Agreement will terminate and the Rights shall be of
no further force or effect.
3.17 Commissions and Fees. Except for fees payable to Goldman,
Sachs & Co. pursuant to the terms of the letter agreement between CompuServe and
Goldman, Sachs & Co., the amount of and payment schedule for which have been
communicated to WorldCom, there are no claims for brokerage commissions,
investment bankers' fees or finder's or similar fees in connection with the
transactions contemplated by this Agreement and the Stockholders Agreement which
may be now or hereafter asserted against WorldCom, WAC, CompuServe or any of the
CompuServe Entities resulting from any action taken by CompuServe, any
CompuServe Entity, H&R Block or any H&R Block Entity or their stockholders,
directors, officers, employees or agents.
3.18 Vote Required. The affirmative vote of the holders of a
majority of the CompuServe Common Shares (Block Group being the majority
stockholder of CompuServe) is the only vote of the holders of any class or
series of CompuServe's capital stock necessary to approve and adopt this
Agreement and consummate the transactions contemplated by this Agreement.
3.19 Opinion of Financial Advisor. CompuServe has received the
written opinion of its financial advisors, Goldman, Sachs & Co., to the effect
that, as of the date hereof, the Exchange Ratio is fair to the holders of
CompuServe Common Shares, other than H&R Block.
3.20 Takeover Statutes. The Board of Directors of CompuServe has
taken all necessary actions so that the restrictions contained in Section 203 of
the DGCL will not apply to the execution, delivery or performance of this
Agreement or the Stockholders Agreement by CompuServe, H&R Block, WorldCom or
WAC or the consummation of the Merger and the transactions contemplated hereby
or thereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING H&R BLOCK
H&R Block hereby makes the following representations and warranties to
WorldCom and WAC:
4.1 Organization, Existence and Good Standing. H&R Block is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Missouri and has all necessary corporate power and authority to
own, lease, operate and transfer its properties and to conduct its business as
currently conducted. H&R Block has made available to WorldCom complete and
correct copies of its Restated Articles of Incorporation and Bylaws as amended
to the date of this Agreement.
21
<PAGE>
4.2 H&R Block Ownership of Capital Stock. H&R Block owns, beneficially
and of record, the issued and outstanding shares of capital stock or other
securities of or interests in Block Group, all of which shares or other
securities or interests are duly authorized, validly issued and outstanding,
fully paid and nonassessable, and free and clear of all Liens or Other
Encumbrances. As of the date of this Agreement, except as set forth on Schedule
--------
4.2, there are no pre-emptive rights, options, warrants or similar rights
- ---
granted by H&R Block or any H&R Block Entity in respect of shares of capital
stock or other securities of or interests in CompuServe or the CompuServe
Entities or any agreements to which H&R Block or any H&R Block Entity is a party
providing for the issuance or sale by H&R Block or a H&R Block Entity of capital
stock or other securities of or interests in CompuServe or any CompuServe
Entity.
4.3 Power and Authority; Non-Contravention; Filings and Consents"""".
(a) H&R Block has full corporate power and authority to execute, deliver and
perform its obligations under this Agreement, the Stockholders Agreement, and
the Standstill Agreement and all agreements and other documents executed and
delivered, or to be executed and delivered, by it pursuant to this Agreement,
the Stockholders Agreement, and the Standstill Agreement and has taken all
action required by law, its Articles of Incorporation, its Bylaws or otherwise,
to duly and validly authorize the execution, delivery and performance of this
Agreement, the Stockholders Agreement, and the Standstill Agreement and such
related documents and the consummation of the transactions contemplated hereby
and thereby. The execution and delivery of, and the performance of its
obligations under, this Agreement, the Stockholders Agreement, and the
Standstill Agreement by H&R Block do not and the consummation of the
transactions contemplated by this Agreement, the Stockholders Agreement, and the
Standstill Agreement will not (i) conflict with or violate any provisions of the
Restated Articles of Incorporation or Bylaws of H&R Block; or (ii) constitute a
breach of or default under or result in the creation of any Liens or Other
Encumbrances or Tax on or against, any assets, rights or property of H&R Block,
CompuServe or any of the CompuServe Entities or give rise, with or without
notice or lapse of time, to any third-party right of termination, cancellation,
material modification or acceleration under any note, bond, mortgage, pledge,
lien, lease, agreement, license, commitment or instrument, applicable to H&R
Block, CompuServe or any of the CompuServe Entities, or to which H&R Block,
CompuServe or any of the CompuServe Entities is a party or by which H&R Block,
CompuServe or any of the CompuServe Entities or any of their respective assets
is or are bound, or conflict with or violate any restrictions of any kind to
which they are subject, which breach, default, lien, encumbrance, Tax,
termination, cancellation, modification or acceleration would have a Material
Adverse Effect on CompuServe or which would prevent or materially delay the
consummation of the transactions contemplated by this Agreement, the
Stockholders Agreement, and the Standstill Agreement or otherwise prevent H&R
Block from performing its obligations hereunder or thereunder in any material
respect; or (iii) subject to obtaining the consents, approvals, orders,
authorizations and registrations, and making the filings described in Section
4.2(b) below, violate any law, order, writ, judgment, award, statute, rule,
regulation or decree of any Governmental Entity or arbitrator, which, if
violated or accelerated, would have a Material Adverse Effect on CompuServe or
which would prevent or materially delay the consummation of the transactions
contemplated by this Agreement, the Stockholders Agreement, and the Standstill
Agreement or otherwise prevent H&R Block from performing its obligations
hereunder or thereunder in any material respect. The execution, delivery and
performance of this
22
<PAGE>
Agreement, the Stockholders Agreement, and the Standstill Agreement have been
approved by the Board of Directors of H&R Block. This Agreement, the
Stockholders Agreement, and the Standstill Agreement have been duly executed and
delivered by H&R Block and, assuming this Agreement, the Stockholders Agreement,
and the Standstill Agreement constitute valid and binding obligations of
WorldCom, enforceable against WorldCom in accordance with their respective
terms, constitute valid and binding obligations of H&R Block, enforceable
against H&R Block in accordance with their respective terms.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required to be obtained,
made or filed by H&R Block in connection with the execution and delivery of this
Agreement, the Stockholders Agreement, and the Standstill Agreement by H&R Block
or the performance by H&R Block of its obligations hereunder, except for (i) the
filing of a premerger notification and report form by H&R Block under the HSR
Act, (ii) filings with and, where required, approval by one or more non-U.S.
competition or antitrust regulatory bodies, (iii) the filing with the SEC of
such reports under the Exchange Act, as may be required in connection with this
Agreement, the Stockholders Agreement, and the Standstill Agreement and the
transactions contemplated by this Agreement hereby and thereby, and (iv) such
consents, approvals, orders, authorizations, registrations, declarations, or
filings the failure of which to be obtained, made or filed would not (A) impair
in any material respect the ability of H&R Block to perform its obligations
hereunder, (B) prevent or impede, in any material respect, the consummation of
the transactions contemplated by this Agreement, the Stockholders Agreement, and
the Standstill Agreement, or (C) have a Material Adverse Effect on CompuServe.
4.4 Taxes. Except as disclosed in the H&R Block SEC Documents or as or
set forth on Schedule 4.4:
------------
(a) All federal, state, local and foreign Tax Returns required to be filed
by or on behalf of H&R Block or any H&R Block Entity have been timely filed or
requests for extensions have been timely filed and any such extension has been
granted and has not expired, and all such filed tax returns are accurate and
complete in all material respects, except for such failures to file and/or to be
complete and accurate as would not, individually or in the aggregate, have a
Material Adverse Effect on CompuServe or any CompuServe Entity;
(b) All Taxes required to be paid (including with respect to Taxes required
to be withheld) by H&R Block and any H&R Block Entity as of the date of the H&R
Block SEC documents have been paid in full or adequately reserved against in
accordance with GAAP on the consolidated financial statements of H&R Block other
than any failure to pay or reserve for as would not have a Material Adverse
Effect on CompuServe or any CompuServe Entity; and
(c) As of the date hereof, there is no outstanding Tax audit, inquiry or
assessment (and no written notice of any such audit or inquiry has been
received), with respect to H&R Block or any H&R Block Entity that, individually
or in the aggregate, would have a Material Adverse Effect on CompuServe or any
CompuServe Entity.
23
<PAGE>
4.5 Assets and Employees Used in CompuServe's Business. ' (a)
Except as set forth on Schedule 4.5(a), neither H&R Block nor any H&R Block
---------------
Entity owns, leases, holds, possesses or controls any interests, assets or
rights which are principally used in or principally related to the business of
CompuServe or any of the CompuServe Entities, whether tangible or intangible,
and whether fixed, contingent or otherwise, including contracts, contractual
rights, licenses and intellectual property rights (which, if owned by CompuServe
or a CompuServe Entity, would constitute a CompuServe Right) principally used in
or principally related to the business of CompuServe and the CompuServe
Entities; provided, however, that such interests, assets or rights shall not
include (x) assets held under any H&R Block employee benefit plans, such as life
insurance policies and deferred compensation plans for the benefit of CompuServe
Employees, or (y) any other H&R Block insurance policy (except, in the case of
clauses (x) and (y), any pre-paid benefits or coverage under insurance policies
which inure to CompuServe or any of the CompuServe Entities and coverage with
respect to such policies for accrued or past claims or losses). Except as set
forth in Schedule 4.5(a), no employees of H&R Block or any H&R Block Entity are
---------------
used in the business of or provide services to CompuServe or any CompuServe
Entity. All of the interests, assets or rights set forth on Schedule 4.5(a)
---------------
will be transferred and contributed for no additional consideration to
CompuServe or a CompuServe Entity at or prior to the Closing, as directed by
WorldCom, pursuant to Section 2.1 hereof.
(b) Schedule 4.5(b) sets forth all interests, assets and rights,
---------------
whether tangible or intangible, and whether fixed, contingent or otherwise,
which H&R Block or any H&R Block Entity owns, leases, holds, possesses, or
controls which are used in or related to the business of CompuServe and the
CompuServe Entities, except for any such interests, assets or rights set forth
on Schedule 4.5(a). None of the interests, assets or rights set forth on
---------------
Schedule 4.5(b) is Material to CompuServe.
- ---------------
4.6 Legal Proceedings"""". Except as set forth on Schedule 4.6,
------------
there is no action, suit, claim, demand, proceeding or investigation pending or
to the knowledge of H&R Block, threatened against H&R Block or any H&R Block
Entity or affecting the transactions contemplated by this Agreement which, if
resolved adversely to H&R Block or such H&R Block Entity, could prevent or
materially delay the consummation of the transactions contemplated by this
Agreement and the Stockholders Agreement.
4.7 Rights Agreement. """" Under the terms of the H&R Block Rights
Agreement, (i) neither WorldCom nor WAC will be deemed to be an "Acquiring
Person" (as defined in the H&R Block Rights Agreement), (ii) neither the "Stock
Acquisition Date" nor the "Distribution Date" (each as defined in the H&R Block
Rights Agreement) will be deemed to occur, and (iii) the "Rights" (as defined in
the H&R Block Rights Agreement) will not separate from the H&R Block Common
Shares, in any such event as a result of the execution, delivery or performance
of this Agreement, the Stockholders Agreement, the Standstill Agreement or any
other agreement provided for herein or therein or the taking of any action
provided for herein or therein.
4.8 Commissions and Fees. Except for fees payable to Goldman,
Sachs & Co. pursuant to the terms of the letter agreement between CompuServe and
Goldman, Sachs & Co., the amount of and payment schedule for which have been
communicated to WorldCom, there are
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no claims for brokerage commissions, investment bankers' fees or finder's or
similar fees in connection with the transactions contemplated by this Agreement
and the Stockholders Agreement which may be now or hereafter asserted against
WorldCom, WAC, CompuServe or any of the CompuServe Entities resulting from any
action taken by H&R Block or any H&R Block Entity or their stockholders,
directors, officers, employees or agents.
4.9 Opinion of Financial Advisor. H&R Block has received the
written opinion of its financial advisors, Salomon Brothers Inc, to the effect
that, as of the date hereof, the Merger Consideration is fair to H&R Block. H&R
Block will be solely responsible for the payment of the fees of Salomon Brothers
Inc. in connection with such opinion, this Agreement, the Stockholders Agreement
and the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES REGARDING BLOCK GROUP
Block Group hereby makes the following representations and warranties to
WorldCom and WAC:
5.1 Organization, Existence and Good Standing. Block Group is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all necessary corporate power and authority to
own, lease, operate and transfer its properties and to conduct its business as
currently conducted. Block Group has made available to WorldCom complete and
correct copies of its Certificate of Incorporation and Bylaws as amended to the
date of this Agreement.
5.2 Block Group Ownership of CompuServe Entities' Capital Stock. Block
Group owns, beneficially and of record, the issued and outstanding shares of
capital stock or other securities of or interests in CompuServe and the
CompuServe Entities as set forth on Schedule 5.2, all of which shares or other
------------
securities or interests are duly authorized, validly issued and outstanding,
fully paid and nonassessable, and free and clear of all Liens or Other
Encumbrances.
5.3 Power and Authority; Non-Contravention; Filings and Consents"""".
(a) Block Group has full corporate power and authority to execute, deliver and
perform its obligations under this Agreement, the Stockholders Agreement, and
the Standstill Agreement and all agreements and other documents executed and
delivered, or to be executed and delivered, by it pursuant to this Agreement,
the Stockholders Agreement, and the Standstill Agreement and has taken all
action required by law, its Certificate of Incorporation, its Bylaws or
otherwise, to duly and validly authorize the execution, delivery and performance
of this Agreement, the Stockholders Agreement, and the Standstill Agreement and
such related documents and the consummation of the transactions contemplated
hereby and thereby. The execution and delivery of, and the performance of its
obligations under, this Agreement, the Stockholders Agreement, and the
Standstill Agreement by Block Group do not and the consummation of the
transactions
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contemplated by this Agreement, the Stockholders Agreement, and the
Standstill Agreement will not (i) conflict with or violate any provisions of the
Certificate of Incorporation or Bylaws of Block Group; (ii) constitute a breach
of or default under or result in the creation of any Liens or Other Encumbrances
or Tax on or against, any assets, rights or property of CompuServe or any of the
CompuServe Entities or give rise, with or without notice or lapse of time, to
any third-party right of termination, cancellation, material modification or
acceleration under any note, bond, mortgage, pledge, lien, lease, agreement,
license, commitment or instrument, applicable to CompuServe or any of the
CompuServe Entities, or to which CompuServe or any of the CompuServe Entities is
a party or by which CompuServe or any of the CompuServe Entities or any of their
respective assets is or are bound, or conflict with or violate any restrictions
of any kind to which they are subject, which breach, default, lien, encumbrance,
Tax, termination, cancellation, modification or acceleration would have a
Material Adverse Effect on CompuServe or which would prevent or materially delay
the consummation of the transactions contemplated by this Agreement, the
Stockholders Agreement, and the Standstill Agreement or otherwise prevent Block
Group from performing its obligations hereunder or thereunder in any material
respect; or (iii) subject to obtaining the consents, approvals, orders,
authorizations and registrations, and making the filings described in Section
5.2(b) below, violate any law, order, writ, judgment, award, statute, rule,
regulation or decree of any Governmental Entity or arbitrator, which, if
violated or accelerated, would have a Material Adverse Effect on CompuServe or
which would prevent or materially delay the consummation of the transactions
contemplated by this Agreement, the Stockholders Agreement, and the Standstill
Agreement or otherwise prevent Block Group from performing its obligations
hereunder or thereunder in any material respect. The execution, delivery and
performance of this Agreement, the Stockholders Agreement, and the Standstill
Agreement have been approved by the Board of Directors and the sole stockholder
of Block Group. This Agreement, the Stockholders Agreement, and the Standstill
Agreement have been duly executed and delivered by Block Group and, assuming
this Agreement, the Stockholders Agreement, and the Standstill Agreement
constitute valid and binding obligations of WorldCom and WAC, enforceable
against WorldCom and WAC in accordance with their respective terms, constitute
valid and binding obligations of Block Group, enforceable against Block Group in
accordance with their respective terms.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required to be obtained,
made or filed by Block Group in connection with the execution and delivery of
this Agreement, the Stockholders Agreement, and the Standstill Agreement by
Block Group or the performance by Block Group of its obligations hereunder,
except for (i) the filing with the SEC of such reports under the Exchange Act,
as may be required in connection with this Agreement, the Stockholders
Agreement, and the Standstill Agreement and the transactions contemplated by
this Agreement, and (ii) such consents, approvals, orders, authorizations,
registrations, declarations, or filings the failure of which to be obtained,
made or filed would not (A) impair in any material respect the ability of Block
Group to perform its obligations hereunder, (B) prevent or impede, in any
material respect, the consummation of the transactions contemplated by this
Agreement and the Stockholders Agreement, or (C) have a Material Adverse Effect
on CompuServe.
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5.4 Legal Proceedings. Except as set forth on Schedule 5.4,
------------
there is no action, suit, claim, demand, proceeding or investigation pending or
to the knowledge of Block Group, threatened against Block Group or affecting the
transactions contemplated by this Agreement which, if resolved adversely to
Block Group, could prevent or materially delay the consummation of the
transactions contemplated by this Agreement and the Stockholders Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES REGARDING WORLDCOM
WorldCom hereby makes the following representations and warranties to H&R
Block, Block Group and CompuServe:
6.1 Organization, Existence and Good Standing. WorldCom is a
corporation duly organized, and validly existing and in good standing under the
laws of the State of Georgia and has all necessary corporate power and authority
to own, lease and operate its properties and to conduct its business as
currently conducted. Each WorldCom Entity is duly organized, validly existing
and, to the extent such concept is applicable under the laws of such
jurisdictions, in good standing in its respective jurisdiction of organization,
and has all necessary corporate power to own, lease and operate its properties
and to carry on its business as currently conducted, except where the failure to
be so organized, existing and in good standing or to have such power and
authority would not have a Material Adverse Effect. WorldCom and each WorldCom
Entity is duly qualified to do business and, to the extent such concept is
applicable in such jurisdictions, is in good standing in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes qualification necessary, except where the failure
to be so duly qualified and in good standing would not have a Material Adverse
Effect. WorldCom has made available to H&R Block and CompuServe complete and
correct copies of its Second Amended and Restated Articles of Incorporation, as
amended, and Bylaws, as amended.
6.2 WorldCom Capital Stock. The authorized capital stock of
WorldCom consists of (i) 2,500,000,000 WorldCom Common Shares, of which, as of
September 3, 1997, 905,153,690 shares were issued and outstanding, and no shares
were issued and held as treasury shares, and (ii) 50,000,000 shares of Preferred
Stock, par value $.01 per share ("WorldCom Preferred Stock"), of which 94,992
shares are designated Series A 8% Cumulative Convertible Preferred Stock (94,992
of which shares were issued and outstanding as of September 3, 1997), 15,000,000
shares are designated Series B Convertible Preferred Stock (12,461,640 of which
shares were issued and outstanding as of September 3, 1997), and 2,500,000
shares are designated Series 3 Junior Participating Preferred Stock in
connection with the WorldCom Rights Agreement (none of which shares are issued
and outstanding as of September 3, 1997). All of the issued and outstanding
WorldCom Common Shares and shares of WorldCom Preferred Stock are duly
authorized, validly issued, fully paid and non-assessable. As of September 3,
1997, WorldCom Stock Options to purchase an aggregate of 81,876,997 WorldCom
Common Shares were
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outstanding under WorldCom's stock plans (the "WorldCom Stock Plans").
Except as provided herein and except for WorldCom Common Shares issued
or WorldCom Stock Options granted or awarded after September 3, 1997, pursuant
to the terms of the WorldCom Stock Plans, as of the date of this Agreement there
are no preemptive rights, options, warrants, or similar rights granted by
WorldCom in respect of shares of WorldCom capital stock or any other agreements
to which WorldCom is a party providing for the issuance or sale by it of any
additional securities, nor are there outstanding any WorldCom debt securities or
other instruments issued by WorldCom or to which WorldCom is a party entitling
the holders thereof to vote or to direct or otherwise restrict the vote of the
holders of WorldCom Common Shares or which are convertible into or exchangeable
for any voting securities of WorldCom. As of the date hereof, except as set
forth on Schedule 6.2, neither WorldCom, nor any WorldCom Entity, nor to the
------------
knowledge of WorldCom, any shareholder of WorldCom is a party to any voting
trust, voting agreement, proxy or similar agreements relating to the WorldCom
Common Shares. As of the date of this Agreement, except for WorldCom Common
Shares reserved for issuance upon the exercise of warrants and stock options
granted or which may be granted under the WorldCom Stock Plans, an aggregate of
2,500,000 shares of Series 3 Junior Participating Preferred Stock reserved for
issuance in connection with the WorldCom Rights Agreement (and WorldCom Common
Shares to which a rights holder may become entitled in certain circumstances to
purchase under the WorldCom Rights Agreement), and an aggregate of 33,916,930
WorldCom Common Shares reserved for issuance pursuant to conversion of the
Series A 8% Cumulative Convertible Preferred Stock and the Series B Convertible
Preferred Stock, there are no shares of authorized capital stock of WorldCom
reserved for issuance. As of the date hereof, there is no liability for or
obligations with respect to any dividends declared or accumulated but unpaid
with respect to any shares of WorldCom capital stock.
6.3 Power and Authority; Non-Contravention; Filings and Consents.
(a) WorldCom has full corporate power and authority to execute, deliver and
perform its obligations under this Agreement, the Stockholders Agreement, and
all agreements and other documents executed and delivered, or to be executed and
delivered, by it pursuant to this Agreement and the Stockholders Agreement, and
has taken all action required by law, its Second Amended and Restated Articles
of Incorporation, its Bylaws or otherwise, to duly and validly authorize the
execution and delivery of, and the performance of its obligations under, this
Agreement, the Stockholders Agreement, and the Standstill Agreement, and such
related documents and the consummation of the transactions contemplated hereby
and thereby. The execution and delivery of and the performance of its
obligations under this Agreement, the Stockholders Agreement, and the Standstill
Agreement do not and the consummation of the transactions contemplated by this
Agreement, the Stockholders Agreement, and the Standstill Agreement will not (i)
conflict with or violate any provisions of the Second Amended and Restated
Articles of Incorporation or Bylaws of WorldCom, (ii) constitute a breach of or
default under or result in the creation of any Lien or Other Encumbrances or Tax
on or against, any assets, rights or property of WorldCom or give rise, with or
without notice or lapse of time, to any third-party right of termination,
cancellation, material modification or acceleration under any note, bond,
mortgage, pledge, lien, lease, agreement, license, commitment or instrument,
applicable to WorldCom or any WorldCom Entity, or to which WorldCom or any
WorldCom Entity is a party or by which WorldCom or any WorldCom Entity is bound,
or conflict with or violate any restrictions of any kind to which they
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are subject, which breach, default, lien, encumbrance, Tax, termination,
cancellation, modification or acceleration would have a Material Adverse Effect,
or which would prevent or materially delay the consummation of the transactions
contemplated by this Agreement, the Stockholders Agreement, and the Standstill
Agreement or otherwise prevent WorldCom from performing its obligations
hereunder in any material respect, or (iii) subject to obtaining the consents,
approvals, orders, authorizations and registrations, and making the filings
described in Section 6.3(b) below, violate any law, order, writ, judgment,
award, statute, rule, regulation or decree of any Governmental Entity or
arbitrator, which, if violated or accelerated, would have a Material Adverse
Effect or which would prevent or materially delay the consummation of the
transactions contemplated by this Agreement or otherwise prevent WorldCom from
performing its obligations hereunder in any material respect. The execution and
delivery of this Agreement, the Stockholders Agreement, and the Standstill
Agreement have been approved by the Board of Directors of WorldCom. This
Agreement, the Stockholders Agreement, and the Standstill Agreement have been
duly executed and delivered by WorldCom and, assuming this Agreement, the
Stockholders Agreement, and the Standstill Agreement constitute valid and
binding obligations of H&R Block, Block Group and CompuServe, enforceable
against them in accordance with their respective terms, constitute valid and
binding obligations of WorldCom, enforceable against WorldCom in accordance with
its terms.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained,
made or filed by WorldCom or any WorldCom Entity in connection with the
execution and delivery of this Agreement by WorldCom or the consummation by
WorldCom of the transactions contemplated hereby, except for (i) the filing of a
pre-merger notification and report form by WorldCom under the HSR Act, (ii)
filings with and, where required, approval by one or more non-U.S. competition
or antitrust regulatory bodies, (iii) filings with the SEC of (x) the
Registration Statement and related prospectus and (y) such reports under the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (iv) the filing of such notices and
other reports as may be required by any applicable securities or "blue sky" laws
of states or other jurisdictions, and (v) such consents, approvals, orders,
authorizations, registrations, declarations, or filings the failure of which to
be obtained, made or filed would not (A) impair in any material respect the
ability of WorldCom to perform its obligations hereunder, (B) prevent or impede,
in any material respect, the consummation of the transactions contemplated by
this Agreement, or (C) have a Material Adverse Effect on WorldCom.
6.4 WorldCom SEC Documents; Financial Information. WorldCom has
filed with the SEC all reports, proxy statements, forms, and other documents
required to be filed therewith prior to the date of this Agreement (the
"WorldCom SEC Documents") and, as of the Closing Date, WorldCom shall have filed
with the SEC all WorldCom SEC Documents required to be filed prior thereto. As
of their respective dates, (i) the WorldCom SEC Documents complied, and all
similar documents filed with the SEC after the date of this Agreement but prior
to the Closing Date will comply, in all material respects, with the requirements
of the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to such WorldCom SEC
Documents and (ii) none of the WorldCom SEC Documents contained, nor will any
similar document filed after the date of this Agreement but
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prior to the Closing Date contain, any untrue statement of a material fact and
none of the WorldCom SEC Documents omitted, nor will any similar document filed
after the date of this Agreement but prior to the Closing Date omit, to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements (including any related notes and
schedules) of WorldCom included in the WorldCom SEC Documents (including any
similar documents filed with the SEC after the date of this Agreement but prior
to the Closing Date) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto and have been or will be prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q under
the Exchange Act) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present in all
material respects the consolidated financial position of WorldCom and its
consolidated subsidiaries (including all applicable WorldCom Entities) as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then-ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Nothing in this Section 6.4 shall constitute
a representation or warranty by WorldCom to the extent that any untrue
statement, omission or failure to comply results from information supplied by
H&R Block, Block Group or CompuServe to WorldCom for inclusion in any documents
filed by WorldCom with the SEC. Except as disclosed in the WorldCom SEC
Documents, and except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since the date of the most
recent consolidated balance sheet included in the WorldCom SEC Documents (the
"WorldCom Balance Sheet"), neither WorldCom nor any WorldCom Entity has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) which would be required by GAAP to be set forth on a consolidated
balance sheet of WorldCom and its consolidated subsidiaries or in the notes
thereto that are not so included or disclosed and which would reasonably be
expected to have a Material Adverse Effect.
6.5 Subsequent Material Adverse Change. Except as disclosed in the
WorldCom SEC Documents or as otherwise permitted hereunder, through the date
hereof (i) WorldCom has not, since the date of the WorldCom Balance Sheet,
suffered any Material Adverse Change, and (ii) no event has occurred which would
prevent or materially impair WorldCom's ability to perform its obligations
hereunder.
6.6 Legal Proceedings. Except as set forth in the WorldCom
disclosure letter of even date herewith or disclosed in the WorldCom SEC
Documents, there is no action, suit, claim, demand, proceeding or investigation
pending or, to the knowledge of WorldCom, threatened against WorldCom or any of
the WorldCom Entities or affecting the consummation by WorldCom of the
transactions contemplated hereby which, if resolved adversely to WorldCom or any
of the WorldCom Entities, would have a Material Adverse Effect or which could
prevent or materially delay the consummation of the transactions contemplated by
this Agreement and the Stockholders Agreement. There are no Material judgments,
decrees, injunctions or orders of any Governmental Entity or arbitrator against
WorldCom or any WorldCom Entity.
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6.7 Taxes. Except as disclosed in the WorldCom SEC Documents or as
set forth on Schedule 6.7: (i) WorldCom has filed all Material Tax Returns
------------
required to be filed by it or requests for extensions to file such returns or
reports have been timely filed and granted and have not expired, except to the
extent that such failures to file, taken together, would not have a Material
Adverse Effect; (ii) all Taxes required to be paid by WorldCom have been paid or
adequately reserved in accordance with GAAP in the financial statements of
WorldCom other than the failure to pay or reserve as would not have a Material
Adverse Effect; (iii) WorldCom has not been notified that any Tax Returns of
WorldCom are currently under audit by the IRS or, except for Tax Returns that
are not Material to WorldCom or do not involve any Material amounts of Taxes
shown to be due on any Returns, any state, local or foreign Tax agency; and (iv)
there are no waivers of the statute of limitations for the assessment or payment
of any federal, state, local or foreign Taxes by WorldCom that would be Material
to WorldCom.
6.8 Compliance with Laws in General. Except as disclosed in the
WorldCom SEC Documents, neither WorldCom nor any WorldCom Entity has violated,
failed to comply with or acted or failed to act in any material respect so as to
incur liability under any federal, state, local or foreign law, regulation or
ordinance, judgment, decree or order relating to its business, operations,
properties or assets including the Occupational Safety and Health Act, the
Americans with Disabilities Act and any Environmental Laws, except where such a
violation, action or failure to act would not have a Material Adverse Effect,
and no notice of any pending investigation or inquiry of a potential violation
of, non-compliance with or alleged liability under any such law, regulation or
ordinance, judgment, decree or order has been received by WorldCom, which, if it
were determined that a violation had occurred, would have a Material Adverse
Effect.
6.9 Vote Required. No vote is required of the holders of any class
or series of WorldCom capital stock to approve this Agreement and consummate the
transactions contemplated hereby.
6.10 Commissions and Fees. There are no valid claims for brokerage
commissions, investment bankers' fees or finder's or similar fees in connection
with any of the other transactions contemplated by this Agreement and the
Stockholders Agreement which may be now or hereafter be asserted against H&R
Block or CompuServe resulting from any action taken by WorldCom or any of
WorldCom's directors, officers, employees or agents.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES REGARDING WAC
WorldCom and WAC, jointly and severally, hereby make the following
representations and warranties to H&R Block, Block Group and CompuServe:
7.1 Organization, Existence, Good Standing and Ownership
Interest. WAC is a limited liability company duly organized, validly
existing and in good standing under the laws of
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the State of Delaware and has all necessary limited liability company power to
own its properties and assets and to carry on its business as contemplated to be
conducted. WorldCom is the sole member of WAC. There are no options, warrants or
debt securities or other instruments or securities outstanding which are
convertible into, or which grant the holder thereof the right to acquire any
securities of or interests in WAC.
7.2 Power and Authority; Non-Contravention. WAC has full limited
liability company power and authority to execute, deliver and perform its
obligations under this Agreement and all other agreements and other documents
executed and delivered, or to be executed and delivered, by it pursuant to this
Agreement and has taken or will have taken all actions required by law, its
Certificate of Formation, its Limited Liability Company Agreement or otherwise,
to duly and validly authorize the execution and delivery of, and the performance
of its obligations under, this Agreement and such related documents and the
consummation of the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement do not and the
consummation of the transactions contemplated by this Agreement will not (i)
conflict with or violate any provisions of the Certificate of Formation or
Limited Liability Company Agreement of WAC, or (ii) constitute a breach of or
default under or result in the creation of any Lien or Other Encumbrance or Tax
on or against, any assets, rights or property of WAC or give rise, with or
without notice or lapse of time, to any third-party right of termination,
cancellation, material modification or acceleration under any note, bond,
mortgage, pledge, lien, lease, agreement, license, commitment or instrument,
applicable to WAC or to which WAC is a party or by which WAC is bound, or
conflict with or violate any restrictions of any kind to which they are subject,
which breach, default, lien, encumbrance, Tax, termination, cancellation,
modification or acceleration would prevent or materially delay the consummation
of the transactions contemplated by this Agreement or otherwise prevent WAC from
performing its obligations hereunder in any material respect, or (iii) subject
to obtaining the consents, approvals, orders, authorizations and registrations,
and making the filings described in Section 7.3 below, violate any law, order,
writ, judgment, award, statute, rule, regulation or decree of any Governmental
Entity or arbitrator, which, if violated or accelerated, would prevent or
materially delay the consummation of the transactions contemplated by this
Agreement or otherwise prevent WAC from performing its obligations hereunder or
thereunder in any material respect. The execution, delivery and performance of
this Agreement have been approved by WorldCom as the sole member of WAC. This
Agreement has been duly executed and delivered by WAC and, assuming this
Agreement constitutes a valid and binding obligation of CompuServe, Block Group
and H&R Block, enforceable against them in accordance with their respective
terms, constitutes a valid and binding obligation of WAC, enforceable against
WAC in accordance with its terms.
7.3 Consents and Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained, made or filed by WAC in connection with the
execution and delivery of this Agreement by WAC or the consummation by WAC of
the transactions contemplated by this Agreement, except for such consents,
approvals, orders, authorizations, registrations, declarations, or filings the
failure of which to be obtained, made or filed would not (a) impair in any
material respect the ability of
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WAC to perform its obligations hereunder or (b) prevent or impede, in any
material respect, the consummation of the transactions contemplated by this
Agreement.
7.4 Legal Proceedings. There are no actions, suits, claims,
demands or proceedings pending or, to the knowledge of WAC, threatened against
WAC.
7.5 No Contracts or Liabilities. WAC has not engaged in any
business activities of any type or kind whatsoever, other than preparation for
the transactions contemplated by this Agreement, and, other than its obligations
under this Agreement, is not obligated under any contracts, claims, leases,
liabilities (contingent or otherwise), loans or otherwise.
7.6 Commissions and Fees. There are no valid claims for
brokerage commissions, investment bankers' fees or finder's or similar fees in
connection with any of the other transactions contemplated by this Agreement
which may be now or hereafter asserted against H&R Block or CompuServe resulting
from any action taken by WAC, WorldCom as its sole member or any of WorldCom's
or WAC's directors, officers, employees or agents.
ARTICLE VIII
COVENANTS
8.1 Interim Conduct of CompuServe and the CompuServe Entities.
Each of H&R Block and Block Group covenants to use all reasonable efforts to
ensure, and H&R Block, Block Group and CompuServe jointly and severally,
covenant and agree with WorldCom and WAC, that, except (1) as contemplated by
this Agreement or (2) with the prior written consent of WorldCom, which consent
will not be unreasonably withheld, after the date hereof and until the earlier
of the termination of this Agreement pursuant to Article XI and the Closing
Date:
(a) Subject to the other provisions of this Section 8.1, the business
of each of CompuServe and the CompuServe Entities, including investment
practices and policies, will be conducted only in the ordinary course of
business consistent with past practice, and CompuServe and the CompuServe
Entities will use all reasonable efforts to preserve their business
organizations and maintain their existing relations with all of their customers,
suppliers, employees, creditors and business partners;
(b) Neither CompuServe nor any CompuServe Entity will, directly or
indirectly, split, combine or reclassify the outstanding shares of capital stock
of CompuServe or any outstanding capital stock, interest in or security of any
CompuServe Entity;
(c) Neither CompuServe nor any CompuServe Entity will: (i) amend its
Articles of Incorporation or Certificate of Incorporation, as the case may be,
or Bylaws or similar organizational documents; (ii) declare, set aside or pay
any dividend or other distribution with respect to capital stock payable in
cash, stock, securities or property other than dividends paid by
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CompuServe's wholly-owned, direct or indirect, subsidiaries to CompuServe or one
of CompuServe's wholly-owned, direct or indirect, subsidiaries; (iii) issue,
sell, transfer, grant, award, pledge, dispose of or encumber any shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class of CompuServe (except for CompuServe Common Shares issued pursuant to the
terms of CompuServe Stock Options outstanding as of the date of this Agreement,
or pursuant to the terms of the Crystal Club Plan in the ordinary course of
business consistent with past practice)) or interest in or securities of any
CompuServe Entity; (iv) transfer, lease, license, sell, mortgage, pledge,
dispose of, or encumber any of its assets, in an amount in any instance or
series of related instances exceeding $1,000,000 in the aggregate (measured in
terms of net book value), except pursuant to the existing terms of contracts
entered into prior to the date hereof and set forth on Schedule 8.1(c); or (v)
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redeem, purchase or otherwise acquire, directly or indirectly, any of the
capital stock of CompuServe or any interest in or securities of any CompuServe
Entity (except for CompuServe Common Shares acquired pursuant to the terms of
the Employee Stock Purchase Plan and the Crystal Club Plan in the ordinary
course of business consistent with past practice);
(d) CompuServe and the CompuServe Entities will not: (i) hire
employees and consultants such that the total number of employees and
consultants of CompuServe and the CompuServe Entities would exceed 3,080 or (ii)
terminate employees and consultants such that the net decrease in the number of
employees and consultants of CompuServe and the CompuServe Entities resulting
therefrom would exceed 200 (which net decrease calculation shall be based on a
starting point of 2,880 employees and consultants and shall not include
employees and consultants who voluntarily terminate their employment or
services); (iii) grant any increase in the compensation or bonus payable or to
become payable by CompuServe or any of the CompuServe Entities to any director,
officer or employee of CompuServe or any of the CompuServe Entities, except (1)
to the extent that each such grant or increase is in the ordinary course of
business and consistent with past practice and the aggregate of all such grants
or increases does not exceed $6,000,000 on an annualized basis, and (2) bonuses
in an aggregate amount not in excess of $15,000,000 (half of which shall be paid
by H&R Block) to key employees (equitably distributed as between the Online
Services Business and the other businesses of CompuServe and the CompuServe
Entities) as CompuServe deems necessary in order to encourage such employees to
continue their employment from the date hereof until the Effective Time, payable
only if such employment so continues; (iv) adopt any new, or amend or otherwise
increase, or accelerate the payment or vesting of the amounts payable or to
become payable under any existing CompuServe Benefit Plan, except as
contemplated in Section 8.26; (v) enter into any, or amend any existing,
employment, consulting or severance agreement with, or grant any severance or
termination pay to, any officer, director or employee of CompuServe or any of
the CompuServe Entities; (vi) make any additional contributions to any grantor
trust created by CompuServe or any of the CompuServe Entities to provide funding
for non-tax-qualified employee benefits or compensation except as required by
the terms of any grantor trust of CompuServe existing on the date hereof; or
(vii) provide any new severance program to or increase the benefits under any
existing severance program of CompuServe or any of the CompuServe Entities;
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(e) Except in the ordinary course of business and consistent with past
practice, neither CompuServe nor any CompuServe Entity will in any respect
modify, amend or terminate any of its contracts, intellectual property licenses,
leases or other agreements and arrangements, or waive, release or assign any
rights or claims thereto or thereunder;
(f) Except as would not be Material, neither CompuServe nor any
CompuServe Entity will permit any insurance policy naming CompuServe or any of
the CompuServe Entities as a beneficiary or a loss payable payee to be canceled
or terminated;
(g) Neither CompuServe nor any CompuServe Entity will: (i) incur or
assume any debt except for borrowings under existing credit facilities which are
identified in the CompuServe SEC Documents or in the ordinary course of business
consistent with past practice in an amount not exceeding $1,000,000 in the
aggregate; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other Person in an amount exceeding $1,000,000 in the aggregate, whether or
not in the ordinary course of business or consistent with past practice, except
for customary indemnification obligations pursuant to agreements entered into in
the ordinary course of business, consistent with past practice; (iii) make any
loans, advances or capital contributions to, or investments in, any other Person
(other than a wholly-owned CompuServe Entity) in an amount exceeding $1,000,000
in the aggregate, or modify any credit policies or practices granted to
customers or make any concessions or offer any inducements to accelerate
payments; (iv) other than as contemplated by CompuServe's May 23, 1997 business
plan for fiscal 1998 as furnished to WorldCom, enter into any financial
commitments (including any capital expenditure or asset purchase), whether or
not in the ordinary course of business or consistent with past practice, in an
amount exceeding $1,000,000 in the aggregate; (v) other than in the ordinary
course of business consistent with past practice, enter into any contract
granting any third-party geographic or market or programming or content
exclusivity; or (vi) other than contracts entered into for capital expenditures
in accordance with CompuServe's May 23, 1997 business plan, enter into any
contract that is not terminable without penalty on or prior to December 31, 2000
involving payments by CompuServe or any of the CompuServe Entities in excess of
$1,000,000 individually or $10,000,000 in the aggregate;
(h) Except as would not be Material, neither CompuServe nor any
CompuServe Entity will change any of the accounting principles or practices used
by it unless required by statutory accounting principles or GAAP and notice
thereof is given to WorldCom promptly following such change;
(i) Neither CompuServe nor any CompuServe Entity will pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction of any such claims, liabilities or obligations (i) reflected or
reserved against in, or contemplated by, the CompuServe Balance Sheet in an
amount not in excess of that in the CompuServe Balance Sheet; (ii) incurred in
the ordinary course of business consistent with past practice and in accordance
with the other restrictions contained herein, and which by their terms have
become due and payable since the date of the CompuServe Balance Sheet; (iii)
which are legally required to be paid, discharged or
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satisfied and are paid in accordance with the terms of such claims, liabilities
or obligations in existence as of the date of this Agreement; or (iv) out of
insurance proceeds not in excess of $1,000,000 in the aggregate;
(j) Neither CompuServe nor any CompuServe Entity will adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation, share
exchange, restructuring, recapitalization or other reorganization of CompuServe
or any of the CompuServe Entities;
(k) Other than in the ordinary course of business consistent with past
practice, and except as contemplated by this Agreement, neither CompuServe nor
any CompuServe Entity will engage in any transaction, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any
Related Party except on terms no less favorable than would be available in
competitive arm's-length transactions;
(l) Except as would not be Material or as contemplated by Article IX
hereof, neither CompuServe nor any CompuServe Entity will make any Tax election
or increase or establish any reserve for Taxes or any other liability on its
books or otherwise provided therefor, except as required by applicable law or
GAAP and as to which CompuServe has provided prompt notice after any such
election, or increase or establishment of reserve to WorldCom;
(m) Neither CompuServe nor any CompuServe Entity will settle any
litigation, other proceeding or arbitration requiring a payment in an amount
equal to or greater than $250,000 individually or $1,000,000 in the aggregate or
involving any material limitation on its future actions or the surrender or
compromise of any of its material rights;
(n) Neither CompuServe nor any CompuServe Entity will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or to
authorize, recommend, propose or announce an intention to do any of the
foregoing; and
(o) Neither CompuServe nor any CompuServe Entity will act, or fail or
omit to act, so as to cause any Material Adverse Change.
8.2 Voting of Shares. H&R Block and Block Group hereby jointly and
severally agree that at any meeting of stockholders of CompuServe, however
called, Block Group will vote, and H&R Block will cause Block Group to vote, all
of Block Group's CompuServe Common Shares (i) in favor of the adoption and
approval of this Agreement (as amended from time to time) and the transactions
contemplated by this Agreement by the stockholders of CompuServe, (ii) against
any proposal for any recapitalization, merger (other than the Merger), share
exchange, exchange offer, tender offer, sale of assets, sale of stock or other
business combination between or among CompuServe or any of the CompuServe
Entities, on the one hand, and any other Person other than WorldCom or any
WorldCom Entity, on the other hand, or any liquidation, dissolution or other
action or agreement, that would result in a breach of any representation,
warranty, covenant or other obligation or agreement of H&R Block, Block Group or
CompuServe under this Agreement or that would result in any of the conditions to
the obligations of any party under this Agreement not being fulfilled, and (iii)
in favor of any other
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matter necessary for the consummation of the transactions contemplated by this
Agreement with respect to which Block Group may be entitled to vote.
8.3 No Transfers. Each of H&R Block, Block Group and CompuServe
hereby covenants and agrees that, until the termination of this Agreement
pursuant to Article XI, it will not, and H&R Block will not cause or permit
Block Group to, sell, transfer, tender, assign, hypothecate or otherwise dispose
of, or create or permit to exist any Liens or Other Encumbrances on, whether
directly or indirectly, any of the CompuServe Common Shares or securities of
interests in a CompuServe Entity, respectively, or any of the assets required to
be transferred to CompuServe pursuant to Section 2.1 hereof (except in
accordance with Section 2.1).
8.4 Indemnification. (a) Indemnification by H&R Block. H&R Block
and Block Group, jointly and severally, hereby agree to indemnify, defend and
hold harmless WorldCom and WAC and, after the Closing Date, CompuServe and the
CompuServe Entities, each of their respective successors-in-interest and
assigns, and each of their respective past and current directors, officers,
employees, consultants, representatives and agents (the "H&R Block Indemnified
Parties"), from and against any and all Losses and Expenses which are based on,
arise out of or relate to, directly or indirectly (i) the conduct of the
business or affairs of H&R Block, Block Group or any other H&R Block Entity on
or prior to the Closing Date; (ii) any action, suit, claim, demand, proceeding
or investigation brought by or on behalf of persons who were, at or prior to the
Effective Time, holders of the capital stock of H&R Block, Block Group or
CompuServe which suit, claim, demand, action, proceeding or investigation
alleges that any action or failure to act of the issuer of such capital stock,
any Affiliate of such issuer or any director, officer, employee or agent of such
issuer or any Affiliate of such issuer in connection with this Agreement, the
Stockholders Agreement, or the Standstill Agreement or any of the transactions
contemplated hereby or thereby was a breach of fiduciary duty, or a violation of
law or unauthorized, ultra vires or otherwise wrongful or illegal; or (iii) any
breach of the representations, warranties, covenants or agreements of H&R Block
or Block Group set forth in this Agreement or pursuant to the certificates
contemplated in Section 10.2(d) relating to Sections 2.1, 2.2, 2.3, 4.1, 4.2,
4.3, 4.5 or 4.6, Article V, or Sections 8.2, 8.3, 8.6, 8.7 (as to H&R Block or
Block Group), 8.10 (as to H&R Block or Block Group), 8.15 (as to H&R Block or
Block Group), 8.16 (as to H&R Block or Block Group), 8.18, 8.20, 8.21, or 8.23
(as to H&R Block or Block Group) or (iv) any action, suit, claim, demand or
proceeding or investigation brought in connection with the enforcement of any or
all of the foregoing clauses (i), (ii) or (iii).
(b) General Indemnification by H&R Block. H&R Block and Block Group
hereby agree, jointly and severally, to indemnify, defend and hold harmless the
H&R Block Indemnified Parties from and against 80.13% of any Losses and Expenses
which are based on, arise out of or relate to, directly or indirectly, (i) the
matters set forth in Schedule 8.4(b) whether or not disclosed on any other
---------------
Schedule to this Agreement or otherwise, each of which shall be deemed to be a
Third-Party Claim (as defined in Section 8.4(e)(i) below) as to which any
required notification of claim for indemnification shall be deemed to have been
given; (ii) any breach of the representations, warranties, covenants or
agreements set forth in this Agreement or pursuant to the certificates
contemplated in Section 10.2(d) relating to Sections 3.1, 3.2, 3.3, 3.4, 3.17,
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3.18, 8.6, 8.7 (as to CompuServe) or 8.10 (as to CompuServe); (iii) any breach
of any representations, warranties, covenants or agreements of H&R Block, Block
Group or CompuServe herein (or in the certificates contemplated by Section
10.2(d)), other than those described in the foregoing clause (ii) and without
regard to any qualification as to materiality stated herein (including any
reference to Material, Material Adverse Change or Material Adverse Effect), with
regard to any claim for indemnification relating to any matter for which
indemnification is provided by WorldCom pursuant to or arising out of any
agreement providing for or relating to the divestiture by WorldCom of any or all
of the Online Services Business, if and to the extent that the aggregate of all
Losses and Expenses based on, arising out of or related to all breaches (other
than with respect to a knowing or intentional breach of any such representation,
warranty, covenant or agreement, as to which no dollar threshold shall apply)
described in this clause (iii) exceeds $10 million; (iv) any breach of any
representations, warranties, covenants or agreements, other than those described
in the foregoing clause (ii) and without regard to any qualification as to
materiality stated herein (including any reference to Material, Material Adverse
Change or Material Adverse Effect), with regard to any claim for indemnification
regarding any matter other than matters covered in the foregoing clause (iii),
if and to the extent that the aggregate of all Losses and Expenses based on,
arising out of or related to all breaches (other than with respect to a knowing
or intentional breach of any such representation, warranty, covenant or
agreement, as to which no dollar threshold shall apply) described in this clause
(iv) exceeds $10 million; or (v) any action, suit, claim, demand or proceeding
brought in connection with the enforcement of the foregoing clauses (i), (ii),
(iii) and (iv). Any matter covered by both of the foregoing clauses (iii) and
(iv) shall be apportioned equally to both thresholds.
(c) Indemnification by WorldCom and WAC. WorldCom and WAC and, after
the Closing, CompuServe, hereby agree, jointly and severally, to indemnify,
defend and hold harmless H&R Block, Block Group, their respective successors in-
interest and assigns, and each of their respective past and current directors,
officers, employees, consultants, representatives and agents from and against
any Losses and Expenses which are based on, arise out of or relate to, directly
or indirectly, (i) the conduct of the business of CompuServe after the Closing
as long as and to the extent that CompuServe constitutes a WorldCom Entity; or
(ii) any action, claim or proceeding brought in connection with the enforcement
of the foregoing clause (i).
(d) Notification of Claims. For the purpose of this Section 8.4, the
term "Indemnifying Party" shall mean the party having an obligation hereunder to
indemnify the other party or parties pursuant to this Section 8.4, and the term
"Indemnified Party" shall mean the party having the right to be indemnified
pursuant to this Section 8.4. Whenever any claim shall arise for
indemnification under this Section 8.4, the Indemnified Party shall promptly
notify the Indemnifying Party in writing of such claim and, when known, the
facts constituting the basis for such claim (in reasonable detail). Failure by
the Indemnified Party to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of any liability hereunder unless and only to the extent such
failure prejudices the Indemnifying Party. The H&R Block Indemnified Parties
shall not be entitled to indemnification under Section 8.4(b)(ii) unless, prior
to March 15, 1999, a H&R Block Indemnified Party has notified H&R Block and
Block Group in writing of the existence of any Losses and Expenses that may
reasonably be expected to give rise to any such
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indemnification obligation. Notwithstanding any provision herein to the
contrary, (i) any claim for indemnification related to or arising out of any Tax
matter may be brought at any time prior to 60 Business Days after the expiration
of the applicable Tax statute of limitations with respect to the relevant
taxable period (including all extensions obtained, whether automatic or
permissive) and (ii) any claim for indemnification based on, related to or
arising out of any Tax matter set forth in Section 9.2(a) and Section 9.2(b)
shall be governed solely by Section 9.2 hereof.
(e) Indemnification Procedures.
(i) After the giving of notice by an Indemnified Party as
required by paragraph (d) of any claim of the commencement of any action by
a Person or Governmental Entity who is not a party to this Agreement or an
Affiliate of such a party (a "Third-Party Claim"), if the Indemnifying
Party undertakes to defend any such claim, it shall be required to take
control of the defense and investigation with respect to such claim and to
employ and engage reputable attorneys of its own choice reasonably
acceptable to the Indemnified Party to handle and defend the same, at the
Indemnifying Party's cost, risk and expense, upon written notice to the
Indemnified Party of such election, which notice acknowledges the
Indemnifying Party's obligation to provide indemnification hereunder. The
Indemnifying Party shall not settle any Third-Party Claim that is the
subject of indemnification without the written consent of the Indemnified
Party, which consent shall not be unreasonably withheld or delayed. The
Indemnified Party shall cooperate in all reasonable respects with the
Indemnifying Party and its attorneys in the investigation, trial and
defense of any lawsuit or action with respect to such claim and any appeal
arising therefrom (including the filing in the Indemnified Party's name of
appropriate crossclaims and counterclaims). In connection with any Third-
Party Claim, each Indemnified Party shall use reasonable efforts to make
available to the Indemnifying Party, upon written request and at reasonable
times, its and its subsidiaries' officers, directors, employees and agents
to act as witnesses to the extent that such persons may reasonably be
required to be available in connection with any claim under this Section
8.4. The Indemnified Party may, at its own cost, participate in any
investigation, trial and defense of such lawsuit or action controlled by
the Indemnifying Party and any appeal arising therefrom. If there are one
or more legal defenses available to the Indemnified Party that conflict
with those available to the Indemnifying Party, the Indemnified Party shall
have the right, at the expense of the Indemnifying Party, to assume the
defense of the lawsuit or action; provided, however, that the Indemnified
Party may not settle such lawsuit or action without the consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or
delayed. Notwithstanding anything to the contrary in this paragraph
(e)(i), if a Third-Party Claim is for money damages asserted in an amount
not to exceed $1,000,000 and is principally for non-monetary relief that
would have a continuing Material Adverse Effect on the Indemnified Party,
then the Indemnified Party shall be entitled to take control of the defense
and investigation with respect to such claim and to employ and engage
reputable attorneys of its own choice reasonably acceptable to the
Indemnifying Party to handle and
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defend the same, at the Indemnifying Party's cost, risk and expense, upon
written notice to the Indemnifying Party of such election
(ii) If, within a reasonable time following receipt of a notice
of a Third-Party Claim pursuant to paragraph (d), the Indemnifying Party
does not undertake to defend any such claim, the Indemnified Party may, but
shall have no obligation to, contest at the expense of the Indemnifying
Party to the extent provided in this Section 8.4 any lawsuit or action with
respect to such claim and the Indemnifying Party shall be bound by the
result obtained with respect thereto by the Indemnified Party (including
the settlement thereof without the consent of the Indemnifying Party).
(iii) Any claim of indemnification for Losses and Expenses which
does not result from a Third-Party Claim shall be asserted by written
notice given by the party claiming a right of indemnification
("Indemnitee") to the party from whom indemnification is sought
("Indemnitor") specifying in reasonable detail the nature and basis for the
claim and the Losses and Expenses incurred. Such Indemnitor shall have a
period of 30 days after the receipt of such notice within which to respond
thereto. If the Indemnitor does not respond within such 30-day period,
such Indemnitor shall be deemed to have refused to accept responsibility to
make payment. If such Indemnitor does not respond within such 30-day
period or rejects such claim in whole or in part, the Indemnitee shall be
free to pursue such remedies as may be available to such party, under
applicable law or under this Agreement.
(iv) If the amount of any Losses and Expenses shall, at any time
subsequent to the payment required by this Agreement, be reduced by
recovery, settlement, insurance proceeds or otherwise, the amount of such
reduction, less any expenses incurred in connection therewith, shall
promptly be repaid by the Indemnitee to the Indemnitor.
(f) Tax-Related Adjustment. An indemnity payment otherwise due and
payable hereunder (i) shall be decreased (but not below zero) to the extent of
any net actual reduction in federal income Tax liability that is actually
realized by the Indemnified Party at the time of its payment of an indemnifiable
loss and (ii) shall be increased to indemnify the Indemnified Party for any
additional federal income Taxes payable by the Indemnified Party by reason of
the receipt or accrual of such indemnity payment.
8.5 No Contribution. Each of H&R Block and Block Group, for itself
and on behalf of the other H&R Block Entities, waives, and acknowledges and
agrees that it and they will not have and will not exercise or assert (or
attempt to exercise or assert), any right of contribution, right of subrogation,
right of indemnity or other similar right or remedy against CompuServe or any of
the CompuServe Entities, with respect to any action or failure to act by H&R
Block, Block Group or any other H&R Block Entity or CompuServe or any CompuServe
Entity, occurring on or prior to the Effective Time in connection with any
actual or alleged breach of any representation, warranty, covenant or other
obligation or agreement set forth in this Agreement, or any Losses or Expenses
referred to in Section 8.4 or Section 9.2 of this Agreement, at or after the
Effective Time, for any other claim accrued as of the Effective Time.
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8.6 Meeting of CompuServe Stockholders. CompuServe shall take all
steps necessary in accordance with its Certificate of Incorporation and Bylaws
and the DGCL to call, set a record date, give notice of, convene and hold a
special meeting of its stockholders (the "CompuServe Stockholders Meeting") to
occur as soon as practicable for the purpose of approving and adopting this
Agreement and authorizing the Merger and for such other purposes as may be
necessary (the "CompuServe Proposal"). Subject to Section 8.14(a) of this
Agreement, the Board of Directors of CompuServe shall (i) take all steps
necessary to present and recommend to its stockholders the approval and adoption
of this Agreement and approval of the transactions contemplated hereby to which
it is a party and any other matters to be submitted to its stockholders in
connection therewith and (ii) use all reasonable efforts to obtain the approval
and adoption by the CompuServe stockholders of this Agreement and any of the
transactions contemplated hereby requiring such stockholder approval.
8.7 Registration Statement; Proxy Statement. (a) As soon as
practicable after the date of this Agreement, WorldCom and CompuServe shall
prepare and file with the SEC the proxy statement relating to the CompuServe
Stockholders Meeting (the "CompuServe Proxy Statement" or "Proxy Statement"),
and WorldCom shall prepare a Registration Statement on Form S-4 (the
"Registration Statement") with respect to the Merger and registration of the
WorldCom Common Shares to be issued to CompuServe's stockholders in connection
therewith. Each of WorldCom, H&R Block and CompuServe shall use all reasonable
efforts to have the Registration Statement declared effective by the SEC as
promptly as practicable thereafter. The CompuServe Proxy Statement will be
mailed to the stockholders of CompuServe as soon as possible after the
Registration Statement is declared effective. No amendment or supplement to the
Proxy Statement shall be made without providing each other such party with
reasonable time to review and comment on such amendment or supplement and in any
case without prior written consent of WorldCom. No amendment (or supplement) to
the Registration Statement (or the prospectus forming a part thereof) shall be
made without providing each other such party with reasonable time to review and
comment on such amendment (or supplement) and in any case without prior approval
of CompuServe, which approval shall not be unreasonably withheld. Promptly
after receiving notice thereof, unless such notice was received from another
party hereto, each of WorldCom and CompuServe shall advise each such other party
of the time when the Registration Statement has become effective or any
amendment thereto or any supplement or amendment to the CompuServe Proxy
Statement has been filed, or the issuance of any stop order, or of any request
by the SEC or NASDAQ for amendment of the Registration Statement. WorldCom
shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified or consenting to service of
process in any jurisdiction in any action other than one arising out of the
offering of the WorldCom Common Shares in such jurisdiction) reasonably required
to be taken under any applicable state securities or "blue sky" laws in
connection with the issuance of WorldCom Common Shares in connection with the
Merger, and each of CompuServe and H&R Block shall furnish all information
concerning CompuServe or H&R Block, as the case may be, as may be reasonably
requested in connection any such action. Except for the Proxy Statement or the
preliminary prospectus/proxy statement, none of WorldCom, CompuServe or H&R
Block shall distribute any written material that might
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constitute a "prospectus" relating to the Merger within the meaning of the
Securities Act or any applicable state securities law, without the prior written
consent of WorldCom.
(b) Each of H&R Block, CompuServe and WorldCom covenants that none of the
information supplied or to be supplied by it for inclusion, or incorporated or
to be incorporated by reference, in (i) the Registration Statement will, at the
time the Registration Statement is filed with the SEC, at any time it is amended
or supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (ii) the CompuServe Proxy Statement will, at the date it is
first mailed to the stockholders of CompuServe, or at the time of the CompuServe
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. Each of H&R Block, CompuServe and WorldCom covenants that
the CompuServe Proxy Statement and the Registration Statement will comply as to
form in all material respects with the requirements of the Exchange Act or the
Securities Act, as the case may be. Notwithstanding the foregoing, (i) no
representation or covenant is made by CompuServe or H&R Block with respect to
statements made or incorporated by reference therein based on information
supplied by WorldCom for inclusion or incorporated by reference in the
CompuServe Proxy Statement or the Registration Statement and (ii) no
representation or covenant is made by WorldCom with respect to statements made
or incorporated by reference therein based on information supplied by CompuServe
or H&R Block for inclusion or incorporated by reference in the CompuServe Proxy
Statement or the Registration Statement. If at any time prior to the Effective
Time there shall occur (i) any event with respect to CompuServe or any
CompuServe Entity, or with respect to other information supplied by CompuServe
for inclusion or incorporated by reference in the Proxy Statement or the
Registration Statement, (ii) any event with respect to H&R Block or any H&R
Block Entity, or with respect to other information supplied by H&R Block for
inclusion or incorporated by reference in the Proxy Statement or the
Registration Statement or (iii) any event with respect to WorldCom, or with
respect to information supplied by WorldCom for inclusion or incorporated by
reference in the Proxy Statement or the Registration Statement, in any case
which event is required to be described in an amendment of, or a supplement to,
the CompuServe Proxy Statement or the Registration Statement, such event shall
be so described, and such amendment or supplement shall be promptly filed with
the SEC and, as required by law, disseminated to the stockholders of CompuServe.
(c) Each of CompuServe and WorldCom shall promptly notify the other parties
of the receipt of any comments from the SEC or its staff or any other
appropriate government official and of any requests by the SEC or its staff or
any other appropriate government official for amendments or supplements to any
of the filings with the SEC in connection with the Merger and other transactions
contemplated hereby or for additional information and shall supply the other
with copies of all correspondence between CompuServe or any of its respective
representatives, or WorldCom or any of its representatives, as the case may be,
on the one hand, and the SEC or its staff or any other appropriate government
official, on the other hand, with respect thereto. CompuServe and WorldCom
shall use all of their respective reasonable efforts
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to respond to any comments of the SEC with respect to the Registration Statement
and the Proxy Statement as promptly as practicable. CompuServe, H&R Block and
WorldCom shall cooperate with each other and furnish all information necessary
in order to prepare the Registration Statement and the Proxy Statement, and
shall provide promptly to the other parties any information such party may
obtain that could necessitate amending or supplementing any such document.
(d) WorldCom covenants that it shall apply to have the WorldCom Common
Shares to be issued in connection with the Merger approved for quotation on
NASDAQ, subject to official notice of issuance.
(e) WorldCom covenants that it will not, without the prior written
consent of CompuServe, (i) agree to waive any obligations of AOL under Sections
5.6 or 5.12 of the Purchase and Sale Agreement or (ii) request from or deem be
to provided by AOL a waiver of any of WorldCom's obligations under such
sections.
8.8 Access to Information. Subject to the provisions of the
Confidentiality Agreement, between the date hereof and the Closing Date, each of
H&R Block, Block Group, CompuServe and WorldCom and their respective Entities
shall (i) give to each such other party and its counsel, accountants and other
representatives reasonable access, at reasonable times and after reasonable
notice, to all the properties, documents, contracts, personnel files (subject to
applicable law) and other records of such party; (ii) furnish the other party
with copies of such documents and with such information with respect to the
affairs of such party as the other party may from time to time reasonably
request; and (iii) shall disclose and make available to each such party and its
representatives all books, contracts, accounts, personnel records, letters of
intent, papers, records, communications with regulatory authorities and other
documents relating to the business and operations of such party as the other
party may from time to time reasonably request. In addition, CompuServe shall
make available to WorldCom all such banking, investment and financial
information as shall be necessary to allow for the efficient integration of
CompuServe's banking, investment and financial arrangements with those of
WorldCom at the Closing, including monthly financial statements. Nothing
contained in this Section 8.8 shall be deemed to create any duty or
responsibility on the part of any party to investigate or evaluate the value,
validity or enforceability of any contract, lease or other asset included in the
assets of any other party. With respect to matters as to which any party has
made express representations or warranties herein, the parties shall be entitled
to rely upon such express representations and warranties irrespective of any
investigations made by such parties. With respect to the obligations of H&R
Block, Block Group, CompuServe and their respective Entities under this Section
8.8, "other party" as used in clauses (i), (ii) and (iii), above, shall be
deemed to include AOL. None of H&R Block, the H&R Block Entities, CompuServe,
the CompuServe Entities, WorldCom or the WorldCom Entities shall be required to
provide access to customer identity or pricing information or to furnish any
documents or information that such party has been advised by counsel may not be
provided under applicable law, would result in the loss of a legal privilege or
would violate a confidentiality obligation, provided that, in the case of
documents or information subject to a legal duty, such party shall use its
reasonable best efforts to obtain any third party consents required to comply
with any confidentiality obligations giving rise to such
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legal duty, in the case of customer identity or pricing information, such party
shall make arrangements for such information to be furnished to counsel for the
party requesting such information and, in the case of privileged information,
such party shall make arrangements for such documentation to be provided to
counsel for the party requesting such information, to the extent reasonable
assurance can be obtained that the legal privilege would not thereby be lost.
8.9 Confidentiality. CompuServe and WorldCom acknowledge and
confirm that they have entered into a letter agreement with AOL dated August 14,
1997 (the "Confidentiality Agreement") and that the Confidentiality Agreement
shall remain in full force and effect in accordance with its terms,
notwithstanding WorldCom's and CompuServe's entering into this Agreement and
whether or not the transactions contemplated by this Agreement are consummated
or terminated.
8.10 HSR Act Compliance, Etc. (a) H&R Block and WorldCom shall
promptly make their respective filings, and shall thereafter use their best
efforts to promptly make any required submissions, under the HSR Act with
respect to the transactions contemplated hereby. H&R Block, Block Group,
CompuServe and WorldCom shall use their respective reasonable efforts to
promptly make all other required filings and submissions with respect to all
other permits, authorizations, consents and approvals from third parties and
Governmental Entities necessary to consummate the transactions contemplated by
this Agreement and the Stockholders Agreement.
(b) H&R Block, Block Group, CompuServe and WorldCom also agree to take
any and all of the following actions to the extent necessary to obtain the
approval of any Governmental Entity with jurisdiction over the enforcement of
any applicable laws regarding the transactions contemplated by this Agreement
and the Stockholders Agreement: entering into negotiations; providing
information; substantially complying with any second request for information
pursuant to the HSR Act or any similar foreign antitrust law; and making
proposals. The parties hereto will consult, consistent with their respective
legal obligations, and cooperate with each other, and consider in good faith the
views of each other, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to the HSR Act or any other federal, state or foreign
antitrust or fair trade law.
8.11 Public Disclosures. H&R Block, Block Group, CompuServe and
WorldCom shall consult with each other before issuing any press release or
otherwise making any public statement with respect to the transactions
contemplated by this Agreement or the Stockholders Agreement, and shall not
issue any such press release or make any such public statement prior to such
consultation except as may be required by applicable law or requirements of the
Exchange Act, NASDAQ or any national securities exchange as advised by counsel,
in which case the parties shall use their reasonable efforts to consult with
each other prior to issuing such a release or making such a statement.
WorldCom, H&R Block and CompuServe shall issue a joint press release, mutually
acceptable to H&R Block, CompuServe and WorldCom, promptly upon execution and
delivery of this Agreement. H&R Block, Block Group, CompuServe and WorldCom
shall cooperate and consult with each other to develop and implement guidelines
for
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communications to employees, customers and suppliers of CompuServe regarding the
transactions contemplated by this Agreement.
8.12 Resignation of Directors and Officers. At or prior to the
Closing, CompuServe shall deliver to WorldCom if and as requested by WorldCom
evidence satisfactory to WorldCom of the resignation of the directors and
officers, solely in their capacities as such, of CompuServe and any CompuServe
Entity, such resignations to be effective at the Closing.
8.13 Notification of Certain Matters. H&R Block, Block Group and
CompuServe shall give prompt notice to WorldCom, and WorldCom shall give prompt
notice to H&R Block, Block Group and CompuServe, of (a) the occurrence or non-
occurrence of any event the occurrence or non-occurrence of which would or could
reasonably be expected to cause any representation or warranty respectively made
by them and contained in this Agreement or the Stockholders Agreement to be
untrue or inaccurate at or prior to the Closing, as the case may be, and (b) any
failure of H&R Block, Block Group, CompuServe or WorldCom, as the case may be,
to comply with or satisfy any covenant, agreement or condition to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 8.13 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
8.14 No Solicitation. (a)(i) CompuServe shall, and shall direct
and use reasonable efforts to cause its officers, directors, employees,
representatives and agents to, immediately cease any discussions or negotiations
with any parties that may be ongoing with respect to a Competitive Proposal.
CompuServe shall not, nor shall it permit any of the CompuServe Entities to, nor
shall it authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of the CompuServe Entities to, directly or
indirectly, (A) solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed or reasonably likely to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Competitive Proposal or (B)
participate in any discussions or negotiations regarding any Competitive
Proposal. "Competitive Proposal" means any inquiry, proposal or offer from any
Person relating to any direct or indirect acquisition or purchase of 10% or more
of the assets of CompuServe and the CompuServe Entities or 10% or more of any
class of equity securities of CompuServe or any of the CompuServe Entities, any
tender offer or exchange offer that if consummated would result in any Person
beneficially owning 10% or more of any class of equity securities of CompuServe
or any of the CompuServe Entities, any merger, consolidation, share exchange,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving CompuServe or any of the CompuServe Entities, other than
the transactions contemplated by this Agreement and the Stockholders Agreement,
or any other transaction the consummation of which could reasonably be expected
to impede, interfere with, prevent or materially delay the Merger or which would
reasonably be expected to dilute materially the benefits to WorldCom of the
transactions contemplated by this Agreement and the Stockholders Agreement.
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(ii) Except to the extent the Board of Directors of CompuServe
determines it is required to do otherwise in accordance with its fiduciary
duties, neither the Board of Directors of CompuServe nor any committee thereof
shall withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to WorldCom, the approval or recommendation by such Board of Directors
or such committee of the CompuServe Proposal. Neither the Board of Directors
nor any committee thereof shall approve or recommend, or propose publicly to
approve or recommend, any Competitive Proposal or cause CompuServe to enter into
any letter of intent, agreement in principle, acquisition agreement or other
similar agreement related to a Competitive Proposal. Any such withdrawal or
modification of the recommendation of the CompuServe Proposal shall not change
the approval of the Board of Directors of CompuServe for purposes of causing
Section 203 of the DGCL to be inapplicable to the CompuServe Proposal or the
status of WorldCom and WAC as other than an "Acquiring Person" under the
CompuServe Rights Agreement and shall not directly or indirectly cause a "Shares
Acquisition Date" or a "Distribution Date" (as such terms are defined in the
CompuServe Rights Agreement) to occur.
(iii) In addition to the obligations of CompuServe set forth in
paragraphs (a)(i) and (a)(ii) of this Section 8.14, CompuServe shall immediately
advise WorldCom orally and in writing of any request for information or of any
Competitive Proposal, the material terms and conditions of such request or
Competitive Proposal and the identity of the person making such request or
Competitive Proposal. CompuServe will keep WorldCom fully informed of the
status and details (including amendments or proposed amendments) of any such
request or Competitive Proposal.
(b) (i) H&R Block shall, and shall direct and use reasonable efforts
to cause its officers, directors, employees, representatives and agents to,
immediately cease any discussions or negotiations with any parties that may be
ongoing with respect to a Competitive Proposal. H&R Block shall not, nor shall
it permit any of the H&R Block Entities to, nor shall it authorize or permit any
of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
the H&R Block Entities to, directly or indirectly, (A) solicit, initiate or
encourage (including by way of furnishing information), or take any other action
designed or reasonably likely to facilitate, any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any
Competitive Proposal or (B) participate in any discussions or negotiations
regarding any Competitive Proposal.
(ii) In addition to the obligations of H&R Block set forth in
paragraph (b)(i) of this Section 8.14, H&R Block shall immediately advise
WorldCom orally and in writing of any request for information or of any
Competitive Proposal, the material terms and conditions of such request or
Competitive Proposal and the identity of the person making such request or
Competitive Proposal. H&R Block will keep WorldCom fully informed of the status
and details (including amendments or proposed amendments) of any such request or
Competitive Proposal.
(c) Nothing contained in this Section 8.14 shall prohibit CompuServe from
taking and disclosing to its stockholders a position contemplated by Rule 14e-
2(a) promulgated under the Exchange Act or from making any disclosure to its
stockholders if, in the good faith
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judgment of the Board of Directors of CompuServe, after consultation with
outside counsel, failure so to disclose would be inconsistent with its fiduciary
duties to CompuServe's stockholders, under applicable law; provided, however,
-------- -------
neither CompuServe nor its Board of Directors nor any committee thereof shall,
except as permitted by Section 8.14(a)(ii), as applicable, withdraw or modify,
or propose publicly to withdraw or modify, its position with respect to the
CompuServe Proposal or approve or recommend, or propose publicly to approve or
recommend, a Competitive Proposal.
8.15 Other Actions. Unless such action or omission is required by
applicable law or otherwise contemplated or permitted by this Agreement
(including the assignment of the Online Services Business), neither H&R Block,
Block Group, nor CompuServe, nor WorldCom nor WAC shall knowingly or
intentionally take any action or omit to take any action, if such action or
omission would, or reasonably might be expected to, result in any of the
representations and warranties set forth herein being or becoming untrue or
inaccurate or any of the conditions to the Merger set forth in this Agreement or
to transactions contemplated by the Stockholders Agreement not being satisfied,
or would adversely affect the ability of CompuServe, Block Group, H&R Block,
WorldCom or WAC to obtain any consents or approvals required of it for the
consummation of the transactions contemplated by this Agreement and the
Stockholders Agreement, without imposition of a condition or restriction which
would have a Material Adverse Effect, or would, or might reasonably be expected
to, materially delay or prevent the holding of the CompuServe Stockholders
Meeting or the taking of a vote thereat, the filing and clearance of the
CompuServe Proxy Statement or the filing and effectiveness of the Registration
Statement or would, or might reasonably be expected to, otherwise materially
impair the ability of H&R Block, Block Group, CompuServe, WorldCom or WAC to
consummate the transactions contemplated by this Agreement and the Stockholders
Agreement, in accordance with the terms of this Agreement and the Stockholders
Agreement or materially delay any such consummation.
8.16 Cooperation. Each of H&R Block, Block Group, CompuServe,
WorldCom and WAC shall use its best efforts (i) to cooperate with each other in
determining whether any filings are required to be made or consents are required
to be obtained in any jurisdiction prior to the Closing (and the closing under
the Stockholders Agreement), in connection with the consummation of the
transactions contemplated hereby and thereby and cooperate in making any such
filings promptly and in seeking to obtain any such consents in a timely manner,
or (ii) to take, or cause to be taken, all actions necessary to comply promptly
with all legal requirements which may be imposed by agency or court order on
such party (or any subsidiaries or other Affiliates of such party) with respect
to this Agreement and the Stockholders Agreement, and (iii) to take, or cause to
be taken, all actions necessary to obtain (and to cooperate with the other party
to obtain) any consent, authorization, order or approval of, or any exemption
by, any Governmental Entity and/or any other public entity which is required to
be obtained or made by such party or any of its subsidiaries or other Affiliates
in connection with this Agreement and the Stockholders Agreement and the
transactions contemplated hereby and thereby. H&R Block and CompuServe shall
reasonably cooperate with WorldCom in furnishing financial information relating
to the Online Services Business, the network services business and any other
business of CompuServe for periods prior to the Closing to the extent such
information may be required to
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prepare financial information required to be filed under the Securities Act, the
Exchange Act or the rules and regulations
promulgated by the SEC thereunder.
8.17 CompuServe and CompuServe Entity Employees. (a) All current
employees of CompuServe or a CompuServe Entity ("CompuServe Employees") as of
the Closing shall be employed, immediately after the Closing, by CompuServe or a
CompuServe Entity. On and after the Closing, WorldCom shall honor, and cause
CompuServe to honor, all provisions of all employment or severance agreements or
plans in effect for CompuServe Employees (or any former employee of CompuServe
or any CompuServe Entity) as of the Closing. H&R Block, Block Group and
CompuServe jointly and severally represent and warrant that Schedule 8.17 is a
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complete list of all such employment and severance agreements and plans existing
as of the date hereof (the "Schedule 8.17 Agreements"). Notwithstanding the
foregoing, at any time after the Closing, the employment of any CompuServe
Employee may be terminated and any Schedule 8.17 Agreement may be amended or
terminated in accordance with its terms; provided, however, that WorldCom agrees
-------- -------
that it shall not, either directly or indirectly through control of CompuServe
or any CompuServe Entity, provide notice of a materially adverse amendment or
termination of any CompuServe severance plan, policy or agreement described in
Schedule 8.17 for a period of twelve months following the Closing Date.
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(b) WorldCom, following the Closing Date, shall permit such CompuServe
Employees who are retained as CompuServe or CompuServe Entity employees or
become WorldCom employees thereafter, and who were participating in CompuServe
Benefit Plans immediately prior to the Closing Date, to participate in
corresponding employee compensation and benefit plans, programs, policies and
fringe benefits (including severance and post-employment benefits, if any) of
WorldCom which shall, in the aggregate, provide the CompuServe Employees with
benefits that are comparable to those provided under the CompuServe Benefit
Plans as of the Closing Date and substantially in accordance with the
eligibility criteria thereof, which shall be of general applicability, it being
understood that such plans, programs, policies and fringe benefits after the
Closing will be those of WorldCom immediately before the Closing and it being
further understood that such plans, programs, policies or fringe benefits may
not be materially and adversely amended, terminated or discontinued for a period
of six months following the Closing Date unless otherwise required by applicable
law. Notwithstanding the foregoing, (i) WorldCom may continue (or cause
CompuServe to continue after the Closing) one or more of the CompuServe Benefit
Plans, and WorldCom will be deemed to have satisfied its obligations under this
Section 8.17(b) with respect to the type of benefits provided under such
CompuServe Benefit Plan(s) and (ii) WorldCom agrees that it will not, either
directly or indirectly through its control of CompuServe, amend in any material
respect or terminate the CompuServe Deferred Compensation Plan for a period of
six months following the Closing Date. WorldCom shall credit prior service of
CompuServe Employees with CompuServe or any CompuServe Entity, as applicable,
for purposes of determining the vesting, eligibility, waiting periods or
qualification of or participation of such employees under WorldCom's benefit
programs and any successor benefit programs to the extent that such prior
service was recognized under such CompuServe Benefit Plans (which shall include
severance, if any, and vacation pay plans but shall not include stock option or
award plans and shall not result in duplication of benefits); such prior service
credited
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under a WorldCom benefit program shall include service with other entities to
the extent that such service is credited by CompuServe or any CompuServe Entity
for purposes of any CompuServe Benefit Plan similar to such WorldCom benefit
plan. Any WorldCom benefit plan which is a Block Group health plan within the
meaning of Section 5000(b) of the Code shall waive all pre-existing condition
limitations with respect to the CompuServe Employees. WorldCom agrees that the
vacation benefits of the CompuServe Employees that have accrued and are unused
as of the Closing Date (including vacation days carried over in accordance with
the CompuServe vacation policy) shall be carried over for use after the Closing
Date in accordance with the CompuServe vacation policy so long as such policy
remains in effect.
(c) The parties hereto acknowledge and agree that (i) the consummation
of the transactions contemplated by this Agreement shall constitute a "change in
control" of CompuServe for purposes of the CompuServe Benefit Plans (including
the Schedule 8.17 Agreements) and (ii) the resignation of any officer or
director of CompuServe in his or her position as such pursuant to Section 8.12
of this Agreement shall not be treated as a voluntary termination of employment
of such officer or director for purposes of any Section 8.17 Agreement and will
not otherwise adversely affect the material rights of such officers or directors
under any Section 8.17 Agreement.
(d) Notwithstanding the provisions of Section 8.17(a), (b) and (c) or
any other provision of this Agreement, in the event WorldCom assigns or
transfers the Online Services Business to AOL (or its Affiliate or assignee),
WorldCom shall have no obligation hereunder to provide any employment,
compensation or benefits to any former employee of the Online Services Business,
but WorldCom shall provide, in the documents relating to such assignment or
transfer, that AOL (or such Affiliate or assignee) shall provide benefits to
such employees which are substantially equivalent in value to the benefits
otherwise called for under paragraph (b) above.
8.18 CompuServe Name. Each of H&R Block and Block Group
acknowledges that the name "CompuServe," whether alone or in combination with
one or more other words, and including any abbreviations or derivations of such
name, is an asset of CompuServe and will be an asset solely of CompuServe
immediately following the Closing. Nothing in this Agreement constitutes a
license or transfer of rights in or with respect to the word "CompuServe" or any
such abbreviation or derivation to H&R Block, Block Group or any other Person
(except WorldCom) after the Closing and neither H&R Block, Block Group nor any
such other Person shall use or purport to use, license or otherwise transfer the
word "CompuServe" or any such abbreviation or derivation for any business
purpose after the Closing. Following the Closing, each of H&R Block and Block
Group agrees to take all actions and to execute all documents and certificates
as WorldCom may reasonably request to effectuate the intention of this Section
8.18.
8.19 Affiliate Letters. At least 30 days prior to the Closing
Date, H&R Block, Block Group and CompuServe shall deliver to WorldCom a list of
names and addressees of those persons who were, in the reasonable judgment of
H&R Block, Block Group or CompuServe, as the case may be, at the record date for
the CompuServe Stockholders Meeting, "affiliates" (each such Person, a "Rule 145
Affiliate") of either H&R Block, Block Group or CompuServe within
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the meaning of Rule 145 of the rules and regulations promulgated under the
Securities Act. H&R Block and Block Group shall execute and deliver, and H&R
Block, Block Group and CompuServe shall use all reasonable efforts to deliver or
cause to be delivered to WorldCom, prior to the Closing Date, from each of their
respective Rule 145 Affiliates identified in the foregoing list, an Affiliate
Letter in the form attached as Exhibit C. WorldCom shall be entitled to place
legends as specified in such Affiliate Letters on the certificates evidencing
any WorldCom Common Shares to be received by such Rule 145 Affiliates pursuant
to the Merger and terms hereof, and to issue appropriate stop transfer
instructions to the transfer agent for the WorldCom Common Shares, consistent
with the terms of such Affiliate Letters.
8.20 Noncompete and Nonsolicitation Agreement. Subject to the
satisfaction of the conditions to its obligations in Article X, below, each of
H&R Block and Block Group shall execute and deliver to WorldCom at the Closing,
without further consideration, a noncompete and nonsolicitation agreement in
substantially the form attached hereto as Exhibit D (the
"Noncompete/Nonsolicitation Agreement").
8.21 Facilities Agreements. H&R Block hereby agrees that, for a
period of two years following the Closing, it will not terminate any of the
sublease agreements in effect on the date of this Agreement between H&R Block or
a H&R Block Entity, as sublessor, and CompuServe or a CompuServe Entity, as
sublessee, governing the use by CompuServe or such CompuServe Entity of office
space for the operation of communications processors and attendant equipment,
provided, however, that H&R Block or such H&R Block Entity may terminate any
such agreement in accordance with its terms if (i) H&R Block's or such H&R Block
Entity's tenancy under the applicable master lease agreement is terminated at
any time or (ii) CompuServe or such CompuServe Entity defaults in payment of
rent reserved under such sublease or shall materially breach or violate any
other term, covenant or condition of such sublease or of the applicable master
lease agreement.
8.22 SEC and Stockholder Filings. Each of CompuServe and WorldCom
shall send to the other a copy of all material public reports and materials as
and when it sends the same to its stockholders, the SEC or any state or foreign
securities commission.
8.23 Takeover Statutes. If any "fair price," "moratorium," "business
combination," "control share acquisition" or other similar antitakeover statute
or regulation enacted under state or federal laws in the United States (each a
"Takeover Statute"), including Section 203 of the DGCL, is or may become
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applicable to the Merger or the Stockholders Agreement, CompuServe, H&R Block
and the members of their respective Boards of Directors will grant such
approvals, and take such actions as are necessary so that the transactions
contemplated by this Agreement and the Stockholders Agreement may be consummated
as promptly as practicable on the terms contemplated hereby and thereby and
otherwise act to eliminate or minimize the effects of any Takeover Statute on
any of the transactions contemplated hereby or thereby.
8.24 Comfort Letters. (a) Upon the request of WorldCom, CompuServe
shall use reasonable business efforts to provide to WorldCom prior to the
Effective Time "comfort letters" from the independent certified public
accountants for CompuServe and the CompuServe Entities
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dated the date on which the Registration Statement, or last amendment thereto,
shall become effective, and dated the Closing Date, addressed to the Board of
Directors of each of CompuServe and WorldCom, covering such matters as WorldCom
shall reasonably request with respect to facts concerning the financial
condition of CompuServe and the CompuServe Entities and customary for such
certified public accountants to deliver in connection with a transaction similar
to the Merger.
(b) Upon the request of CompuServe, WorldCom shall use reasonable
business efforts to provide to CompuServe prior to the Effective Time "comfort
letters" from the independent certified public accountants for WorldCom and the
WorldCom Entities dated the date on which the Registration Statement, or last
amendment thereto, shall become effective, and dated the Closing Date, addressed
to the Board of Directors of CompuServe and WorldCom, covering such matters as
CompuServe shall reasonably request with respect to facts concerning the
financial condition of WorldCom and the WorldCom Entities and customary for such
certified public accountants to deliver in connection with a transaction similar
to the Merger.
8.25 Interim Conduct of WorldCom. WorldCom covenants and agrees with
H&R Block, Block Group and CompuServe that, except (i) as contemplated in this
Agreement, or (ii) with the prior written consent of H&R Block, which consent
shall not be unreasonably withheld, after the date hereof and until the earlier
of the termination of this Agreement pursuant to Article XI and the Closing
Date:
(a) WorldCom will not declare, set aside or pay any dividend or other
distribution payable in cash, stock, securities or property other than cash or
stock dividends on preferred stock or stock dividends;
(b) WorldCom will not adopt a plan of complete or partial liquidation,
dissolution or recapitalization of WorldCom; and
(c) Neither WorldCom nor any WorldCom Entity will enter into an
agreement, contract, commitment or arrangement to do any of the foregoing, or
authorize, recommend, propose or announce an intention to do any of the
foregoing.
8.26 Stock Options. WorldCom and CompuServe hereby agree that all
CompuServe Stock Options, including all rights, options or similar rights to
acquire CompuServe Common Stock, shall be canceled as of the Effective Time
without any further liability or obligation of CompuServe thereunder in
accordance herewith. On or as soon as practicable following the date of this
Agreement and prior to the Effective Time, the Board of Directors of CompuServe
(or, if appropriate, any committee administering the CompuServe Stock Option
Plans), shall adopt such resolutions or take such other actions as may be
required to cause all CompuServe Stock Options not previously exercised in
accordance with their terms to be canceled effective immediately prior to the
Effective Time (or earlier if permitted under the terms thereof), and only
entitle the holders thereof, upon surrender thereof, to receive an amount in
cash as set forth on Schedule 8.26 (the "CompuServe Stock Option Payments").
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ARTICLE IX
TAX MATTERS
9.1 Section 338 Election. (a) The parties intend that the
acquisition of CompuServe by WorldCom through the Merger will constitute a
qualified stock purchase within the meaning of Section 338(d)(3) of the Code. In
order to effectuate such intent:
(i) Block Group acknowledges that pursuant to the terms of this
Agreement, as a consequence of the Merger it has the right to receive in
exchange for its shares of CompuServe Common Stock either (A) shares of
WorldCom Common Stock or (B) both shares of WorldCom Common Stock and
cash, as provided in Section 1.3(a)(ii) above, in either case subject to
receipt of cash in lieu of fractional shares as provided in Section 1.3(b)
above. In order to allow the transaction contemplated by this Agreement to
constitute a qualified stock purchase under Section 338 of the Code and not
a tax-free reorganization, by executing this Agreement Block Group hereby
elects to receive both shares of WorldCom Common Stock and cash, as
provided in Section 1.3(a)(ii), and agrees that such election shall be
irrevocable.
(ii) H&R Block (as the common parent of the selling consolidated
group within the meaning of Section 338(h)(10) of the Code), WorldCom and
CompuServe shall jointly make timely and irrevocable elections under
Section 338(h)(10) of the Code (which elections shall be made with respect
to the CompuServe and each of the eligible CompuServe Entities requested by
WorldCom) and, if permissible, similar elections under any applicable
state, local or foreign income tax laws (jointly, the "Elections"). H&R
Block and WorldCom agree to report the transfer of the CompuServe Common
Shares (and the deemed sale of the shares of the affected CompuServe
Entities) under this Agreement consistent with such Election and agree not
to take any action that could cause such Election to be invalid, and shall
take no position contrary thereto unless required to do so pursuant to a
determination (as defined in Section 1313(a) of the Code or any similar
state, local or foreign tax provision).
(b) (i) To the extent possible, WorldCom, H&R Block, and CompuServe
agree to execute at the Closing any and all forms necessary to effectuate the
Election (including Internal Revenue Service Form 8023-A and any similar forms
under applicable state, local and foreign income tax laws (the "Section 338
Forms")). In the event, however, any Section 338 Forms are not executed at the
Closing, WorldCom, H&R Block and CompuServe agree to prepare and complete each
such Section 338 Form no later than 10 Business Days prior to the date such
Section 338 Form is required to be filed. H&R Block and WorldCom shall each
cause the Section 338 Forms to be duly executed by an authorized person for H&R
Block and WorldCom, in each case, and shall duly and timely file the Section 338
Forms in accordance with applicable tax laws and the terms of this Agreement.
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(ii) As soon as practicable after the Closing Date, WorldCom shall
deliver to H&R Block a written notice setting forth (with reasonable
specificity) WorldCom's good faith calculation of (1) the Modified
Aggregate Deemed Sales Price (as defined below) and the allocation thereof
among the assets of CompuServe and of the affected CompuServe Entities in
accordance with the principles of Treasury Regulation (S)1.338(h)(10)-
1(f)(1)(ii) and (2) the adjusted grossed-up basis of the assets of
CompuServe and of the assets of the affected CompuServe Entities pursuant
to Treasury Regulation (S)1.338(h)(10) - 1(e)(5) (the "Deemed Purchase
Price") (collectively, "Buyer's Allocation"). Within 20 Business Days
after receipt thereof, H&R Block shall deliver to WorldCom written notice
indicating whether H&R Block agrees or disagrees with Buyer's Allocation.
If H&R Block agrees with Buyer's Allocation or if H&R Block fails to
deliver such written notice within such 20 Business Days, Buyer's
Allocation shall constitute the "Agreed Allocation." If H&R Block provides
timely written notice to WorldCom of any disagreement with Buyer's
Allocation, the Agreed Allocation shall be determined through the Tax
Settlement Procedure. Except as determined to the contrary by the
appropriate taxing authority upon an audit of its (or its Affiliates') Tax
Returns, each of H&R Block, CompuServe, the affected CompuServe Entities
and WorldCom shall file all Tax Returns consistent with the Agreed
Allocation. For purposes of this Section 9.1, the term "Modified Aggregate
Deemed Sales Price" shall mean the amount resulting from the Elections,
determined pursuant to Treasury Regulation (S)1.338(h)(10)-1(f) without
regard to items described in Treasury Regulation (S)1.338(h)(10)-
1(f)(4)(ii) (it being understood that H&R Block may take such items into
account in filing Tax Returns).
(c) For purposes of this Agreement, the "Tax Settlement Procedure" is as
follows:
Upon receipt by H&R Block or by WorldCom, as the case may be (the
"Calculating Party"), of notice from the other party (the "Disputing Party") of
disagreement with any Tax calculation or determination supplied by the
Calculating Party, the Calculating Party and the Disputing Party shall begin
good faith negotiations to resolve such disagreement. If the Calculating Party
and the Disputing Party are able to resolve such disagreement within ten
Business Days after the Calculating Party's receipt of notice of disagreement
(or any longer period mutually agreed to by the parties), the relevant amount
will become the amount agreed upon by the Calculating Party and the Disputing
Party. If the Calculating Party and the Disputing Party are unable to resolve
any disagreement within ten (10) Business Days after the Calculating Party's
receipt of notice of disagreement, the Calculating Party and the Disputing Party
shall jointly request the national office of Arthur Andersen LLP, or, if such
firm is unavailable, another independent nationally recognized auditing firm
selected by the parties (the "Tax Settlement Auditor") to resolve any issue in
dispute as soon as possible and shall cooperate with the Tax Settlement Auditor
to resolve such dispute. The Tax Settlement Auditor shall make a determination
with respect to all disputed issues, which determination shall be set forth in a
written report delivered to the Calculating Party and the Disputing Party. The
Calculating Party and the Disputing Party shall each pay one-half of the fees
and expenses of the Tax Settlement Auditor with respect to such determination.
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9.2 Tax Indemnification. (a) H&R Block and the H&R Block Entities
(other than CompuServe and the CompuServe Entities) jointly and severally shall
be responsible for, shall pay or cause to be paid, and shall indemnify and hold
harmless WorldCom and WAC and, after the Closing, CompuServe and the CompuServe
Entities (subject to the obligations of CompuServe and the CompuServe Entities
to make payments under Section 9.2(j)) and each of their respective successors-
in-interest from and against any and all Losses and Expenses for or in respect
of each of the following:
(i) Any and all Taxes with respect to any taxable period of CompuServe
or any of the CompuServe Entities (or any predecessor) ending on or before
the Closing Date (including any and all Taxes arising as a result of the
Elections), but excluding any transactions occurring after the Closing
(other than the Elections) which are not related to the Merger and the
other transactions contemplated by this Agreement ("Excluded
Transactions");
(ii) Any and all Taxes resulting from CompuServe or any of the
CompuServe Entities (or any predecessor) having been (or ceasing to be)
included in any affiliated, consolidated, combined or unitary Tax Return
that included CompuServe or any of the CompuServe Entities (or any
predecessor) for any taxable period (or portion thereof) ending on or
before the Closing Date (including any liability for Taxes resulting from
an acceleration of an "intercompany transaction" within the meaning of
Treasury Regulation (S)1.1502-13(d), any deferred income triggered by
Treasury Regulation (S)1.1502-14, and any excess loss accounts taken into
income under Treasury Regulation (S)1.1502-19 or any analogous or similar
provisions under state, local or foreign law or any predecessor provision
or regulation) that occurred on or before the Closing Date (but excluding
the Excluded Transactions);
(iii) Any and all Taxes of any member of an affiliated, consolidated,
combined or unitary group (other than CompuServe or any CompuServe Entity)
of which CompuServe or any CompuServe Entity (or any predecessor) is or was
a member on or prior to the Closing Date, by reason of the liability of
CompuServe or any CompuServe Entity (i) pursuant to Treasury Regulation
(S)1.1502-6(a) or any analogous or similar state, local or foreign law or
regulation, (ii) as a transferee or successor, or (iii) by contract or
otherwise (including under any Tax sharing, Tax indemnity, Tax allocation
or similar contracts (whether or not written) to which CompuServe or any of
the CompuServe Entities, any predecessor of CompuServe or any of the
CompuServe Entities, or any transferor to CompuServe or any of the
CompuServe Entities, is a party or is obligated thereunder;
(iv) Any and all Employment and Withholding Taxes with respect to all
periods prior to and as of the Closing Date;
(v) To the extent not previously paid, any and all real property Taxes
allocable to CompuServe or any CompuServe Entity (or any predecessor)
pursuant to Section 9.2(c) hereof (excluding real property Taxes resulting
from the Excluded Transactions
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and any increase in real property Taxes arising from a revaluation of the
property as a result of the sale of the CompuServe Common Shares or the
Elections);
(vi) Any and all Taxes allocable to H&R Block, CompuServe or any
CompuServe Entity pursuant to Section 9.2(c) hereof and not previously paid
thereunder; and
(vii) Any breach of any representation or warranty contained in
Section 3.10 or of any covenant of H&R Block or any other H&R Block Entity
contained in Section 9.2.
(b) WorldCom agrees to indemnify and hold harmless H&R Block and the other
H&R Block Entities from and against (and H&R Block and the other H&R Block
Entities shall have no liability under Section 9.2(a) on account of) any and all
Losses and Expenses for or in respect of any and all Taxes of CompuServe or any
of the CompuServe Entities (or any predecessor) that are not described in
Section 9.2(a) (including Taxes resulting from an Excluded Transaction).
(c) H&R Block and WorldCom shall, to the extent permitted by applicable
law, elect with the relevant taxing authority to close the taxable period of
CompuServe and the CompuServe Entities on the Closing Date. In any case where
applicable law does not permit CompuServe or any CompuServe Entity to close its
taxable year on the Closing Date (and in the case of Taxes described in Section
9.2(a)(v)), Taxes attributable to the taxable period of CompuServe or any
CompuServe Entity beginning on or before and ending after the Closing Date shall
be allocated (i) to H&R Block for the period up to and including the Closing
Date (excluding any Excluded Transaction and any increase in real property Taxes
arising from a revaluation of the property as a result of the merger or the
Elections), and (ii) to WorldCom, CompuServe or any CompuServe Entity, as
appropriate, for the period subsequent to the Closing Date (including any
Excluded Transaction and any increase in real property Taxes arising from a
revaluation of the property as a result of the merger or the Elections). Any
allocation required to determine any Taxes attributable to any period beginning
on or before and ending after the Closing Date (including any Taxes resulting
from a Tax audit or administrative or court proceeding) shall be made by means
of a closing of the books and records of CompuServe and the CompuServe Entities
as of the close of business on the Closing Date, excluding any Excluded
Transaction, and, to the extent not susceptible to such allocation, by
apportionment on the basis of elapsed days, except that extraordinary items
described in Treasury Regulation (S)1.1502-76(b)(2)(ii)(C) shall be allocated to
the day that they are taken into account. Real property Taxes (excluding those
arising from any Excluded Transaction and any increase in such Taxes arising
from a revaluation of the property as a result of the merger or the Elections)
shall be allocated on the basis of elapsed days.
(d) (i) Promptly after receipt by WorldCom, WAC, CompuServe or any of the
CompuServe Entities of written notice of the assertion or commencement of
any claim, audit, examination, or other proposed change or adjustment by
any taxing authority concerning any Tax covered by Section 9.2(a) (each a
"Tax Claim"), WorldCom shall notify H&R Block. Such notice shall contain
factual information (to the extent known by
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WorldCom, CompuServe or any of the CompuServe Entities) describing the
asserted Tax Claim in reasonable detail and shall include copies of any
notice or other document received from any taxing authority in respect of
any such asserted Tax Claim. The failure of WorldCom to give H&R Block
prompt notice as provided herein shall not relieve H&R Block of any of its
obligations under Section 9.2, except and only to the extent that H&R Block
is materially prejudiced by such failure.
(ii) H&R Block shall promptly notify WorldCom of the commencement of
any claim, audit, examination or other proposed change or adjustment by any
taxing authority which could reasonably be expected to affect the liability
of CompuServe or any of the CompuServe Entities for Taxes. Such notice
shall contain factual information (to the extent known by H&R Block or any
H&R Block Entities) describing the asserted Tax Claim in reasonable detail
and shall include copies of any notice or other document received from any
taxing authority in respect of any such asserted Tax Claim. The failure of
H&R Block to give WorldCom prompt notice as provided herein shall not
relieve WorldCom of any of its obligations under Section 9.2, except and
only to the extent that WorldCom or any of the WorldCom Entities (including
CompuServe and any of the CompuServe Entities) is materially prejudiced by
such failure.
(iii) H&R Block shall have the sole right to represent CompuServe's
or any of the CompuServe Entities' interests in any Tax audit or
administrative or court proceeding relating to any Tax covered by Section
9.2(a) and to employ counsel of its choice, provided that if the results of
such Tax audit or proceeding could reasonably be expected to be material to
WorldCom, CompuServe, any of the CompuServe Entities or their Affiliates
for any taxable period including or ending after the Closing Date, then H&R
Block and WorldCom shall jointly control the defense and settlement of any
such Tax audit or proceeding and each party shall cooperate with the other
party at its own expense and there shall be no settlement or closing or
other agreement with respect thereto without the consent of the other
party, which consent shall not be unreasonably withheld; provided, however,
for a Tax audit or proceeding with respect to any Seller Consolidated and
Combined Return, WorldCom shall only be entitled to participate actively
with respect to those issues as to which they have an interest and not
control jointly the settlement of the entire audit. H&R Block shall
promptly notify WorldCom if it decides not to control the defense or
settlement of any such Tax audit or administrative or court proceeding and
WorldCom thereupon shall be permitted to defend and settle such Tax audit
or proceeding.
(e) (i) H&R Block shall properly prepare or cause to be properly
prepared, and shall timely file or cause to be timely filed, (x) all Tax
Returns which include CompuServe or any CompuServe Entities required to be
filed on or before the Closing Date, and (y) all Tax Returns which include
CompuServe or any CompuServe Entities or their assets or operations for all
taxable periods of CompuServe and of the CompuServe Entities ending on or
before the Closing Date (which Tax Returns shall include CompuServe and the
CompuServe Entities and the reportable items from the assets or operations
of CompuServe and the CompuServe Entities through and including the
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Closing Date). Such Tax Returns (insofar as they relate to CompuServe or
any of the CompuServe Entities) shall be prepared in a manner consistent
with past practices and prior audit adjustments and H&R Block shall pay or
cause to be paid all Taxes shown as due on such Tax Returns or otherwise
levied or assessed upon CompuServe or any of the CompuServe Entities or any
of their assets on or prior to the Closing Date. Insofar as they relate to
CompuServe and the CompuServe Entities, such Tax Returns shall be provided
to WorldCom for WorldCom's review and comment 20 Business Days prior to
filing, and WorldCom shall be entitled to suggest to H&R Block any
reasonable changes to such Tax Returns, which suggestions may be rejected
by H&R Block in its discretion. H&R Block shall, subsequent to the Closing
Date, provide written notice to WorldCom of its intent to file any amended
Tax Return or claim for refund with respect to any taxable period ending on
or prior to the Closing Date that could reasonably be expected to be
material to WorldCom, CompuServe, any of the CompuServe Entities, or their
Affiliates for any taxable period including or ending after the Closing
Date, and H&R Block shall not make such filing without the consent of
WorldCom, which consent shall not be unreasonably withheld.
(ii) Except as set forth in clause (i) above, WorldCom shall be
responsible for the filing and payment (subject to WorldCom's right to
indemnification to the extent provided in Section 9.2(a)) of all other Tax
Returns required to be filed after the Closing Date by or on behalf of
CompuServe and any of the CompuServe Entities, or with respect to their
assets and operations. WorldCom shall, subsequent to the Closing Date,
provide written notice to H&R Block of its intent to file any amended Tax
Return that could reasonably be expected to be material to H&R Block, and
WorldCom shall not make such filing without the consent of H&R Block, which
consent shall not be unreasonably withheld.
(iii) With respect to any Tax Return required to be filed by WorldCom
for a taxable period of CompuServe or any of the CompuServe Entities
beginning on or before the Closing Date and ending after the Closing Date,
WorldCom shall deliver, at least 30 Business Days prior to the due date for
filing such Tax Return (including extensions), to H&R Block a statement
setting forth the amount of Tax allocated to H&R Block pursuant to Section
9.2(c), (the "Tax Statement") and copies of such Tax Returns, and WorldCom
shall cause CompuServe and the CompuServe Entities to pay all Taxes shown
as due on such Tax Returns. H&R Block shall have the right to review such
Tax Return and the Tax Statement prior to the filing of such Tax Return and
to suggest to WorldCom any reasonable changes to such Tax Returns. Any
disagreement between the parties will be resolved through the Tax
Settlement Procedure. If the Tax Settlement Auditor is unable to make a
determination with respect to any disputed issue within five Business Days
prior to the due date (including extensions) for the filing of the Tax
Return in question, then WorldCom may file such Tax Return on the due date
(including extensions) therefor without such determination having been made
and without H&R Block's consent. Notwithstanding the filing of such Tax
Return, the Tax Settlement Auditor shall make a determination with respect
to any disputed issue, and the amount of Taxes that are allocated to H&R
Block pursuant to Section 9.2(c) or Section 9.2(a)(v), as the case may
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be, shall be as determined by the Tax Settlement Auditor. The fees and
expenses of the Tax Settlement Auditor shall be paid one-half by WorldCom,
on the one hand, and one-half by H&R Block, on the other. Nothing in this
Section 9.2(e)(iii) shall excuse H&R Block from its indemnification
obligations pursuant to Section 9.2 hereof if the amount of Taxes as
ultimately determined (on audit or otherwise), for the periods covered by
such Tax Returns and which are allocable to H&R Block pursuant to Section
9.2(c) or Section 9.2(a)(v), as the case may be, exceeds the amount
determined under this Section 9.2(e)(iii).
(iv) H&R Block and WorldCom shall cooperate fully with each other and
make available to each other in a timely fashion such Tax data and other
information as may be reasonably required by H&R Block or WorldCom for the
preparation and timely filing of any Tax Returns required to be prepared
and filed by H&R Block, WorldCom, CompuServe or any CompuServe Entity
hereunder (or by AOL as assignee of the Online Services Business) or in
connection with the preparation or filing of any election, claim for
refund, consent or certification.
(f) H&R Block and WorldCom shall provide to each other, and WorldCom shall
cause CompuServe and the CompuServe Entities to provide to H&R Block, full
access, at any reasonable time and from time to time, at the business location
at which the books and records are maintained, after the Closing Date, to such
Tax data of CompuServe and the CompuServe Entities as H&R Block or WorldCom, as
the case may be, may from time to time reasonably request and shall furnish, and
request the independent accountants and legal counsel of H&R Block, WorldCom,
CompuServe and the CompuServe Entities to furnish to H&R Block, WorldCom,
CompuServe and the CompuServe Entities as the case may be, such additional Tax
and other information and documents in the possession of such persons as H&R
Block, WorldCom, CompuServe and the CompuServe Entities may from time to time
reasonably request.
(g) Any claim for indemnity hereunder may be made at any time prior to 60
Business Days after the expiration of the applicable Tax statute of limitations
with respect to the relevant taxable period (including all extensions obtained,
whether automatic or permissive).
(h) The party seeking indemnification or other payment pursuant to this
Section 9.2 shall give the other party written notice of claim for
indemnification or payment, which notice shall include a calculation of the
amount of the requested indemnity or other payment and shall furnish to the
other party copies of all books, records and other information reasonably
requested by the other party to the extent necessary to substantiate such claim
and verify the amount thereof. If reasonably necessary in order to make or
substantiate a claim (or to determine if a claim should be made), each party
shall be permitted access to the other party's books, records and other
information in connection therewith. The party requested to make any indemnity
or other payment pursuant to this Section 9.2 shall deliver to the party
requesting payment, within 20 Business Days after receiving both the foregoing
notice and all books, records and other information reasonably requested by it,
a detailed statement describing its objections (if any) thereto. Any such
objections will be resolved through the Tax Settlement Procedure.
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(i) H&R Block shall be responsible for, shall pay or cause to be paid, and
shall indemnify and hold harmless WorldCom, WAC, CompuServe, and the CompuServe
Entities, from and against any Losses and Expenses arising after the Closing
Date arising under any Tax sharing, Tax indemnity, Tax allocation or similar
contracts (whether or not written) to which CompuServe or any of the CompuServe
Entities, any predecessor of CompuServe or any of the CompuServe Entities, or
any transferor to CompuServe or any of the CompuServe Entities, is a party or is
obligated thereunder (other than the tax sharing agreement between H&R Block and
CompuServe dated April 22, 1996), in each case on or prior to the Closing Date.
None of WorldCom, WAC, CompuServe or any of the CompuServe Entities shall have
any liability pursuant to any such agreement after the Closing Date.
(j) All Tax sharing agreements between H&R Block and CompuServe shall
be terminated as of the Closing Date except for the Tax Sharing Agreement
between CompuServe and H&R Block dated April 22, 1996, as currently in effect,
which shall continue to apply as provided therein, except to the extent
inconsistent with the provisions of this Section 9.2, it being the intent of the
parties that CompuServe shall be entitled to all the benefits payable and shall
be subject to all the liabilities under that agreement (subject to adjustment as
provided therein) with respect to the taxable periods it was a member of the H&R
Block Group (as defined in that agreement); provided, however, any amounts due
and payable under that agreement shall be computed without taking into account
the Taxes resulting from the Elections (i.e., as though the Elections were not
made) to the extent such Tax liabilities are subject to indemnification under
Section 9.2.
9.3 Tax Related Adjustments. (a) H&R Block and WorldCom agree that any
indemnity payment made under this Agreement shall be treated by the parties on
their Tax Returns as an adjustment to the Exchange Ratio. If, notwithstanding
such treatment by the parties, any indemnity payment is determined to be taxable
to (i) H&R Block (other than as an adjustment to the Exchange Ratio) or (ii)
WorldCom, WAC, CompuServe or any CompuServe Entity, for federal income Tax
purposes by the IRS, the indemnifying party shall indemnify the indemnified
party for any additional federal income Taxes payable by the indemnified party
by reason of the receipt or accrual of such indemnity payment (including any
payments under this Section 9.3).
(b) An indemnity payment otherwise due and payable hereunder shall be
decreased (but not below zero) to the extent of any net actual reduction in
federal income Tax liability that is actually realized by the indemnified party
at the time of its payment of an indemnifiable loss.
(c) WorldCom shall pay to H&R Block, any refund of any Tax for which H&R
Block is responsible under Section 9.2(a) other than as a result of a carryback
of any credit or deduction from a taxable year ending after the Closing Date.
WorldCom shall pay to H&R Block such refund (including interest received
thereon) (reduced by any actual Tax increase or actual Tax detriment to
WorldCom, WAC, CompuServe or any of the CompuServe Entities as a result of the
receipt thereof, but increased by any actual Tax benefit resulting from such
payment) promptly upon receipt thereof by the recipient thereof. WorldCom
shall, if H&R Block requests,
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cause the relevant entity to file for and obtain any refunds or equivalent
amounts to which H&R Block is entitled under this Section 9.3(c), and WorldCom
shall permit H&R Block to principally control the prosecution of any such refund
claim, provided, however, that WorldCom must consent to any such refund claim,
which consent may not be unreasonably withheld, and that any such refund claim
shall be at the sole expense of the H&R Block.
9.4 Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) ("Transfer Taxes") incurred in connection with the effectuation of the
Merger and all transactions pursuant to this Agreement (including the Elections)
shall be shared equally by H&R Block and WorldCom.. Any Tax Returns that must
be filed in connection with Transfer Taxes shall be prepared by H&R Block. At
least 20 Business Days prior to the date such Tax Returns are to be filed, H&R
Block shall provide copies of any such Tax Returns to WorldCom for WorldCom's
review. Any dispute as to the amount of such Taxes shall be resolved in
accordance with the Tax Settlement Procedure. H&R Block and WorldCom shall
cooperate in the timely completion and filing of all such Tax Returns.
ARTICLE X
CONDITIONS TO CLOSING
10.1 Mutual Conditions. The respective obligations of each party to
consummate the Merger shall be subject to the satisfaction, at or prior to the
Closing, of the following conditions:
(a) The holders of the requisite number of CompuServe Common Shares
shall have duly and validly approved and adopted this Agreement;
(b) Any mandatory waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act, any foreign
competition law or similar law shall have expired or been terminated;
(c) No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, injunction or other order,
whether temporary, preliminary or permanent, which is in effect and which has or
would have the effect of making the transactions contemplated by this Agreement
illegal or restraining or prohibiting consummation of such transactions;
(d) The Registration Statement shall have been declared effective, no
stop order with respect to the Registration Statement shall be in effect, and no
proceeding for that purpose shall have been instituted or threatened by the SEC;
(e) The WorldCom Common Shares to be issued in connection with the
Merger shall have been approved for quotation on NASDAQ, subject to official
notice of issuance; and
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(f) There shall not have occurred and be continuing any general
banking moratorium in the United States or any general suspension of trading of
securities on any national stock exchange or in the over-the-counter market.
10.2 Conditions to Obligations of WorldCom and WAC. The obligations of
WorldCom and WAC to consummate the Merger shall be subject to the satisfaction,
at or prior to the Closing, of the following conditions (any of which may be
waived prior to the Closing by WorldCom):
(a) The representations and warranties of H&R Block, Block Group and
CompuServe set forth in this Agreement that are qualified by Material Adverse
Effect or otherwise as to materiality shall be true and correct, and those that
are not so qualified shall be true and correct except for failures to be true
and correct as would not have a Material Adverse Effect on CompuServe, as of the
date of this Agreement and as of the Closing as though made at and as of the
Closing, except to the extent that such representations and warranties expressly
relate to a specific earlier date (in which case such representations and
warranties that are qualified by a Material Adverse Effect shall be true and
correct, and those that are not so qualified shall be true and correct except
for failures to be true and correct as would not, individually or in the
aggregate, have a Material Adverse Effect on CompuServe, on and as of such
earlier date). None of the representations or warranties regarding CompuServe
or any of the CompuServe Entities contained in Article III, disregarding any
qualifications regarding materiality (including any reference to Material,
Material Adverse Change or Material Adverse Effect), shall be untrue or
incorrect, except for such untrue or incorrect representations or warranties
that, when taken together as a whole, do not constitute a Material Adverse
Effect.
(b) Neither CompuServe nor any CompuServe Entity shall have suffered
a Material Adverse Change from the date of the CompuServe Balance Sheet to the
Closing Date.
(c) Each of the covenants and agreements of H&R Block, CompuServe and
Block Group to be performed or observed at or prior to the Closing Date pursuant
to the terms hereof shall have been duly performed or observed except where such
failure would not have a Material Adverse Effect on CompuServe or would not
materially impair the ability of H&R Block, Block Group or CompuServe to
consummate the Merger and the other transactions contemplated hereby.
(d) WorldCom shall have been furnished with certificates, executed by
duly authorized officers of H&R Block, CompuServe and Block Group, as the case
may be, dated the Closing Date, certifying as to the fulfillment of the
conditions set forth in the immediately preceding clauses (a) and (c) and
Section 10.1(a), which certificates shall constitute a restatement of each such
party's representations and warranties as of the Closing Date, except to the
extent a representation or warranty is specifically limited to a particular
date.
(e) WorldCom shall have received opinions of counsel to H&R Block,
Block Group and CompuServe, dated as of the Closing Date, in form and substance
reasonably satisfactory to WorldCom, covering the matters set forth in Exhibit
E.
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(f) No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, injunction or other order,
whether temporary, preliminary or permanent, which is in effect which would
impose Material restrictions on the conduct of WorldCom's business or
CompuServe's business following consummation of the Merger.
(g) WorldCom shall have received the opinion of counsel to WorldCom,
dated as of the Closing Date, in form and substance reasonably satisfactory to
WorldCom, covering the Tax matters set forth in Exhibit F.
(h) Each of H&R Block and Block Group shall have executed and
delivered to WorldCom an Affiliate Letter in the form attached hereto as Exhibit
C executed by an authorized officer of each of H&R Block and Block Group.
(i) The Standstill Agreement shall have been duly and validly executed
and delivered by each of H&R Block and Block Group to WorldCom and shall be a
valid and binding obligation of each of H&R Block and Block Group enforceable
against H&R Block and Block Group in accordance with its terms.
(j) The Noncompete/Nonsolicitation Agreement in the form attached as
Exhibit D shall have been duly and validly executed and delivered by each of H&R
Block and Block Group to WorldCom and shall be a valid and binding obligation of
each of H&R Block and Block Group enforceable against H&R Block and Block Group
in accordance with its terms.
(k) The conditions to closing set forth in Section 7.1(a) (in the form
existing as of the date of this Agreement) of the Purchase and Sale Agreement,
dated as of the date of this Agreement, by and among WorldCom, AOL and ANS shall
have been satisfied or waived by the applicable party.
10.3 Conditions to Obligations of H&R Block, Block Group and
CompuServe. The obligations of H&R Block, Block Group and CompuServe to
consummate the Merger shall be subject to the satisfaction, at or prior to the
Closing, of the following conditions (any of which may be waived prior to the
Closing by H&R Block, Block Group or CompuServe):
(a) The representations and warranties of WorldCom and WAC set forth
in this Agreement that are qualified by Material Adverse Effect or otherwise as
to materiality shall be true and correct, and those that are not so qualified
shall be true and correct except for failures to be true and correct as would
not have a Material Adverse Effect on WorldCom as of the date of this Agreement
and as of the Closing as though made at and as of the Closing, except to the
extent that such representations and warranties expressly relate to a specific
earlier date (in which case such representations and warranties that are
qualified by a Material Adverse Effect shall be true and correct, and those that
are not so qualified shall be true and correct except for failures to be true
and correct as would not, individually or in the aggregate, have a Material
Adverse Effect on WorldCom, on and as of such earlier date).
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(b) Each of the covenants and agreements of WorldCom and WAC to be
performed or observed at or prior to the Closing Date pursuant to the terms
hereof shall have been duly performed or observed except where such failure
would not have a Material Adverse Effect on WorldCom or WAC or would not
materially impair the ability of WorldCom or WAC to consummate the Merger and
the other transactions contemplated hereby.
(c) Each of CompuServe, Block Group and H&R Block shall have been
furnished with a certificate, executed by a duly authorized officer of WorldCom,
dated the Closing Date, certifying as to the fulfillment of the conditions set
forth in the immediately preceding clauses (a) and (b), which certificate shall
constitute a restatement of WorldCom's and WAC's representations and warranties
as of the Closing Date, except to the extent a representation or warranty is
specifically limited to a particular date.
(d) Each of CompuServe, Block Group and H&R Block shall have received
opinions of counsel to WorldCom, dated as of the Closing Date, in form and
substance reasonably satisfactory to H&R Block, Block Group and CompuServe,
covering the matters set forth in Exhibit G.
(e) Each of Block Group and H&R Block shall have received the opinion
of counsel of Block Group and H&R Block, dated as of the Closing Date, covering
the Tax matters set forth in Exhibit H.
(f) The Registration Rights Letter in the form attached as Exhibit I shall
have been duly and validly executed and delivered by WorldCom to Block Group and
shall be a valid and binding obligation of WorldCom enforceable against it in
accordance with its terms.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
11.1 Termination. This Agreement may be terminated at any time prior
to the Closing, whether before or after adoption and approval of the CompuServe
Proposal by the holders of CompuServe Common Shares:
(a) By mutual written consent of WorldCom, H&R Block, Block Group and
CompuServe;
(b) by any of WorldCom, H&R Block, Block Group or CompuServe if the
Closing shall not have occurred on or before March 1, 1998, unless the
failure to do so is the result of a breach of this Agreement by the
party seeking to terminate this Agreement (for which purposes
CompuServe shall be deemed to include H&R Block and Block Group, if
CompuServe is seeking to terminate this Agreement, and each of H&R
Block and Block Group shall be deemed to include CompuServe and each
other, if either H&R Block or Block Group is seeking to terminate this
Agreement);
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(c) by WorldCom, if there occurs a breach by H&R Block, Block Group or
CompuServe under Section 8.14;
(d) by WorldCom, in the event of a breach by H&R Block, Block Group or
CompuServe of any representation, warranty, covenant or other
agreement contained in this Agreement which (i) would result in the
failure of a condition set forth Section 10.2 and (ii) cannot be or
has not been cured by March 1, 1998 (a "H&R Block Material Breach" or
a "CompuServe Material Breach," as the case may be), provided that
there is not then a WorldCom Material Breach (as hereinafter defined);
(e) by H&R Block, Block Group or CompuServe, in the event of a breach by
WorldCom of any representation, warranty, covenant or other agreement
contained in this Agreement which (i) would result in the failure of a
condition set forth in Section 10.3 and (ii) cannot be or has not been
cured by March 1, 1998 (a "WorldCom Material Breach"), provided that
there is not then a CompuServe Material Breach or H&R Block Material
Breach;
(f) by WorldCom if (i) the Board of Directors of CompuServe or any
committee thereof shall have withdrawn or modified in a manner adverse
to WorldCom its approval or recommendation of the CompuServe Proposal,
or failed to reconfirm its recommendation within fifteen business days
after a written request to do so, or approved or recommended any
Competitive Proposal or (ii) the Board of Directors of CompuServe or
any committee thereof shall have resolved to take any of the foregoing
actions;
(g) by CompuServe, if the Average Trading Price of a WorldCom Common Share
is less than $24.00.
11.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 11.1, this Agreement shall forthwith become void and be
of no further legal effect, without any liability or obligation on the part of
any party, other than the provisions of this Section 11.2 and Sections 8.4, 8.9,
11.5, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7, 12.8, 12.10 and 12.11 and except that
nothing herein shall relieve any party from liability for any breach by a party
of any of its representations, warranties, covenants or agreements set forth in
this Agreement. In the event of any termination of this Agreement, the
Confidentiality Agreement shall also remain in full force and effect in
accordance with its terms.
11.3 Amendment. This Agreement may be amended by the parties at any time
before or after the approval and adoption of this Agreement by the holders of
CompuServe Common Shares; provided, however, that any such amendment shall be
consistent with the DGCL, the DLLCA and the MGBCL. This Agreement may not be
amended except by an instrument in writing signed on behalf of the party to be
charged by its duly authorized officer.
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11.4 Waiver. Subject to the applicable provisions of the DGCL, the DLLCA
and the MGBCL, the parties hereto may waive any provision of this Agreement by a
writing signed by the party against whom the waiver is to be effective by a duly
authorized officer. No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
herein provided shall be cumulative.
11.5 Expenses. (a) All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses, except that at the Closing, H&R Block
shall pay or reimburse all costs and expenses in excess of $2,200,000 in the
aggregate incurred by it and by CompuServe and any CompuServe Entity (including
the fees, commissions and expenses of all investment bankers, financial
advisors, legal advisors, consultants and accountants) in connection with this
Agreement and the transactions contemplated hereby and in connection with any
and all discussions, negotiations and other activities concerning any previously
contemplated possible transaction with any other Person. Notwithstanding the
foregoing, if this Agreement is terminated (i) by WorldCom, H&R Block, Block
Group or CompuServe pursuant to Section 11.1(b) after the failure of the holders
of CompuServe Common Shares to approve and adopt the CompuServe Proposal at the
CompuServe Stockholders Meeting, or (ii) by WorldCom pursuant to Section 11.1(c)
or, as a result of a willful or knowing breach, Section 11.1(d), (iii) by
WorldCom pursuant to Section 11.1(f), or (iv) by H&R Block, Block Group or
CompuServe pursuant to Section 11.1(e) as a result of a willful or knowing
breach, then in the case of clause (i), (ii) or (iii) H&R Block, Block Group and
CompuServe shall be obligated, jointly and severally, to pay, and shall
forthwith pay, to WorldCom the amount of $15,000,000 or in the case of clause
(iv), WorldCom shall be obligated to pay, and shall forthwith pay, to H&R Block,
Block Group and CompuServe the aggregate amount of $15,000,000, in each case in
immediately available funds. Further, if this Agreement is terminated pursuant
to Section 11.1(b); (A) by WorldCom and the condition set forth in Section
10.2(k) has not been satisfied or waived prior to the date of termination and no
other conditions to the parties' obligations to consummate the Merger, other
than conditions within the control of WorldCom, remain unsatisfied, or (B) by
H&R Block, Block Group or CompuServe on or after June 1, 1998, and prior thereto
the condition set forth in Section 10.2(k) has not been satisfied or waived,
WorldCom shall be obligated to pay, and shall forthwith pay, to CompuServe the
aggregate amount of $45,000,000 in immediately available funds. The parties
acknowledge and agree that any of the foregoing payments would be a non-
accountable reimbursement of certain direct and indirect expenses, costs and
lost opportunities of, consequences to and forbearances of the other party or
parties relating to discussions and negotiations regarding, and the preparation,
execution and partial performance of, this Agreement and the transactions
contemplated hereby, which amounts H&R Block, Block Group, CompuServe and
WorldCom agree is reasonable in the circumstances; provided, however, that
nothing in this Section 11.5 shall be deemed to be exclusive of any other rights
any party may have hereunder or at law or in equity for any willful or knowing
Material breach that occurred prior to the termination of this Agreement,
provided that any damages to which a party receiving a payment pursuant to this
paragraph is entitled shall be offset by such payments.
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(b) H&R Block, Block Group, CompuServe and WorldCom acknowledge that the
provisions for the allocation of expenses in Section 11.5 are integral parts of
the transactions contemplated by this Agreement and that, without these
provisions, they would not have entered into this Agreement. Accordingly, if an
expense reimbursement or fee shall become due and payable by either party, and
such party shall fail to pay such expense or fee when due pursuant to Section
11.5, and, in order to obtain such payment, suit is commenced which results in a
judgment against such party therefor, such party shall pay the other party's
reasonable costs, fees and expenses (including reasonable attorneys' fees) in
connection with such suit, together with interest computed on any such amounts
determined to be due pursuant to Section 11.5 (computed from the date upon which
such amounts were due and payable pursuant to Section 11.5 on the basis of the
number of days elapsed) and such costs (computed from the date incurred) at the
prime or base rate of interest publicly announced from time to time by
NationsBank of Texas, N.A. for its most favored borrowers.
ARTICLE XII
MISCELLANEOUS
12.1 Representations and Warranties; Survival. The representations,
warranties, covenants and agreements in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Closing, subject to the
applicable time periods, if any, specified herein.
12.2 Notices. Any notices or other communications required or
desired to be given hereunder shall be deemed to have been properly given if
sent by hand delivery, facsimile and overnight courier, registered or certified
mail, return receipt requested, postage prepaid, to the parties hereto at the
following addresses, or at such other address as such party may advise the
others in writing from time to time by like notice:
If to WorldCom or WAC:
WorldCom, Inc.
515 East Amite Street
Jackson, Mississippi 39201
Attention: Charles T. Cannada
Facsimile: (601) 360-8615
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with copies to:
WorldCom, Inc.
10777 Sunset Office Drive
Suite 330
St. Louis, Missouri 63127
Attention: P. Bruce Borghardt
Facsimile: (314) 909-4101
and
Bryan Cave LLP
One Metropolitan Square, Suite 3600
St. Louis, Missouri 63102-2750
Attention: R. Randall Wang
Facsimile: (314) 259-2020
If to H&R Block, Block Group or (prior to the Closing) CompuServe:
H&R Block, Inc.
World Headquarters
4400 Main Street
Kansas City, MO 64111
Attention: Frank L. Salizzoni
Facsimile: (816) 753-8628
with a copy to:
H&R Block, Inc.
World Headquarters
4400 Main Street
Kansas City, MO 64111
Attention: James Ingraham
Facsimile: (816) 753-8628
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Benjamin F. Stapleton
Facsimile: (212) 558-3588
All such notices or other communications shall be deemed to have been duly given
on the date of hand delivery or telecopy or facsimile, if receipt is confirmed,
or on the next Business Day
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following timely deposit of such communications with overnight courier or on the
third Business Day following the date of mailing, if delivered by registered or
certified mail.
12.3 Governing Law and Dispute Resolution. This Agreement shall be
interpreted, construed and enforced in accordance with the law of the State of
Delaware, applied without giving effect to any conflicts-of-law principles,
except to the extent that Missouri law is applicable to the internal affairs of
H&R Block or Georgia law is applicable to the internal affairs of WorldCom. Any
dispute relating to this Agreement or the transactions contemplated hereby shall
be resolved in the state courts of general jurisdiction, or the Chancery Court
if it has subject matter jurisdiction, of the State of Delaware or in the United
States District Court for the District of Delaware. Each party irrevocably
submits to such courts' exclusive jurisdiction and acknowledges that such courts
are a convenient forum and consents to service of process at the address for
such party set forth in Section 12.2.
12.4 Specific Performance. Each party acknowledges and agrees that, in
the event of an actual or threatened breach of any of the provisions of this
Agreement by such party, the harm to the others will be immediate, substantial
and irreparable and that monetary damages will be inadequate. Accordingly, each
party agrees that, in such an event, the others will be entitled to equitable
relief, including an injunction and an order of specific performance, in
addition to any and all other remedies at law or in equity.
12.5 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement or the application thereof to any Person or any
circumstance is invalid or unenforceable, (a) a suitable and equitable provision
shall be substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such provision to
other persons, entities or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
12.6 Captions. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
12.7 Entire Agreement. This Agreement, including all exhibits and
schedules attached hereto, contains the entire agreement of the parties and
supersedes any and all prior or contemporaneous agreements, written or oral,
between the parties with respect to the subject matter hereof, except the
Confidentiality Agreement.
12.8 Counterparts. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
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12.9 Binding Effect; Assignability. This Agreement shall be binding
on, and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns. Other than the provisions of Sections 8.4, 8.17, 9.2
and 12.10, which provisions are intended to be for the benefit of, and shall be
enforceable by, the specified indemnified parties (in the case of Sections 8.4,
9.2 and 12.10), or the CompuServe Employees (in the case of Section 8.17) and
may be enforced by such beneficiaries, nothing contained in this Agreement or in
any instrument or document executed by any party in connection with the
transactions contemplated hereby shall create any rights in, or be deemed to
have been executed for the benefit of, any Person that is not a party hereto or
thereto, or a successor or permitted assign of such party. No party may assign
or delegate any right or obligation hereunder without the prior written consent
of the other parties; provided, however, that WorldCom, WAC and, after the
Closing, CompuServe and the CompuServe Entities may assign any or all of their
rights and delegate any or all of their obligations under Sections 2.1, 2.3 8.16
(the last sentence only), 8.17 and 8.18 (the last sentence only) hereof;
provided, however, that, notwithstanding the foregoing, WorldCom shall remain
- -------- -------
primarily liable for its obligations hereunder. Any assignment of rights or
delegation of obligations not in compliance herewith shall be null and void.
12.10 Director and Officer Indemnification. From and after the
Effective Time, WorldCom and the Surviving Corporation shall, jointly and
severally, indemnify, defend and hold harmless the directors and officers of
CompuServe as and to the extent provided in CompuServe's Certificate of
Incorporation, By Laws or indemnification agreements, as in effect as of the
date hereof, with respect to matters occurring through the Closing Date,
provided that this Section 12.10 shall not relieve H&R Block or Block Group of
their obligations under Section 8.4 hereof. To the extent reasonably available,
WorldCom agrees to cause the Surviving Corporation to maintain in effect for not
less than three years after the Closing Date policies of directors' and
officers' liability insurance comparable to those maintained by CompuServe with
carriers comparable to CompuServe's existing carriers; provided, however, that
the Surviving Corporation shall not be required to pay an annual premium for
such insurance in excess of 150% of the last annual premium paid prior to the
date hereof, but in such case shall purchase as much coverage as possible for
such amount.
12.11 No Rule of Construction. The parties acknowledge that all parties
have read and negotiated the language used in this Agreement. The parties agree
that, because all parties participated in negotiating and drafting this
Agreement, no rule of construction shall apply to this Agreement which construes
ambiguous language in favor of or against any party by reason of that party's
role in drafting this Agreement.
12.12 Schedules. The Schedules in this Agreement shall be arranged in
separate parts corresponding to the numbered and lettered sections, and the
disclosure in any numbered or lettered part shall be deemed to relate to and to
qualify only the particular representation or warranty set forth in the
corresponding numbered or lettered section, and not any other representation or
warranty (unless an express and specific reference to any other Schedule which
clearly identifies the particular item being referred is set forth therein).
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ARTICLE XIII
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
indicated below:
"Acquiring Person" has the meaning set forth in Section 3.16.
"Affiliate" means, with respect to any Person, at the time in question, any
other Person controlling, controlled by or under common control with such
Person. For purposes of this definition, "control" (including the terms
"controlling," "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities or otherwise.
"Agreed Allocation" has the meaning set forth in Section 9.1(b)(ii).
"Agreement" has the meaning set forth in the first paragraph of this
Agreement and Plan of Merger.
"ANS" means ANS Communications, Inc., a Delaware corporation and wholly
owned subsidiary of AOL.
"AOL" means America Online, Inc., a Delaware corporation.
"Average Trading Price" means the average of the daily closing prices per
WorldCom Common Share, as quoted by NASDAQ as reported in The Wall Street
---------------
Journal, Eastern Edition, or if not reported thereby, The New York Times, for
- ------- ------------------
the twenty consecutive full NASDAQ trading days ending on the date immediately
prior to the third full NASDAQ trading day immediately preceding the Closing
Date.
"Block Group" has the meaning set forth in the first paragraph of this
Agreement.
"H&R Block" has the meaning set forth in the first paragraph of this
Agreement.
"H&R Block Entity" or "H&R Block Entities" means any corporation, limited
liability company, partnership, limited partnership or other organization
whether incorporated or unincorporated, other than CompuServe or a CompuServe
Entity, (i) of which at least a majority of the securities or interests having
by the terms thereof ordinary voting power to elect at least a majority of the
Board of Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by H&R Block and/or by any one or more of the H&R Block Entities, (ii) of which
H&R Block or any one or
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more of the H&R Block Entities is the general partner or managing member or
(iii) which H&R Block or any one or more of the H&R Block Entities otherwise
controls.
"Business Day" means a day other than a Saturday, Sunday or a day on which
the banks in New York City are authorized or obligated by law or executive order
to close.
"Buyer's Allocation" has the meaning set forth in Section 9.1(b)(ii).
"Calculating Party" has the meaning set forth in Section 9.1(c).
"Certificate of Merger" has the meaning set forth in Section 1.1.
"Certificates" has the meaning set forth in Section 1.4.
"Closing" has the meaning set forth in Section 1.2.
"Closing Date" has the meaning set forth in Section 1.2.
"Code" means the Internal Revenue Code of 1986, as amended (including any
successor statute), and the rules and regulations promulgated thereunder.
"Competitive Proposal" has the meaning set forth in Section 8.14(a)(i).
"Confidentiality Agreement" has the meaning set forth in Section 8.9.
"CompuServe" has the meaning set forth in the first paragraph of this
Agreement.
"CompuServe Balance Sheet" has the meaning set forth in Section 3.5.
"CompuServe Benefit Plans" has the meaning set forth in Section 3.11(a).
"CompuServe Common Shares" means the shares of CompuServe Common Stock.
"CompuServe Common Stock" means the common stock, $.01 par value per share,
of CompuServe.
"CompuServe Employees" has the meaning set forth in Section 8.17(a).
"CompuServe Entity" or "CompuServe Entities" means any corporation, limited
liability company, partnership, limited partnership or other organization
whether incorporated or unincorporated (i) of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by CompuServe and/or by any one or more of the
CompuServe Entities, (ii) of which CompuServe or any one or more of the
CompuServe Entities is the general
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partner or managing member or (iii) which CompuServe or any one or more of the
CompuServe Entities otherwise controls.
"CompuServe Material Breach" has the meaning set forth in Section 11.1(d).
"CompuServe Proposal" has the meaning set forth in Section 8.6(a).
"CompuServe Proxy Statement" has the meaning set forth in Section 8.7.
"CompuServe Rights" has the meaning set forth in Section 3.13.
"CompuServe Rights Agreement" means that certain Rights Agreement dated as
of April 19, 1996, as amended on September 7, 1997, between CompuServe and
Harris Trust and Savings Bank.
"CompuServe SEC Documents" has the meaning set forth in Section 3.5.
"CompuServe Stock Options" has the meaning set forth in Section 3.2.
"CompuServe Stock Plans" has the meaning set forth in Section 3.2.
"CompuServe Stockholders Meeting" has the meaning set forth in Section 8.6.
"CompuServe Stock Option Payments" has the meaning set forth in Section
8.26.
"CompuServe Stock Options" has the meaning set forth in Section 3.2.
"CompuServe Stock Plans" has the meaning set forth in Section 3.2.
"Deemed Purchase Price" has the meaning set forth in Section 9.1(b)(ii).
"DGCL" means the Delaware General Corporation Law.
"DLLCA" means the Delaware Limited Liability Company Act.
"Disputing Party" has the meaning set forth in Section 9.1(c).
"Distribution Date" has the meaning set forth in Section 3.16.
"Effective Time" shall have the meaning set forth in Section 1.2.
"Elections" has the meaning set forth in Section 9.1(a)(ii).
"Employment and Withholding Taxes" means all employment, payroll and
withholding Taxes payable with respect to salaries, wages, commissions, other
compensation or other
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payments actually or constructively made by CompuServe or any CompuServe Entity
on or before the Closing Date, except to the extent such Taxes have been
withheld on or prior to the Closing Date and are required to be paid to the
appropriate taxing authority after the Closing Date.
"Environmental Laws" means any federal, state or local, domestic or foreign
statute, regulation, rule or ordinance, and any judicial or administrative
interpretation thereof, regulating the use, generation, handling, storage,
transportation, discharge, emission, spillage or other release of Hazardous
Substances or relating to the protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Exchange Agent" has the meaning set forth in Section 1.5(a).
"Exchange Ratio" has the meaning set forth in Section 1.3(a)(i).
"Excluded Transactions" has the meaning set forth in Section 9.2(a)(i).
"GAAP" means United States generally accepted accounting principles and its
foreign equivalents.
"Governmental Authorization" means any (a) permit, license, certificate,
franchise, permission, clearance, registration, qualification or authorization
issued, granted, given or otherwise made available by or under the authority of
any Governmental Entity or pursuant to any legal requirement; or (b) right under
any contract with any Governmental Entity.
"Government Contracts" has the meaning set forth in Section 3.8(e).
"Governmental Entity" means any federal, state or local government or any
court, administrative or regulatory agency, body or commission or other
government authority or agency, domestic or foreign.
"H&R Block Indemnified Parties" has the meaning set forth in Section
8.4(a).
"H&R Block Material Breach" has the meaning set forth in Section 11.1(d).
"H&R Block Rights Agreement" means that certain Rights Agreement dated as
of July 14, 1988, as amended on May 9, 1990, September 11, 1991 and May 10,
1995, between H&R Block and Boatmen's Trust Company.
"Hazardous Substances" means any hazardous substances as defined by 42
U.S.C. (S)9601(14), any pollutant or contaminant as defined by 42 U.S.C.
(S)9601(33) or any toxic
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substance, oil or hazardous materials or other chemicals or substances regulated
by any Environmental Laws which the applicable party or any predecessor in
interest has generated, transported or disposed of or has been found at any
property owned or operated by such party.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and regulations promulgated thereunder.
"including" means, when following any general statement, term or matter,
"including but not limited to," "including, without limitation," or words of
similar import and shall not be construed to limit such statement, term or
matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language is used with reference to the word "including" or similar items or
matters, but rather shall be deemed to refer to all other items or matters that
could reasonably fall within the broadest possible scope of the general
statement, term or matter.
"Indemnified Party" or "Indemnified Parties" has the meaning set forth in
Section 8.4(d).
"Indemnifying Party" has the meaning set forth in Section 8.4(d).
"Indemnitee" has the meaning set forth in Section 8.4(e)(iii).
"Indemnitor" has the meaning set forth in Section 8.4(e)(iii).
"International Distribution Agreements" has the meaning set forth in
Section 3.8(c).
"IRS" means the Internal Revenue Service of the United States of America.
"knowledge" means, with respect to H&R Block, Block Group, CompuServe or
WorldCom, the actual knowledge of, or knowledge which could reasonably be
obtained through reasonably diligent investigation or inquiry by, any director
or executive officer of the applicable entity, as the case may be, and, in the
case of CompuServe, shall also include the actual knowledge of, or knowledge
which could reasonably be obtained through reasonably diligent investigation or
inquiry by, H&R Block's Chief Executive Officer, Chief Financial Officer and
Vice President, Legal, Block Group's Chief Executive Officer, Chief Financial
Officer and Secretary, and CompuServe's General Counsel and his predecessor, and
the following additional CompuServe and CompuServe Entity officers and
employees: any persons principally responsible for the finance and accounting
function and operations of the Online Services Business of CompuServe and the
CompuServe Entities, the European Online Services Business of CompuServe and the
CompuServe Entities and the network services business of CompuServe and the
CompuServe Entities, and the officers of each CompuServe Entity.
"Liens or Other Encumbrance" means any lien, pledge, mortgage, security
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any shareholder or other agreement or
encumbrance or any other rights of third parties.
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"Losses and Expenses" means any and all damages, debts, liabilities,
obligations, losses, deficiencies, demands, claims, penalties, assessments,
judgments, fees, actions, proceedings, orders and suits of whatever kind and
nature, and regardless of whether or not related to a Third-Party Claim, a
direct claim or otherwise, and all costs and expenses related thereto (including
reasonable attorney's fees and disbursements).
"Material" means, when used in connection with any party hereto, material
with respect to the business, operations, properties, assets, liabilities,
condition (financial or otherwise) or prospects of such party, and its related
Entities, taken as a whole.
"Material Adverse Change" means, when used in connection with any party
hereto, any change which is materially adverse to the business, operations,
properties, assets, liabilities or condition (financial or otherwise) of such
party, and its related Entities, taken as a whole.
"Material Adverse Effect" means, when used in connection with any party
hereto, any effect that has a material adverse impact on the business,
operations, properties, assets, liabilities or condition (financial or
otherwise) of such party, and its related Entities, taken as a whole.
"Merger" has the meaning set forth in Section 1.1.
"Merger Consideration" has the meaning set forth in Section 1.3(a)(i).
"MGBCL" means the Missouri General Business and Corporation Law.
"Modified Aggregate Deemed Sales Price" has the meaning set forth in
Section 9.1(b)(ii).
"Network Services Agreements" has the meaning set forth in Section 3.8(d).
"NASDAQ" means the Nasdaq National Market.
"Noncompete/Nonsolicitation Agreement" has the meaning set forth in Section
8.20.
"Online Services Business" means electronic information services providing
access for computer users to "proprietary" content, services, entertainment
and/or other information, to "open" services such as the Internet, the World
Wide Web and/or a combination of the foregoing, including organization-specific
LANs, WANs and Intranets, regardless of means of delivery or transport media.
"Person" means and includes any natural person, corporation, limited
liability company, partnership, limited partnership, firm, joint venture,
association, joint-stock company, trust, business trust, unincorporated
organization, Governmental Entity or other entity.
"Proxy Statement" has the meaning set forth in Section 8.7.
"Purchase and Sale Agreement" has the meaning set forth in Section 10.2(k).
75
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"Registration Statement" has the meaning set forth in Section 8.7.
"Related Party" means, with respect to any party, any of such party's or
its parent's or subsidiaries' directors, officers, 50% or greater shareholders,
employees or, except with respect to such party's primary relationship with such
other Person, a consultant or agent.
"Rights" has the meaning set forth in Section 3.16.
"Rule 145 Affiliate" has the meaning set forth in Section 8.19.
"Schedule 8.17 Agreements" has the meaning set forth in Section 8.17(a).
"SEC" means the Securities and Exchange Commission.
"Section 338 Forms" has the meaning set forth in Section 9.1(b)(i).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Seller Consolidated and Combined Return" means any consolidated,
affiliated, combined or unitary income or franchise Tax Return of H&R Block,
Block Group or CompuServe which includes CompuServe and/or any CompuServe
Entity.
"Shares Acquisition Date" has the meaning set forth in Section 3.16.
"Standstill Agreement" has the meaning set forth in the recitals.
"Surviving Corporation" has the meaning set forth in Section 1.1.
"Surviving Corporation Common Stock" has the meaning set forth in Section
1.3(d).
"Takeover Statute" has the meaning set forth in Section 8.23.
"Tax" and "Taxes" means all taxes, charges, fees, levies, tariffs, duties
or other similar assessments, including, (i) income, gross receipts, gains,
surtax, severance, payroll, production, ad valorem or value added, surtax,
premium, excise, real property, personal property, windfall profit, sales, use,
transfer, duty, licensing, withholding, employment, payroll, estimated and
franchise taxes imposed by the United States of America, any state, local, or
foreign government, or any subdivision, agency, or other similar Person of the
United States or any such government, and (ii) any interest, fines, penalties,
assessments, or additions to tax resulting from, attributable to or incurred in
connection with any Tax or any contest, dispute or refund thereto; whether or
not imposed on a consolidated combined or unitary basis or as a result of
transferee, joint or several liability.
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"Tax Claim" has the meaning set forth in Section 9.2(d)(i).
"Tax Return" means any report, return, statement or other information
required to be supplied to a taxing authority in connection with Taxes.
"Tax Settlement Auditor" has the meaning set forth in Section 9.1(c).
"Tax Settlement Procedure" has the meaning set forth in Section 9.1(c).
"Tax Sharing Agreement" means the Tax Sharing Agreement, dated as of April
22, 1996, between H&R Block and CompuServe.
"Tax Statement" has the meaning set forth in Section 9.2(e)(iii).
"Third-Party Claim" has the meaning set forth in Section 8.4(f)(i).
"Transfer Taxes" has the meaning set forth in Section 9.4.
"WAC" has the meaning set forth in the first paragraph of this Agreement.
"WorldCom" has the meaning set forth in the first paragraph of this
Agreement.
"WorldCom Balance Sheet" has the meaning set forth in Section 6.4.
"WorldCom Common Shares" means the shares of WorldCom Common Stock.
"WorldCom Common Stock" means the common stock, $.01 par value per share,
of WorldCom.
"WorldCom Entity" or "WorldCom Entities" means any corporation, limited
liability company, partnership, limited partnership or other organization
whether incorporated or unincorporated (i) of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by WorldCom and/or by any one or more of the
WorldCom Entities, (ii) of which WorldCom or any one or more of the WorldCom
Entities is the general partner or managing member or (iii) which WorldCom or
any one or more of the WorldCom Entities otherwise controls.
"WorldCom Material Breach" has the meaning set forth in Section 11.1(e).
"WorldCom Preferred Stock" has the meaning set forth in Section 6.2.
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"WorldCom Rights Agreement" means that certain Rights Agreement dated as of
August 25, 1996 between WorldCom and The Bank of New York, as Rights Agent, as
amended by Amendment No. 1 to Rights Agreement dated as of May 22, 1997.
"WorldCom SEC Documents" has the meaning set forth in Section 6.4.
"WorldCom Stock Plans" has the meaning set forth in Section 6.2.
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IN WITNESS WHEREOF, H&R Block, Block Group, CompuServe, WorldCom and WAC
have caused this Agreement and Plan of Merger to be executed by their respective
duly authorized officers, and have caused their respective corporate seals to be
hereunto affixed, all as of the day and year first above written.
H&R BLOCK, INC.
/s/ Frank L. Salizzoni
By:_______________________________
H&R BLOCK GROUP, INC.
/s/ Frank L. Salizzoni
By:_______________________________
COMPUSERVE CORPORATION
/s/ Frank L. Salizzoni
By:_______________________________
WORLDCOM, INC.
/s/ Charles T. Cannada
By:_______________________________
WALNUT ACQUISITION COMPANY, L.L.C.
/s/ Charles T. Cannada
By:_______________________________
79
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- -------------------------------------------------------------------------------
PURCHASE AND SALE AGREEMENT
BY AND AMONG
AMERICA ONLINE, INC.,
ANS COMMUNICATIONS, INC.
AND
WORLDCOM, INC.
DATED AS OF
SEPTEMBER 7, 1997
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I THE PURCHASE AND SALE.............................................. 2
1.1 Purchase and Sale....................................................... 2
1.2 The Closing............................................................. 2
1.3 Exchange of Consideration............................................... 2
1.4 Delayed Assets and Liabilities.......................................... 3
1.5 CompuServe Transitional Matters......................................... 4
1.6 ANS Transitional Matters................................................ 7
1.7 Employee Severance Obligations.......................................... 9
1.8 Allocation of Consideration............................................. 9
1.9 Treatment of ANS and AOL Options........................................ 10
1.10 Treatment of CompuServe Options........................................ 11
1.11 Treatment of CompuServe Options........................................ 11
ARTICLE II ASSET TRANSFER; SETTLEMENT OF INTERCOMPANY ACCOUNTS............... 11
2.1 Transfer of Assets...................................................... 11
2.2 Intercompany Accounts................................................... 12
2.3 Release of Claims....................................................... 12
ARTICLE III REPRESENTATIONS AND WARRANTIES REGARDING AOL AND ANS............. 13
3.1 Organization, Existence and Good Standing............................... 13
3.2 ANS Capital Stock Ownership of ANS Entities; Investments................ 13
3.3 Ownership of ANS Entities' Capital Stock; Investments................... 13
3.4 Power and Authority; Non-Contravention; Filings and Consents............ 14
3.5 Financial Information................................................... 15
3.6 Subsequent Events....................................................... 16
3.7 Legal Proceedings....................................................... 17
3.8 Contracts............................................................... 17
3.9 Accounts Receivable..................................................... 19
3.10 Taxes.................................................................. 19
3.11 Employee Benefit Plans; Employment Matters............................. 20
3.12 Compliance with Laws; Permits.......................................... 22
3.13 Patents, Trademarks, Etc............................................... 23
3.14 No Assets Held by AOL or AOL Entities.................................. 24
3.15 Labor Matters.......................................................... 24
3.16 Insurance.............................................................. 24
3.17 Commissions and Fees................................................... 25
3.18 Real Property.......................................................... 25
ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING WORLDCOM................. 25
4.1 Organization, Existence and Good Standing............................... 25
4.2 Power and Authority; Non-Contravention; Filings and Consents............ 25
<PAGE>
4.3 Legal Proceedings...................................................... 26
4.4 No Vote Required....................................................... 27
4.5 Investment Representation.............................................. 27
4.6 CompuServe Agreement.................................................. 27
4.7 Title to CompuServe Assets............................................. 27
4.8 Representations Relating to CompuServe Assets.]........................ 27
4.9 CompuServe Power and Authority; Non-Contravention; Filing and
Consents............................................................... 27
ARTICLE V COVENANTS......................................................... 28
5.1 Interim Conduct of ANS and each ANS Entity and the ANS Network
Services Business...................................................... 28
5.2 Indemnification........................................................ 31
5.3 No Contribution........................................................ 35
5.4 Access to Information.................................................. 35
5.5 Confidentiality........................................................ 35
5.6 HSR Act Compliance, Etc................................................ 36
5.7 Public Disclosures..................................................... 36
5.8 Resignation of Directors and Officers.................................. 36
5.9 Notification of Certain Matters........................................ 36
5.10 No Solicitation....................................................... 37
5.11 Other Actions......................................................... 38
5.12 Cooperation........................................................... 38
5.13 ANS and ANS Network Services Business Employees....................... 38
5.14 ANS Name.............................................................. 39
5.15 CompuServe Name....................................................... 39
5.16 Noncompetition and Nonsolicitation Agreement.......................... 40
5.17 Key-Employee Nondisclosure and Nonsolicitation Agreements............. 40
5.18 Board Seat............................................................ 40
5.19 Services Agreements................................................... 40
5.20 Status of Title to the CompuServe Assets.............................. 40
5.21 Delivery of ANS Shares................................................ 40
5.22 Consummation of Merger................................................ 40
5.23 Covenants Relating to CompuServe Online Services Business............. 40
5.24 Exercise of Option; Negotiation Period................................ 41
ARTICLE VI TAX MATTERS...................................................... 41
6.1 Section 338 Election................................................... 41
6.2 Tax Indemnification.................................................... 43
6.3 Tax Related Adjustments................................................ 47
6.4 Transfer Taxes......................................................... 49
ARTICLE VII CONDITIONS TO CLOSING........................................... 49
7.1 Mutual Conditions...................................................... 49
7.2 Conditions to Obligations of WorldCom.................................. 49
7.3 Conditions to Obligations of AOL and ANS............................... 51
ii
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ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.............................. 52
8.1 Termination............................................................ 52
8.2 Effect of Termination.................................................. 53
8.3 Amendment.............................................................. 53
8.4 Waiver................................................................. 53
8.5 Expenses............................................................... 53
ARTICLE IX MISCELLANEOUS.................................................... 54
9.1 Representations and Warranties; Survival............................... 54
9.2 Notices................................................................ 54
9.3 Governing Law and Dispute Resolution................................... 55
9.4 Specific Performance................................................... 56
9.5 Severability........................................................... 56
9.6 Financial Information.................................................. 56
9.7 Captions............................................................... 56
9.8 Entire Agreement....................................................... 56
9.9 Counterparts........................................................... 56
9.10 Binding Effect; Assignability......................................... 57
9.11 No Rule of Construction............................................... 57
9.12 Schedules............................................................. 57
ARTICLE X DEFINITIONS....................................................... 57
iii
<PAGE>
EXHIBITS
EXHIBIT A FORM OF BILL OF SALE
EXHIBIT B FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT C COST ALLOCATION AND INTER-COMPANY SERVICE ARRANGEMENTS
EXHIBIT D AGREEMENT TO FORM BUSINESS ENTITY
EXHIBIT E NONCOMPETITION AND NONSOLICITATION AGREEMENT
EXHIBIT F KEY EMPLOYEE AGREEMENTS
EXHIBIT G TRANSITION SERVICES AGREEMENT
EXHIBIT H NETWORK SERVICES AGREEMENT 1
EXHIBIT I NETWORK SERVICES AGREEMENT 2
SCHEDULES OF ANS AND AOL
Schedule 1.6 Retention Bonuses
Schedule 1.7(a) Severance Arrangements
Schedule 1.9 Options Convertible into Securities of ANS
Schedule 2.1 Transfer of Assets
Schedule 2.2 Intercompany Accounts As of June 30, 1997
Schedule 2.3(a) Release Of Claims (Release By AOL)
Schedule 2.3(b) Release Of Claims (Release By WorldCom)
Schedule 3.2(a) Issued Capital Stock
Schedule 3.2(b) Liens And Encumbrances On ANS Stock
Schedule 3.2(c) Outstanding Options And Warrants
Schedule 3.3(a) Ownership Of ANS Entities' Stock
Schedule 3.3(b) Capital Stock Of Other Entities
Schedule 3.4(a) Consents And Waivers
Schedule 3.5 ANS Financial Statements
Schedule 3.6 Subsequent Events
Schedule 3.7 Legal Proceedings
Schedule 3.8(a) Contracts (General)
Schedule 3.8(b) Contracts (Certain Terms)
Schedule 3.8(c) Contracts (International Distributors)
Schedule 3.8(d) Agreements with Ten Largest Customers (Excluding AOL)
Schedule 3.8(e) Contracts (Government Contracts)
Schedule 3.8(f) Contracts (Consents)
Schedule 3.10 Tax Disclosure (General)
Schedule 3.10(g) Tax Disclosure (Tax Sharing Agreements)
Schedule 3.11(a) Employee Benefit Plans
Schedule 3.11(b) Unions; Effects Of Agreement
Schedule 3.12 Compliance With Laws; Permits
Schedule 3.13 Patents, Trademarks, Etc.
Schedule 3.14 Certain Rights Held By AOL Entities
Schedule 3.18 Real Estate
Schedule 5.1(d) Interim Conduct -- Specified Contracts
Schedule 5.1(e) Interim Conduct -- Employees
Schedule 5.1(h) Interim Conduct -- Material Transactions
Schedule 5.1(l) Interim Conduct -- Related Party Transactions
Schedule 5.13 Interim Conduct -- ANS Employment Matters
Schedule 7.3(f) Lease Guarantees
Schedule 10.1 ANS Excluded Assets
iv
<PAGE>
Schedule 10.2 ANS Network Assets
Schedule 10.5 CompuServe Excluded Assets
Schedule 10.6 Excluded Liabilities
SCHEDULES OF WORLDCOM
Schedule 4.3 Legal Proceedings
Schedule 10.3(b) Pro Forma CompuServe Balance Sheet
Schedule 10.4 CompuServe Liabilities
v
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and
entered into as of the 7th day of September, 1997, by and among AMERICA ONLINE,
INC., a Delaware corporation ("AOL"), ANS COMMUNICATIONS, INC., a Delaware
corporation and a wholly-owned subsidiary of AOL ("ANS"), and WORLDCOM, INC., a
Georgia corporation ("WorldCom"). ANS and AOL are sometimes referred to herein
as the "Selling Entities." All capitalized terms used in this Agreement and not
defined in the text hereof have the meanings set forth in Article X.
W I T N E S S E T H:
WHEREAS, WorldCom is a party to an Agreement and Plan of Merger (the
"CompuServe Agreement") of even date herewith, pursuant to which it has agreed
to acquire CompuServe Corporation, a Delaware corporation ("CompuServe"),
through a merger (the "Merger") with WorldCom Acquisition Company, L.L.C.
("WAC"), which is wholly owned by WorldCom;
WHEREAS, AOL is the record and beneficial owner of all of the issued
and outstanding common shares, par value $.01 per share, and preferred shares,
par value $.01 per share, of ANS (the "ANS Shares");
WHEREAS, the Boards of Directors of AOL, ANS and WorldCom each have
determined that it is in the best interests of their respective stockholders
that they enter into this Agreement, which provides for the acquisition by
WorldCom from AOL of all of the ANS Shares (the "ANS Transfer") and the
acquisition by AOL from CompuServe Incorporated, an Ohio corporation which is a
wholly-owned subsidiary of CompuServe ("CompuServe-Ohio"), of all the right,
title and interest of CompuServe and CompuServe-Ohio in and to the CompuServe
Assets and the CompuServe Online Services Business (the "CompuServe Transfer"),
and have authorized their respective officers to execute and deliver this
Agreement on their behalf;
WHEREAS, the Board of Directors of AOL has determined it to be in the best
interests of its stockholders to sell the ANS Shares to WorldCom, to acquire the
CompuServe Assets and the CompuServe Online Services Business and to enter into
the other transactions contemplated hereby, and has adopted resolutions
approving such matters;
WHEREAS, the Board of Directors of WorldCom has determined it to be in the
best interests of its shareholders to cause CompuServe to transfer the
CompuServe Assets and the CompuServe Online Services Business to AOL,
immediately following the acquisition of CompuServe by WorldCom, and has adopted
a resolution approving such transfers; and
WHEREAS, AOL, ANS and WorldCom desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated by this Agreement and also to prescribe various conditions to the
consummation thereof;
<PAGE>
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto do hereby agree as follows:
ARTICLE I
THE PURCHASE AND SALE
1.1 Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing (as defined in Section 1.2):
(a) AOL shall sell and deliver to WorldCom, or, if so directed by
WorldCom, to CompuServe, the ANS Shares free and clear of all Liens or Other
Encumbrances; and
(b) in exchange for the ANS Shares, WorldCom shall (i) deliver or
cause CompuServe to deliver the Cash Consideration described in Section
1.3(b)(i) to AOL and (ii) cause CompuServe-Ohio to transfer to AOL or its
designee or designees the CompuServe Assets and CompuServe Online Services
Business (subject to the CompuServe Liabilities), which AOL or such designee(s)
shall accept and assume.
The exchange of consideration described in this Section (collectively, the
"Purchase and Sale"), shall take place as more particularly described in Section
1.3.
1.2 The Closing. Subject to the satisfaction or waiver of the conditions
set forth in Article VII, the closing of the Purchase and Sale (the "Closing")
shall take place immediately following the closing of the Merger at the offices
of Bryan Cave LLP in Washington, D.C., at 10:00 a.m., local time, or at such
other time and place as the parties hereto may agree. The day on which the
Closing takes place is referred to herein as the "Closing Date." The Closing
shall be effective at the same time as the Effective Time referred to in the
CompuServe Agreement (which effective time under this Agreement is referred to
herein as the "Effective Time").
1.3 Exchange of Consideration.
(a) At the Closing, AOL shall deliver to WorldCom, or, if so directed
by WorldCom, to CompuServe, a certificate or certificates representing all of
the outstanding ANS Shares, duly endorsed or accompanied by a stock assignment
separate from certificates which shall have been duly executed in blank.
(b) In exchange for the transfer of the ANS Shares as provided herein:
(i) The following shall apply as to the cash consideration (the "Cash
Consideration"): WorldCom shall deliver or cause CompuServe to deliver to
AOL and/or its designee or designees One Hundred Seventy-Five Million
Dollars ($175,000,000) by wire transfer of immediately available funds at
the Closing, to an account or accounts designated at least two Business
2
<PAGE>
Days prior to the Closing Date by AOL by written notice to WorldCom,
subject to the following adjustments: (A) the adjustment with respect to
the AOL Unvested Stock Options as provided in Section 1.9(a), (B) the
adjustment with respect to the WorldCom (ANS) Stock Options as provided in
Section 1.9(b), (C) an adjustment in favor of AOL in the amount of Two
Million Five Hundred Thousand Dollars ($2,500,000), representing a
reimbursement of expenses incurred by AOL in connection with discussions,
negotiations and other actions concerning the previously-contemplated
transaction with CompuServe, and (D) an adjustment in favor of WorldCom in
the amount of Five Million Dollars ($5,000,000) relating to amounts to be
paid to certain employees of ANS as provided in Section 1.6(a), plus
customary additional employer direct costs incurred by ANS resulting from
such payments to employees such as the employer portion of FICA payments
(but not including withholding taxes);
(ii) WorldCom shall cause CompuServe, CompuServe-Ohio and other
appropriate CompuServe Entities to execute and deliver to AOL and/or its
designee or designees at the Closing a bill or bills of sale in
substantially the form attached hereto as Exhibit A (the "Bill of Sale")
and other appropriate instruments of transfer, pursuant to which CompuServe
shall sell, convey, assign and deliver to AOL and/or its designee or
designees all right, title and interest of CompuServe, CompuServe-Ohio and
other appropriate CompuServe Entities in and to the CompuServe Assets; and
(iii) WorldCom shall, and shall cause CompuServe, CompuServe-Ohio and
the other appropriate CompuServe Entities to, execute and deliver to AOL
and/or its designee or designees at the Closing, and AOL shall execute and
deliver to CompuServe, the appropriate CompuServe Entities and WorldCom at
the Closing, the Assignment and Assumption Agreement in substantially the
form attached hereto as Exhibit B (the "Assignment and Assumption
Agreement").
1.4 Delayed Assets and Liabilities.
(a) WorldCom shall use all reasonable efforts to secure all necessary
consents and approvals in order to transfer all of the CompuServe Assets on the
Closing Date as provided herein. However, to the extent that any such required
consent or waiver with respect to the transfer of a contract or other instrument
or obligation included in the CompuServe Assets has not been obtained on or
prior to the Closing Date, such contract or other instrument or obligation (a
"Delayed Asset") shall not be transferred hereunder if so determined by
WorldCom, and any related liability that constitutes a CompuServe Liability (a
"Delayed Liability"), shall not be assumed hereunder by AOL other than to the
extent provided herein unless and until such required consent or waiver has been
obtained. WorldCom shall advise AOL in writing, not later than the second
Business Day prior to the scheduled Closing Date, of any CompuServe Assets which
it anticipates will be Delayed Assets, and shall identify any related Delayed
Liabilities.
(b) If there are any Delayed Assets, WorldCom will, and will cause
CompuServe and the CompuServe Entities to, use all reasonable efforts to provide
3
<PAGE>
AOL with the intended benefits under or of any such Delayed Asset, and (to the
extent that AOL is so provided with the benefits thereof), AOL shall assume, pay
and perform any corresponding Delayed Liabilities.
(c) Following the Closing, the parties shall cooperate in good faith in
order to secure any necessary consents or waivers for the transfer of any
Delayed Assets and Delayed Liabilities, or to enter into other arrangements
which will reflect as nearly as possible the respective benefits and obligations
that would have been in effect had the Delayed Assets and Delayed Liabilities
been transferred and assumed on the Closing Date. Any out-of-pocket expenses
reasonably incurred by the parties in taking the actions referred to in this
paragraph (c) shall be paid by WorldCom. At such time and on each occasion
after the Closing Date that a required consent or waiver shall be obtained with
respect to a Delayed Asset, such Delayed Asset shall forthwith be transferred
and assigned to AOL, and all related Delayed Liabilities shall be simultaneously
assumed by AOL hereunder, whereupon (i) such Delayed Asset shall constitute for
all purposes a CompuServe Asset acquired hereunder and (ii) such Delayed
Liabilities shall constitute for all purposes CompuServe Liabilities assumed
hereunder. Prior to any such transfer of Delayed Assets, WorldCom shall use all
reasonable efforts to preserve and maintain the value of such Delayed Assets in
all material respects, and shall pay all liabilities which become due in respect
of such Delayed Assets prior to the transfer thereof to AOL or its designee(s).
(d) On the earliest to occur of (i) one year following the Closing Date,
(ii) the date on which a Delayed Asset or Delayed Liability is transferred
hereunder and (iii) the time when the parties shall conclude that any Delayed
Asset or Delayed Liability will not be transferred for any reason, then WorldCom
shall, or shall cause a WorldCom Entity to, pay to AOL or its designee an amount
sufficient to compensate it for the loss incurred by it (net of the benefit
resulting from discharge of its obligation in respect of the related Delayed
Liability) resulting from such failure to transfer such Delayed Asset and
Delayed Liability, including interest on the amount of such loss from the
Closing Date to the date of payment, compounded daily, at the prime or base rate
of interest announced from time to time by NationsBank of Texas, N.A. For
purposes of this paragraph (d), the loss incurred by AOL or its designee shall
be deemed to be the excess, if any, of the value of the CompuServe Assets and
the CompuServe Online Services Business as of the Closing Date (after taking
into account the assumption of the CompuServe Liabilities) over the value of the
assets and rights actually transferred to AOL or its designee or designees
hereunder (after taking into account the CompuServe Excluded Assets). The
determination of such value shall take into account any decrease in the overall
value of the CompuServe Assets and the CompuServe Online Services Business which
may result from the absence of or delay in delivering such Delayed Assets, but
shall not otherwise take into account any indirect or consequential damages.
Such payment by WorldCom or a WorldCom Entity shall constitute the sole remedy
of AOL and its designees in respect of the delay in delivery or failure to
deliver the applicable Delayed Assets.
1.5 CompuServe Transitional Matters. In connection with, and in order to
facilitate the implementation of, the CompuServe Transfer, the following
transitional arrangements, requirements and adjustments shall be applicable (for
purposes of this Section 1.5, the term "CompuServe Online Services Business" for
the period of time prior to the Effective Time shall mean the business referred
to in Exhibit C hereto as "CSI"):
4
<PAGE>
(a) Employees. All employees of CompuServe-Ohio and other CompuServe
----------
Entities who are employed as such immediately prior to the Effective Time and
whose respective primary responsibilities are any of the following shall be
employed or offered employment, immediately after the Effective Time, by AOL or
its designee or designees: (i) general management of the CompuServe Online
Services Business, (ii) supporting and operating the CompuServe Online Service
Business and/or CompuServe's Sprynet business ("Sprynet") including but not
limited to content creation and hosting, (iii) general and administrative duties
in MIS, operations and billing, (iv) duties in other departments headed by the
Vice President, Technical Operations (except those primarily supporting the
electronic tax filing and rapid refund line of business), or (v) other general
and administrative duties relating to the provision of finance, administration
and legal support primarily to the CompuServe Online Services Business and/or
Sprynet. Employees whose primary responsibilities relate substantially equally
to the CompuServe Online Service Business and/or Sprynet, on the one hand, and
other CompuServe business activities, including but not limited to network
services but excluding Sprynet, on the other hand, shall be allocated employee-
by-employee substantially equally between AOL and/or its designee or designees,
on the one hand, and CompuServe and/or any one or more of the CompuServe
Entities, on the other hand, in accordance with the process set forth in the
immediately following subsection (c).
(b) Allocation of Facilities and Other Assets. CompuServe-Ohio shall
------------------------------------------
transfer, or cause to be transferred by CompuServe or appropriate other
CompuServe Entities, to AOL and/or its designee or designees subject to Section
1.4, all as provided in Sections 1.3(b)(ii) and (iii), subject to related
CompuServe Liabilities, the Assets (which shall constitute CompuServe Assets)
identified in paragraphs 2, 3, 6 and 7 of that part of the memorandum attached
hereto as Exhibit C captioned "Cost Allocation and Inter-Company Service
Arrangements - CSI" and in Attachments 1 and 2 thereto. Without limiting the
generality of the foregoing, such allocation of assets shall include the
allocation of rights under and with respect to leases of real estate and/or
tangible assets and interests in such leased real property and tangible assets.
(c) Allocation Process. In making the allocations provided for in the
-------------------
immediately preceding paragraphs (a) and (b), each of AOL and WorldCom shall
have equal access to the CompuServe employees and Assets who and which are the
subjects of such allocations, including rights to conduct audits. If any
disagreement arises as to the allocation of any employee or Assets which cannot
be resolved by agreement within 10 days after either party gives notice to the
other that it disagrees with a proposed allocation, the dispute shall be
submitted to final and binding arbitration in accordance with the provisions of
this Section 1.5 and the Commercial Rules of the American Arbitration
Association before an arbitrator mutually satisfactory to AOL and WorldCom
selected by them within an additional 10 days after the giving of such notice
or, if they shall not agree on such selection, selected by an Arbiter chosen
under the procedures specified in paragraph (d)(ii) below. The decision of such
arbitrator shall be final and binding.
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(d) CompuServe Net Working Capital and Cash; Long-Term Liabilities.
---------------------------------------------------------------
(i) Within 30 days after the Closing Date, AOL shall prepare and
deliver to WorldCom a consolidated balance sheet (the "COLS Closing Date
Balance Sheet") of the CompuServe Online Services Business, as transferred
to AOL or its designee(s) on the Closing Date, including the CompuServe
Assets and the CompuServe Liabilities, prepared on a basis consistent with
the pro forma balance sheet which is attached hereto as Attachment 1 to
Exhibit C (the "Pro Forma Balance Sheet"), which shall show, among other
things, net current assets and net current liabilities after taking into
account all transfers made on the Closing Date as contemplated by this
Agreement. AOL shall confer with WorldCom with respect to the preparation
of the COLS Closing Date Balance Sheet, and WorldCom shall have the right
to review all work papers and supporting documentation.
(ii) If WorldCom disputes the COLS Closing Date Balance Sheet
delivered by AOL, WorldCom shall deliver a "Notice of Dispute" to AOL not
more than thirty (30) days after the date WorldCom receives the COLS
Closing Date Balance Sheet. Upon receipt of a Notice of Dispute, AOL shall
promptly consult with WorldCom with respect to its specified points of
disagreement in an effort to resolve the dispute. If any such dispute
cannot be resolved by AOL and WorldCom within ten (10) days after AOL
receives the Notice of Dispute, AOL and WorldCom shall refer the dispute to
the Arbiter hereinafter referred to who shall serve as an arbitrator to
finally determine, as soon as practicable, all points of disagreement with
respect to the COLS Closing Date Balance Sheet. The Arbiter shall be a
partner in the New York office of Price Waterhouse chosen by mutual
agreement of the parties; provided that, if Price Waterhouse shall, at the
time, be serving as the independent public accountants of either WorldCom
or AOL or shall otherwise have a material relationship with either of them,
then the Arbiter shall be a partner at the New York office of KPMG Peat
Marwick chosen by mutual agreement of the parties and if KPMG Peat Marwick
shall have such a material relationship, a partner at another accounting
firm mutually satisfactory to WorldCom and AOL. The Arbiter shall apply
the terms of this Section and shall conduct the arbitration in New York
City at a location or locations to be determined by the Arbiter under such
procedures as the parties may agree or, failing such agreement, under the
Commercial Rules of the American Arbitration Association. The fees and
expenses of the arbitration and the Arbiter incurred in connection with the
arbitration of the COLS Closing Date Balance Sheet shall be allocated
between the parties by the Arbiter in proportion to the extent either party
did not prevail on items in dispute in the COLS Closing Date Balance Sheet,
provided that such fees and expenses shall not include, as long as a party
complies in all material respects with the procedures of this Section, the
other party's outside counsel or accounting fees. All determinations by
the Arbiter shall be final, conclusive and binding with respect to the COLS
Closing Date Balance Sheet and the allocation of arbitration fees and
expenses.
(iii) In the event that, as of the Closing Date, (x) the
CompuServe Online Services Business shall have working capital, calculated
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as the excess, if any, of total current assets less total current
liabilities, as shown on the COLS Closing Date Balance Sheet prepared on a
basis consistent therewith ("Net Working Capital"), which is less than Five
Million Dollars ($5,000,000) and/or (y) the CompuServe Online Service
Business shall have actual cash on hand in an amount which is less than
Fifteen Million Dollars ($15,000,000), as reflected on the COLS Closing
Date Balance Sheet so prepared, then WorldCom or CompuServe shall pay to
AOL an amount equal to such shortfall in Net Working Capital or cash on
hand, as the case may be, if there shall be only one of such requirements
which shall not have been met, or the greater of the two shortfalls if both
of such requirements shall not have been met, by wire transfer of
immediately available funds not more than three Business Days after the
final determination thereof. If both such requirements shall have been
met, neither WorldCom nor CompuServe shall be required to make any such
payment to AOL, and in any case AOL shall not be required to make any
payment to WorldCom or CompuServe in respect of Net Working Capital or cash
on hand, whether or not there shall have been, as of the Closing Date, any
amount of Net Working Capital and/or cash on hand of the CompuServe Online
Services Business in excess of either or both of such requirements, as
reflected on the COLS Closing Date Balance Sheet or otherwise.
(iv) The CompuServe Liabilities assumed by AOL shall not include
any long-term liabilities (which, for purposes hereof, shall not include
operating leases), as of the Closing Date as reflected on the COLS Closing
Date Balance Sheet or otherwise. If, notwithstanding such prohibition, any
long-term liabilities are included with the CompuServe Online Services
Business, WorldCom shall assume and indemnify AOL and/or its designee or
designees from and against any and all Losses and Expenses which AOL and/or
its designee or designees may incur as a result of or in connection
therewith.
1.6 ANS Transitional Matters. Similarly, in order to facilitate the
implementation of the ANS Transfer, the following transitional arrangements,
requirements and adjustments shall be applicable:
(a) Employees. All employees of ANS or any ANS Entity who are
---------
employed as such immediately prior to the Effective Time shall continue to be
employed or offered employment by ANS or such ANS Entity immediately after the
Effective Time, all as more particularly provided in Section 5.13. At the
Closing, ANS has agreed to and shall pay retention bonuses to the employees
named on Schedule 1.6 for continued service during the period from the signing
of the AOL Agreement through the Closing.
(b) Retention of Assets; Exceptions. In accordance with the terms of
-------------------------------
Exhibit C hereto, ANS shall own and retain the ANS Assets, as reflected on the
ANS Closing Date Balance Sheet (as hereinafter defined), except that, for no
additional consideration other than the benefits to ANS and WorldCom under this
Agreement, (i) ANS shall grant to AOL a perpetual paid-up license to any network
management software and network software source code which it or any ANS Entity
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owns or has any interest in at the Effective Time and any modifications thereto
that shall have been theretofore developed internally or customized by ANS, and
ANS shall provide AOL with documentation for such software and access to key ANS
personnel for consulting services related to such software for a period of nine
months after the Effective Time on the basis of ANS's actual cost plus 10% and
(ii) ANS shall assign and transfer to AOL and/or its designee or designees all
of its rights with respect to leased equipment used for ANS's Web-caching
system, which license and leased equipment rights shall constitute ANS Excluded
Assets. Further, after the date hereof but prior to the Effective Time, ANS
shall sell and lease back equipment which it has previously purchased and such
leases shall continue to be held by ANS after the Effective Time, it being
understood and agreed that an amount equal to the amount of any deposits paid by
AOL in connection with the purchase by ANS of such equipment will be paid by ANS
or WorldCom to AOL prior to or at the Effective Time or settled in connection
with the settlement of inter-company accounts as provided in Section 2.2. At
the Effective Time, for no additional consideration other than the benefit to
AOL under this Agreement, AOL shall assign and transfer to ANS all of AOL's
rights under leases for modems leased to AOL for equipment operated by ANS, and
WorldCom and ANS shall assume and indemnify AOL from and against any and all
Losses and Expenses which AOL may incur after the Effective Time as a result of
or in connection therewith.
(c) ANS Net Working Capital and Cash; Long-Term Liabilities.
--------------------------------------------------------
(i) Within 30 days after the Closing Date, WorldCom or ANS shall
prepare and deliver to AOL a consolidated balance sheet of ANS and the ANS
Entities (the "ANS Closing Date Balance Sheet"), prepared on a basis
consistent with the June 30, 1997 balance sheet of ANS included in Schedule
3.5, which shall show, among other things, net current assets and net
current liabilities. WorldCom shall confer with AOL with respect to the
preparation of the ANS Closing Date Balance Sheet, and AOL shall have the
right to review all work papers and supporting documentation.
(ii) If AOL disputes the ANS Closing Date Balance Sheet delivered
by WorldCom or ANS, AOL shall deliver a "Notice of Dispute" to WorldCom not
more than thirty (30) days after the date AOL receives the ANS Closing Date
Balance Sheet. Upon receipt of a Notice of Dispute, WorldCom shall
promptly consult with AOL with respect to its specified points of
disagreement in an effort to resolve the dispute. If any such dispute
cannot be resolved by WorldCom and AOL within ten (10) days after WorldCom
receives the Notice of Dispute, WorldCom and AOL shall refer the dispute to
the Arbiter referred to in Section 1.5(d), who shall serve as an arbitrator
under the procedures specified in such Section and applying the terms of
such Section, to finally determine, as soon as practicable, all points of
disagreement with respect to the ANS Closing Date Balance Sheet. All
determinations by the Arbiter shall be final, conclusive and binding with
respect to the ANS Closing Date Balance Sheet and the allocation of
arbitration fees and expenses.
(iii) In the event that, as of the Closing Date, ANS shall have
negative working capital (that is, an excess of current liabilities over
current assets, as shown on the ANS Closing Date Balance Sheet, referred to
below as "Negative Working Capital"),
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calculated after and having given effect to the payment and settlement of
inter-company accounts as provided in Section 2.2, in excess of Thirty-Six
Million One Hundred Thousand Dollars ($36,100,000), then AOL shall pay to
WorldCom an amount equal to the amount by which ANS Negative Working
Capital exceeds Thirty-Six Million One Hundred Thousand Dollars
($36,100,000), by wire transfer of immediately available funds not more
than three Business Days after the final determination thereof. If ANS
Negative Working Capital shall be equal to or less than Thirty-Six Million
One Hundred Thousand Dollars ($36,100,000) or there shall be no Negative
Working Capital, AOL shall not be required to make any payment to WorldCom
in respect of Negative Working Capital.
(iv) ANS shall not have any long-term liabilities as of the
Closing Date (it being understood that for purposes hereof operating leases
shall not constitute long-term liabilities), as reflected on the ANS
Closing Date Balance Sheet or otherwise; provided that, notwithstanding
such prohibition, if it does have any such long-term liabilities at such
time, AOL shall assume and indemnify WorldCom and ANS from and against any
and all Losses and Expenses which they or either of them may incur as a
result of or in connection therewith.
1.7. Employee Severance Obligations.
(a) AOL shall reimburse WorldCom for all severance payments and other
expenses reasonably incurred by WorldCom, in accordance with its (or AOL's)
customary employment practices, in respect of any employees of ANS or any ANS
Entity whose employment is terminated for any reason within six months following
the Closing, up to an aggregate of $25,000,000 for all such payments under this
paragraph (a). In respect of any such employees whose employment is so
terminated within such six-month period, WorldCom shall provide them with cash
severance payments substantially equivalent to the payments they would have been
entitled to under the AOL severance policy, a copy of which is attached hereto
as Schedule 1.7(a), and they shall be entitled to participate in any other
severance benefits offered by WorldCom to its employees which correspond to
severance benefits offered to ANS employees by either AOL or ANS prior to the
Closing, and otherwise in accordance with the terms and limitations of such
WorldCom benefit programs.
(b) WorldCom shall reimburse AOL for all severance payments and other
expenses reasonably incurred by AOL, in accordance with its (or CompuServe's)
customary employment practices, in respect of any employees of CompuServe or any
CompuServe Entity who is a part of the CompuServe Online Services Business and
who is hired as a result of the transactions provided herein, whose employment
is terminated by AOL for any reason within six months following the Closing, up
to an aggregate of $25,000,000 for all such payments under this paragraph (b).
1.8 Allocation of Consideration. With respect to the allocation of the
consideration exchanged pursuant to the terms of this Agreement, the parties
agree to timely file all forms required under applicable Tax law including the
forms to be filed under Code (S)1060(e).
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1.9 Treatment of ANS and AOL Options. (a) At the Effective Time, WorldCom
shall cause each director, employee or consultant of ANS or any ANS Entity who
is a holder of a then-outstanding, unexercised and unvested AOL stock option
(the "AOL Unvested Stock Options") to receive, without any action on the part of
the holder thereof, options to purchase shares of WorldCom Common Stock
("WorldCom Stock Options") having the same terms and conditions as the AOL
Unvested Stock Options including such terms and conditions as may be
incorporated by reference into the agreements evidencing AOL Unvested Stock
Options pursuant to the AOL Stock Plans under which such AOL Unvested Stock
Options were granted, subject to adjustment as follows: (i) the Average Trading
Price for the AOL Common Stock shall be divided by the Average Trading Price for
the WorldCom Common Stock, and the result shall be the "Adjustment Factor"; (ii)
the exercise price applicable under each AOL Unvested Stock Option shall be
divided by the Adjustment Factor and (iii) the number of shares issuable upon
exercise shall be multiplied by the Adjustment Factor. To the extent that any of
the AOL Unvested Stock Options were incentive stock options within the meaning
of Section 422 of the Code, the WorldCom Stock Options shall also be incentive
stock options pursuant to and to the extent permitted by Section 424(a) of the
Code. WorldCom shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Common Stock of WorldCom for delivery upon the
exercise of WorldCom Stock Options after the Effective Time. Promptly after the
Effective Time, WorldCom shall file or cause to be filed all registration
statements on Form S-8 or other appropriate form as may be necessary in
connection with the purchase and sale of Common Stock of WorldCom contemplated
by such WorldCom Stock Options subsequent to the Effective Time. AOL shall pay
to WorldCom, through a reduction in the Cash Consideration, an amount equal to
50% of the Option Value of such AOL Unvested Stock Options. "Option Value"
means, for this purpose, the Average Trading Price for the WorldCom Common Stock
minus the option exercise price under the WorldCom Stock Options.
(b) At the Effective Time, WorldCom shall cause the persons listed on
Schedule 1.9 to receive, in exchange for the then-outstanding and unexercised
options to acquire ANS shares which are listed on such Schedule, options to
purchase shares of WorldCom Common Stock ("WorldCom (ANS) Stock Options") in
exchange for such unexercised options, having the terms specified on such
Schedule and otherwise in accordance with the terms applicable to stock options
offered to other WorldCom employees under the WorldCom, Inc. 1997 Stock Option
Plan, subject to adjustment as follows: (i) the value of a share of ANS stock,
which is agreed to be $41.6410, shall be divided by the Average Trading Price
for the WorldCom Common Stock, and the result shall be the "Adjustment Factor";
(ii) the exercise price applicable under each ANS stock option shall be divided
by the Adjustment Factor and (iii) the number of shares issuable upon exercise
shall be multiplied by the Adjustment Factor. To the extent that any such AOL
stock options were incentive stock options within the meaning of Section 422 of
the Code, the WorldCom Stock Options shall also be incentive stock options
pursuant to and to the extent permitted by Section 424(a) of the Code. WorldCom
shall take all corporate action necessary to reserve for issuance a sufficient
number of shares of Common Stock of WorldCom for delivery upon the exercise of
WorldCom (ANS) Stock Options after the Effective Time. Promptly after the
Effective Time, WorldCom shall file or cause to be filed all registration
statements on Form S-8 or other appropriate form as may be necessary in
connection with the purchase and sale of
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Common Stock of WorldCom contemplated by such WorldCom (ANS) Stock Options
subsequent to the Effective Time. In consideration for the issuance of such
WorldCom (ANS) Stock Options, AOL shall pay to WorldCom, through a reduction in
the Cash Consideration, an amount equal to 25% of the Option Value of such
WorldCom (ANS) Stock Options. "Option Value" means, for this purpose, the
Average Trading Price of the WorldCom Common Stock minus the option exercise
price under the WorldCom (ANS) Stock Options.
1.10 Treatment of CompuServe Options. AOL shall determine the extent to
which, and the terms on which, it may make stock options available to employees
of the CompuServe Online Services Business who are employed by AOL, whether in
exchange for existing options issued by CompuServe or otherwise, and WorldCom
shall have no liability in respect thereof. All severance and other obligations
relating to employees of the CompuServe Online Services Business (whether or not
AOL chooses to offer them employment) shall be a part of the CompuServe
Liabilities, subject to the provisions of Section 1.7.
1.11 Adjustment Based on Material Adverse Change. If, as of the Closing,
there shall have been a Material Adverse Change with respect to the CompuServe
Online Services Business, then WorldCom shall, or shall cause a WorldCom Entity
to, pay to AOL or its designee(s), promptly following the Closing Date, an
amount sufficient to compensate it for the loss incurred by it resulting from
such Material Adverse Change. For purposes of this Section 1.11, the loss
incurred by AOL or its designee(s) shall be deemed to be the excess, if any, of
the value that the CompuServe Assets and the CompuServe Online Services Business
would have had as of the Closing Date over the value thereof after taking into
account such Material Adverse Change (and after taking into account, in each
case, any effect on the CompuServe Liabilities to be assumed by AOL or its
designee or designees as provided herein). The determination of such value after
taking into account such Material Adverse Change shall take into account any
decrease in the overall value of the CompuServe Assets and the CompuServe Online
Services Business resulting from such Material Adverse Change, but shall not
otherwise take into account any indirect or consequential damages. Such payment
by WorldCom or a WorldCom Entity shall constitute the sole remedy of AOL and its
designees in respect of the applicable Material Adverse Change referred to in
this Section 1.11.
ARTICLE II
ASSET TRANSFER; SETTLEMENT OF INTERCOMPANY ACCOUNTS
2.1 Transfer of Assets. AOL and ANS agree that, prior to the Closing, any
ANS Network Assets, including without limitation modems, owned by or in the
possession of AOL or any AOL Entity (including shared Assets as shown on
Schedule 2.1) will be transferred and contributed for no additional
consideration to ANS in accordance with the provisions of Section 1.6; provided,
however, that such shared Assets shall not include (x) Assets held under any AOL
employee benefit plans, such as life insurance policies and deferred
compensation plans for the benefit of ANS or ANS Entity employees (provided AOL
shall remain responsible for providing any payments or other benefits accrued,
earned or vested thereunder as of the Closing), or (y) any other AOL insurance
policy (except, in the case of clauses (x) and (y), any pre-paid benefits or
coverage under insurance policies which inure to ANS or employees of ANS or any
ANS
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Entities and coverage with respect to such policies for accrued or past claims
or losses). In connection with such transfers, AOL agrees to use all reasonable
efforts to obtain any required consents, approvals or waivers. Subject to the
provisions of Section 7.2(b), to the extent that any such ANS Network Assets
have not been so contributed to ANS prior to or at the Closing, AOL shall, and
shall cause the other AOL Entities to, use all reasonable efforts, including
acting after the Closing and to the maximum extent permitted by law as ANS's
agent, effectuate such transfer and contribution to ANS as soon as practicable
after the Closing for no additional consideration.
2.2 Intercompany Accounts. Immediately prior to the Closing, AOL and each
AOL Entity shall pay all amounts they then owe to ANS or any ANS Entity
(including all amounts owed to ANS pursuant to any Tax sharing agreement), and
ANS and each ANS Entity shall pay all amounts they then owe to AOL or any AOL
Entity (with offsetting amounts to be offset so that only a single net payment
shall be made between any two such parties). To the extent that any such amounts
have not been paid prior to or at the Closing, the obligor shall, as soon as
practicable following the Closing, pay all such unpaid amounts together with
interest thereon, compounded daily, at the prime or base rate of interest
announced from time to time by NationsBank of Texas, N.A. Except as set forth on
Schedule 2.2, there are no amounts owing from ANS or any ANS Entity to AOL or
any AOL Entity, or from AOL or any AOL Entity to ANS or any ANS Entity. If ANS
or an ANS Entity shall owe any such amounts to AOL or an AOL Entity at the
Closing, WorldCom shall cause the necessary funds to be advanced to ANS or such
ANS Entity to provide for such repayment as provided in this Section.
2.3 Release of Claims. (a) Except as set forth in Schedule 2.3(a) or as
provided in Section 1.5 (including Exhibit C referred to therein), immediately
prior to the Effective Time, AOL, for itself and on behalf of each of the AOL
Entities, releases and forever discharges ANS from any and all claims, demands,
proceedings, causes of action, orders, obligations, contracts, agreements,
debts, and liabilities whatsoever, that AOL or any AOL Entity now has, has ever
had, or may hereafter have against ANS arising prior to the Effective Time or on
account of or arising out of any matter, cause, or event occurring immediately
prior to the Effective Time, including, but not limited to, any rights to
indemnification, contribution or reimbursement from ANS, and whether or not
relating to claims pending prior to, on, or asserted after, the Effective Time.
Further, AOL and each of the AOL Entities, as of the Effective Time, irrevocably
covenants to refrain from, directly or indirectly, asserting any claim or
demand, or commencing, instituting, or causing to be commenced, any proceeding
of any kind against ANS based upon any matter purported to be released hereby.
(b) Effective as of the Effective Time, WorldCom, for itself and on behalf
of each of the WorldCom Entities (including ANS after the Closing), releases and
forever discharges AOL from any and all claims, demands, proceedings, causes of
action, orders, obligations, contracts, agreements, debts, and liabilities
whatsoever, that WorldCom or any WorldCom Entity now has, has ever had, or may
hereafter have against AOL arising prior to the Effective Time or on account of
or arising out of any matter, cause, or event described on Schedule 2.3(b),
except for any of the foregoing which is based on a Third Party Claim; provided,
that this paragraph shall not be deemed to limit or affect the rights of
WorldCom in respect of any Third Party Claim
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pursuant to Section 5.2. Further, WorldCom and each of the WorldCom Entities, as
of the Effective Time, irrevocably covenants to refrain from, directly or
indirectly, asserting any claim or demand, or commencing, instituting, or
causing to be commenced, any proceeding of any kind against AOL based upon any
matter purported to be released hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING AOL AND ANS
AOL and ANS, jointly and severally, hereby make the following
representations and warranties to WorldCom:
3.1 Organization, Existence and Good Standing. AOL is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. ANS is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Each of ANS and
the ANS Entities is duly organized, validly existing and, to the extent such
concept is applicable under the laws of such jurisdiction, in good standing in
its respective jurisdiction of organization. Each of ANS and the ANS Entities
has all necessary corporate power and authority to own, lease and operate its
properties and to conduct its business as currently conducted. Each of ANS and
the ANS Entities is duly qualified to do business as a foreign corporation and,
to the extent such concept is applicable in such jurisdictions, is in good
standing in each jurisdiction in which the properties owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be so duly qualified and in good standing
would not have a Material Adverse Effect. AOL has made available to WorldCom
complete and correct copies of its, ANS's and each ANS Entity's Certificate of
Incorporation (or equivalent charter document) and Bylaws, in each case as
amended to the date of this Agreement.
3.2 ANS Capital Stock Ownership of ANS Entities; Investments. ANS's
authorized and issued capital stock is as shown on Schedule 3.2(a). All shares
shown on such Schedule as owned by AOL have been duly authorized and validly
issued, are owned by and registered in the name of AOL, free and clear of all
Liens and Other Encumbrances except as shown on Schedule 3.2(b) (all of which
Liens or Other Encumbrances shown on such Schedule shall be released and
discharged at or prior to the Closing), and are fully paid and non-assessable.
Other than the rights created pursuant to this Agreement and except as shown on
Schedule 3.2(c), there are no options, warrants, debt securities or other
agreements, instruments or securities outstanding which are convertible into, or
which grant the holder thereof or any other person the right to acquire, any
securities of ANS.
3.3 Ownership of ANS Entities' Capital Stock; Investments. (a) ANS owns
(directly or through one or more ANS Entities as set forth on Schedule
--------
3.3(a)(i), beneficially and (except for de minimis numbers of shares held
- ---------
by nominees as required by the laws of certain foreign jurisdictions) of record,
the issued and outstanding shares of capital stock or other securities of or
interests in the ANS Entities as set forth on Schedule 3.3(a)(i), all of which
------------------
shares or other securities or interests are duly authorized, validly issued and
outstanding, fully paid and non-
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assessable, and free and clear of all Liens or Other Encumbrances except as
shown on Schedule 3.3(a)(ii) (all of which Liens or Other Encumbrances shown on
such Schedule shall be released and discharged at or prior to the Closing). As
of the date of this Agreement, except as set forth on Schedule 3.3(a)(ii), there
-------------------
are no preemptive rights, options, warrants or similar rights granted by ANS or
any ANS Entity in respect of shares of capital stock or other securities of or
interests in the ANS Entities or any agreements to which ANS or any ANS Entity
is a party providing for the issuance or sale by ANS or any ANS Entity of
capital stock or other securities of or interests in any ANS Entity. Except as
set forth on Schedule 3.3(a)(iii), there are no outstanding debt securities,
agreements or interests of any ANS Entity, or, other instruments issued by or to
which ANS, or any ANS Entity or, to the knowledge of AOL or ANS, any other
Person is a party, entitling the holders thereof or parties thereto to vote or
to direct or otherwise restrict the vote of the holders of the capital stock or
other securities of or interests in any ANS Entity or which are convertible into
or exchangeable for capital stock or other securities of or interests in any ANS
Entity. Except as set forth on Schedule 3.3(a)(iii), no capital stock or other
securities of or interests in any ANS Entity are reserved for issuance under any
stock plans or otherwise, and there is no liability for or obligations with
respect to any dividends, distributions or similar participation rights declared
or accumulated but unpaid with respect to any securities of or interests in any
ANS Entity.
(b) Except for the ANS Entities or as set forth on Schedule 3.3(b),
---------------
ANS and the ANS Entities do not own, beneficially or otherwise, any shares of
capital stock or other securities of or any direct or indirect interest of any
nature in, any other corporation, partnership, limited liability company, joint
venture or other entity.
3.4 Power and Authority; Non-Contravention; Filings and Consents.
(a) Each of the Selling Entities has full corporate power and authority to
execute, deliver and perform its obligations under this Agreement and all other
agreements and documents executed and delivered, or to be executed and
delivered, by it pursuant to this Agreement. Each of the Selling Entities has
taken all action required by its respective Certificate of Incorporation and
Bylaws to authorize the execution, delivery and performance of this Agreement
and all other agreements and documents executed and delivered, or to be executed
and delivered, by it pursuant to this Agreement and the consummation of the
transactions contemplated hereby and thereby, and the approval of the
stockholders of AOL is not required in connection therewith. The execution and
delivery of this Agreement by the Selling Entities do not and (except for
consents and waivers listed on Schedule 3.4(a), all of which will be received
prior to the Closing) the consummation of the transactions contemplated by this
Agreement by the Selling Entities will not (i) conflict with or violate any
provisions of their respective Certificates of Incorporation or Bylaws, or (ii)
constitute a breach of or default under or result in the creation of any lien,
charge or other encumbrance or Tax on or against any assets, rights or property
of AOL, ANS or any ANS Entity or give rise, with or without notice or lapse of
time, to any third-party right of termination, cancellation, material
modification or acceleration (other than under any AOL or ANS stock plan or
agreement described on Schedule 3.11) under any note, bond, mortgage, pledge,
lien, lease, agreement, license, commitment or instrument applicable to AOL, ANS
or any ANS Entity or to which AOL, ANS or any ANS Entity is a party
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or by which AOL, ANS or any ANS Entity is bound, or conflict with or violate any
restrictions of any kind to which any of them is subject, which breach, default,
lien, charge, encumbrance, Tax, termination, cancellation, modification or
acceleration would have a Material Adverse Effect or which would prevent or
materially delay the consummation of the transactions contemplated by this
Agreement or otherwise prevent the Selling Entities from performing their
respective obligations hereunder in any material respect, or (iii) subject to
obtaining the consents, approvals, orders, authorizations and registrations and
making the filings described in Section 3.4(b) below, violate any law, order,
writ, judgment, award, statute, rule, regulation or decree of any Governmental
Entity or arbitrator, which, if violated, would have a Material Adverse Effect
or which would prevent or materially delay the consummation of the transactions
contemplated by this Agreement or otherwise prevent either of the Selling
Entities from performing their respective obligations hereunder in any material
respect. The execution and delivery of this Agreement have been approved by the
Board of Directors of each of the Selling Entities. This Agreement has been duly
executed and delivered by each of the Selling Entities and, assuming this
Agreement constitutes a valid and binding obligation of WorldCom, enforceable
against it in accordance with its terms, constitutes a valid and binding
obligation of each of the Selling Entities, enforceable against each of the
Selling Entities in accordance with its terms.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required to be obtained,
made or filed by the Selling Entities or any AOL Entity in connection with the
execution and delivery of this Agreement by the Selling Entities or the
consummation by the Selling Entities of the transactions contemplated by this
Agreement, except for (i) the filing of a pre-merger notification and report
form by AOL under the HSR Act, (ii) filings with and, where required, approval
by one or more non-U.S. competition or antitrust regulatory bodies, (iii) the
filing with the SEC of such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement, and (iv) such consents, approvals, orders, authorizations,
registrations, declarations, or filings the failure of which to be obtained,
made or filed would not, (A) impair in any material respect the ability of
either of the Selling Entities to perform its obligations hereunder, (B) prevent
or impede, in any material respect, the consummation of the transactions
contemplated by this Agreement, or (C) have a Material Adverse Effect.
3.5 Financial Information. Attached hereto as Schedule 3.5 are true,
complete and correct copies of (i) the unaudited consolidated balance sheet of
ANS as of June 30, 1997 (the "Balance Sheet") and the related statements of
income and cash flows (or the equivalent) for the fiscal year then ended
(collectively, the "Financial Statements") and (ii) the unaudited consolidated
balance sheet of ANS as of June 30, 1996 and the related statements of income
and cash flows (or the equivalent) for the fiscal year ended June 30, 1996
(together with the Financial Statements, the "ANS Financial Statements"). Each
of the ANS Financial Statements (including in all cases the notes thereto, if
any) presents fairly in all material respects the financial position, results of
operations and cash flows of ANS, including all applicable ANS Entities and the
ANS Network Services Business as of the times and for the periods referred to
therein, and such ANS Financial Statements (including all reserves included
therein) have been prepared in accordance with GAAP, consistently applied.
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3.6 Subsequent Events. Except as set forth on Schedule 3.6, neither ANS nor
any ANS Entity has, from the date of the Balance Sheet to the date hereof:
(a) Suffered any Material Adverse Change;
(b) Discharged or satisfied any Material lien or encumbrance, or paid,
satisfied or incurred any Material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet or (ii) liabilities incurred since the date of the Balance Sheet
in the ordinary course of business, the discharge, satisfaction or incurrence of
which would not have a Material Adverse Effect;
(c) Increased or established any reserve for Taxes or any other liability
on its books or otherwise provided therefor which, if paid in full, would have a
Material Adverse Effect;
(d) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance, any of the assets, tangible or intangible, which are Material to
the business, operations, properties, assets, liabilities or condition
(financial or otherwise) or prospects of ANS, the ANS Entities or the ANS
Network Services Business;
(e) Sold or transferred any of the ANS Network Assets Material to ANS or
the ANS Network Services Business other than in the ordinary course of business
and consistent with past practice, or canceled any debts or claims or waived any
rights Material to ANS, the ANS Entities or the ANS Network Services Business;
(f) Granted any general or uniform increase in the rates of pay of
employees or any increase in compensation payable or to become payable to any
director, officer or employee, consultant or agent of ANS, the ANS Entities or
the ANS Network Services Business (other than increases in the ordinary course
consistent with past practice), or by means of any bonus or pension plan, or
similar contract or agreement, increased the compensation of any director,
officer or employee agent (other than increases in the ordinary course
consistent with past practice);
(g) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any Material transaction
other than in the ordinary course of business or expressly permitted under other
provisions hereof;
(h) Made any capital commitment which, when added to all other capital
commitments made on behalf of ANS, the ANS Entities or the ANS Network Services
Business since the date of the Balance Sheet, exceeds $25,000,000 in the
aggregate;
(i) Taken any action to (i) amend its Certificate of Incorporation or
Bylaws; (ii) declare, set aside or pay any dividend or other distribution with
respect to capital stock payable in cash, stock, securities or property other
than dividends paid by AOL's wholly owned subsidiaries to AOL or another of
AOL's wholly owned subsidiaries; or (iii) except as shown on Schedule 3.6(i),
issue, sell, transfer, pledge, dispose of or encumber, or redeem, purchase or
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otherwise acquire, directly or indirectly, any shares of, or securities
convertible into or exchangeable for, or options, warrants, calls, commitments
or rights of any kind to acquire, any shares of capital stock of any class of
ANS or any ANS Entity;
(j) Adopted a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of ANS;
(k) Changed in any material respect its Tax or accounting methods,
principles or practices (including any changes in depreciation or amortization
policies or rates or any changes in any assumptions underlying any method of
calculating reserves), other than as required by a change in GAAP or other
applicable law; or
(l) Entered into any agreement, contract, commitment or arrangement to
take any of the actions contemplated in the foregoing clauses (b) through (k),
or authorized, recommended, proposed or announced an intention to take any such
action.
3.7 Legal Proceedings. Except as listed on Schedule 3.7, there is no suit,
claim, proceeding or investigation pending, or to the knowledge of either
Selling Entity, threatened against ANS, any of the ANS Entities or the ANS
Network Services Business or affecting the consummation of the transactions
contemplated by this Agreement which, if resolved adversely to ANS, any of the
ANS Entities or the ANS Network Services Business, would have a Material Adverse
Effect or which could prevent or materially delay the consummation of the
transactions contemplated by this Agreement. There are no Material judgments,
decrees, injunctions or orders of any Governmental Entity or arbitrator against
ANS or any of the ANS Entities or the ANS Network Services Business.
3.8 Contracts
(a) The Selling Entities have made available to WorldCom true and complete
copies of all outstanding Contracts Material to ANS. Except as otherwise
disclosed on Schedule 3.8(a), all of such Contracts are valid, binding and
enforceable in accordance with their terms (assuming the other parties thereto
are bound, as to which no Selling Entity has any reasonable basis to believe
otherwise) and in full force and effect, except where any such invalidity or
failure to be binding, enforceable or in full force and effect would not have a
Material Adverse Effect. Except as otherwise indicated on Schedule 3.8(a), none
of AOL, ANS or any ANS Entity is, and to the knowledge of AOL, no other party to
such Contracts is in default thereunder, and no event has occurred which, with
or without the lapse of time or the giving of notice or both, would constitute a
default thereunder, except in each case for defaults as would not have,
individually or in the aggregate, a Material Adverse Effect.
(b) Except as set forth on Schedule 3.8(b) and except for Contracts which
may be canceled by AOL, ANS or any ANS Entity within 30 days without penalty,
there are no Contracts to which ANS is a party or by which ANS or any ANS Entity
is bound that: (i) contain change of control or anti-assignment provisions
granting to another party or other parties thereto the right to terminate such
agreements or take other action adverse to ANS or any ANS Entity
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upon or following the transactions contemplated by this Agreement, which
termination or adverse action would have a Material Adverse Effect; or (ii)
purport to limit ANS or any ANS Entity from providing any service in any
jurisdiction, whether under the ANS name, any ANS Entity name or WorldCom name
or otherwise (except under the name of AOL or any AOL Entity), or grant any
exclusive geographic, segment or other rights to any third-party, except where
the existence of which limitation or grant would not, after the Closing, have a
Material Adverse Effect.
(c) The Selling Entities have made available to WorldCom true and complete
copies of all agreements to which ANS or any ANS Entity is a party which are
material to the relationship of ANS or any ANS Entity with international
distributors, including those certain license and distributorship agreements
with international distributors into which the ANS or an ANS Entity or, to the
knowledge of AOL, any licensees thereof have entered (collectively, the
"International Distribution Agreements"). Each International Distribution
Agreement is valid, binding and enforceable in accordance with its terms
(assuming the other parties thereto are bound, as to which no Selling Entity has
any reasonable basis to believe otherwise) and in full force and effect, except
where any such invalidity or failure to be binding, enforceable or in full force
and effect would not have a Material Adverse Effect. Except as set forth on
Schedule 3.8(c), to the knowledge of AOL, no party to any International
Distribution Agreement is in material violation of the terms and provisions of
any such agreement, except for violations which would not have a Material
Adverse Effect.
(d) The Selling Entities and ANS Entities have made available to WorldCom
true and complete copies of the 10 largest (based upon annualized revenue as
estimated by AOL or ANS) contracts and agreements with customers of the network
services business of the ANS Network Services Business, which are identified on
Schedule 3.8(d). To the knowledge of AOL, each Network Services Agreement is
valid, binding and enforceable in accordance with its terms (assuming the other
parties thereto are bound, as to which AOL has no reasonable basis to believe
otherwise) and in full force and effect, except where any such invalidity or
failure to be binding, enforceable or in full force and effect would not have a
Material Adverse Effect. To the knowledge of AOL, and except as set forth in
Schedule 3.8(d), no party to any such Network Services Agreement is in violation
of the terms and provisions thereof, except for violations which would not have
a Material Adverse Effect.
(e) Schedule 3.8(e) contains a list of each contract between ANS or any
other ANS Entity and a Governmental Entity which is to be performed by or
through ANS or an ANS Entity and which accounted for at least 3% of the network
services revenues during the 12-month period ended June 30, 1997 (the
"Government Contracts"), true and complete copies of which have been made
available to WorldCom. To the knowledge of AOL, all Government Contracts have
been legally awarded and are binding on the parties thereto and are not
currently the subject of protest proceedings, except as would not have a
Material Adverse Effect.
(f) Except as set forth on Schedule 3.8(f) and except as would not result
in a Material Adverse Effect, no notice, consent, waiver or approval is
contemplated by or required to or from any party to the contracts, intellectual
property licenses, leases, agreements and arrangements
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listed on Schedules 3.8(a) through 3.8(e) in connection with the execution and
delivery of this Agreement or the consummation of the transaction contemplated
hereby, except any such as would not materially delay or impede such
consummation.
3.9 Accounts Receivable. Since the date of the Balance Sheet, neither AOL
nor ANS nor any other ANS Entity has materially changed any principle or
practice with respect to the recordation of accounts receivable of ANS, any ANS
Entity or the ANS Network Services Business or the calculation of reserves
therefor, or any material collection, discount or write-off policy or procedure
related thereto, except as required by GAAP or statutory accounting principles.
3.10 Taxes. Except as disclosed in Schedule 3.10:
(a) All federal, state, local and foreign Tax Returns required to be filed
by or on behalf of each of ANS and the ANS Entities have been timely filed or
requests for extension have been timely filed and any such extension has been
granted and has not expired, and all such filed Tax Returns are accurate and
complete in all material respects, except for such failures to timely file,
request extension or be complete and accurate as would not, individually or in
the aggregate, have a Material Adverse Effect;
(b) All Taxes required to be paid (including all required estimated Tax
payments and with respect to Taxes required to be withheld) by each of ANS and
the ANS Entities have been paid in full or adequately reserved in accordance
with GAAP on the ANS Financial Statements, other than any failure to pay or
reserve for as would not have a Material Adverse Effect;
(c) As of the date hereof, there is no outstanding Tax audit, inquiry or
assessments (and no written notice of any such audit or inquiry has been
received) with respect to ANS or any other ANS Entity that would have a Material
Adverse Effect;
(d) There are no waivers of the statute of limitations for the assessment
or payment of any Tax by ANS or any ANS Entity that would be Material to ANS or
any ANS Entity;
(e) Neither ANS nor any ANS Entity has made any payment(s) since January 1,
1995, is obligated to make any payment(s) or is a party to any agreement that
could obligate it to make any payment(s) after the Closing that would not be
deductible under Code Section 280G or would constitute compensation in excess of
the limitation set forth in Code Section 162(m);
(f) Neither ANS nor any ANS Entity has executed or entered into any closing
agreement under Code Section 7121 (or any similar provision of state, local or
foreign law) or has agreed to make any adjustment to its income or deductions
pursuant to Code Section 481(a) (or similar provision of state, local or foreign
law), in either case that could affect its Tax liability after the Closing Date
to any material extent;
(g) Except as disclosed in Schedule 3.10(g), neither ANS nor any ANS Entity
is a party to a tax sharing, tax indemnity or similar agreement (whether or not
in writing);
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(h) There are no Material Liens or Other Encumbrances with respect to Taxes
upon any of the assets or properties of ANS or any of the ANS Entities, other
than with respect to Taxes not yet due and payable;
(i) Neither ANS nor any ANS Entity has been a member of an affiliated group
(within the meaning of the Code) filing a consolidated federal income Tax Return
other than a group the common parent of which is AOL; and
(j) ANS is and will be as of the Closing Date a member of AOL's selling
consolidated group as defined in Treasury Regulation 1.338(h)(10)-1(c)(3) and
upon making a Section 338(h)(10) election will be a Section 338(h)(10) target
within the meaning of Treasury Regulation 1.338(h)(10)-1(c)(1).
3.11 Employee Benefit Plans; Employment Matters.
(a) Except as set forth on Schedule 3.11(a), and except as would not
have a Material Adverse Effect, neither AOL, nor ANS nor any ANS Entity has
established or maintains or is obligated to make contributions to or under or
otherwise participates in with respect to any current or former employee or
director of ANS or any ANS Entity: (i) any stock option, restricted stock,
stock appreciation rights, bonus or other type of incentive compensation plan,
program, agreement or arrangement; (ii) any severance, pension, profit-sharing,
thrift or savings, retirement, deferred compensation, employee stock ownership,
employee stock purchase or supplemental executive retirement plan, agreement or
arrangement, including, but not limited to, those described in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); or
(iii) any life insurance, death benefit, health and hospitalization, disability,
cafeteria or Section 125, employee assistance, education or tuition assistance,
vacation benefit or fringe benefit plan, or other employee benefit plan,
program, agreement or arrangement, including, but not limited to, those
described in Section 3(1) of ERISA. Except as disclosed on Schedule 3.11(a),
all such plans listed on Schedule 3.11(a) in which United States-based employees
participate (collectively, the "ANS Benefit Plans") have been operated and
administered in all material respects in accordance with all applicable laws,
rules and regulations, including, but not limited to ERISA, the Code, and the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (and any
similar statute of a state or other jurisdiction, domestic or foreign, if
applicable). With respect to each ANS Benefit Plan, AOL and ANS have made
available to WorldCom the following (to the extent they exist with respect to
such ANS Benefit Plan): (i) the document(s) governing such plan, including, if
applicable, the plan document, the trust agreement, any insurance contract,
administrative services agreement, investment manager agreement, and any
amendments thereto; (ii) the two most recent annual reports of such plan on the
appropriate IRS Form 5500-series form; (iii) the financial statements of the
plan for the two most recent plan years, and if applicable, actuarial valuation
or other actuarial reports for the plan for the two most recent plan years; (iv)
the most recent summary plan description for the plan and any subsequent summary
of material modifications; (v) the most recent ruling letter with respect to the
tax-exempt status of any voluntary employee's beneficiary association under
Section 501(c)(9) of the Code which is implementing such plan; and (vi) for each
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plan that is intended to be qualified under Section 401(a) of the Code, a copy
of the most recent IRS determination or opinion letter. Except as disclosed on
Schedule 3.11(a), and except as would not have a Material Adverse Effect, no act
or failure to act by AOL, ANS or any other AOL Entity (i) has resulted in a
"prohibited transaction" (as defined in ERISA) with respect to the ANS Benefit
Plans that is not subject to a statutory or regulatory exception; or (ii) has
resulted or could reasonably be expected to result in the imposition of any Tax,
penalty or other liability in any material amount on ANS or any ANS Entity
pursuant to any provision of the Code or ERISA or any other applicable law. No
ANS Benefit Plan is subject to Title IV of ERISA; and no circumstance exists or
will exist as a result of the consummation of the transactions contemplated by
this Agreement that could result in the existence of a lien on the property of
AOL, ANS or any AOL Entity under the provisions of Title IV of ERISA (other than
one or more liens that are disclosed in Schedule 3.11(a) or would not have a
Material Adverse Effect). Neither AOL, ANS nor any AOL Entity has previously
made, is currently making, or is obligated in any way to make, any contributions
to any multi-employer plan within the meaning of Section 3(37) of ERISA in which
ANS employees participate. AOL, ANS and each AOL Entity has made all
contributions or payments required under the terms of or in connection with all
ANS Benefit Plans or has properly reserved for such amounts on the Balance Sheet
except for amounts that would not be material. Except as disclosed on Schedule
3.11(a) no ANS Benefit Plan provides health and hospitalization or other medical
or life insurance benefits to terminated or retired employees or agents (other
than benefits mandated by applicable law). Neither AOL, ANS nor any other AOL
Entity has, with respect to any ANS employees, any obligation or commitment
(formal or informal) to create any new benefit plan or program in which
employees of ANS or any ANS Entities may participate, or to amend any existing
ANS Benefit Plan to increase the benefits thereunder. AOL, ANS and each AOL
Entity is in compliance with all requirements applicable to any retirement or
other employee benefit plan maintained for its non-United States ANS employees
other than any failures to comply that would not individually or in the
aggregate have a Material Adverse Effect, and there is no material unfunded
liability with respect to any such plan which is not properly reflected in or
reserved for in the Balance Sheet.
(b) Except as set forth on Schedule 3.11(b) or Schedule 5.13, neither
AOL, ANS nor any AOL Entity is a party to any oral or written (i) union, guild
or collective bargaining agreement which covers its employees in the United
States (nor is AOL or AOL aware of any union organizing activity currently being
conducted in respect to any of AOL's, ANS's or any ANS Entity's employees), (ii)
agreement with any officer or employee the material benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction of the nature contemplated by this Agreement or which provides for
any payment or payments (including any severance, unemployment compensation,
golden parachute, bonus or otherwise) of more than an aggregate of $1,000,000
for all such officers and employees upon such occurrence, or (iii) agreement or
plan, including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or with respect to vesting, will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement, to the extent that
any of the matters referred to in this paragraph (b) would affect ANS or any of
the ANS Entities.
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(c) None of the companies with which ANS is a member of a "controlled
group" within the meaning of Section 1563(a) of the Code nor any administrator
or fiduciary of any employee benefit plan adopted by a member of such controlled
group (or any agent of any of the foregoing) has engaged in any transaction or
acted or failed to act in a manner which is reasonably likely to subject
WorldCom to any material liability (to individuals, the IRS, the Pension Benefit
Guaranty Corporation, or any other party) for breach of fiduciary duties,
accumulated funding deficiencies, termination or other liability under ERISA,
the Code, or any other applicable laws.
(d) Each ANS Benefit Plan to which ANS is a party, other than the ANS
stock option plan, as it may apply to the participation of the ANS Employees,
may be amended or terminated by ANS or WorldCom on or at any time after the
Closing Date.
3.12 Compliance with Laws; Permits.
(a) Except as disclosed on Schedule 3.12, neither ANS nor any ANS Entity
(acting in connection with the ANS Network Services Business) has violated,
failed to comply with or acted or failed to act in any material respect so as to
incur liability under any federal, state, local or foreign law, regulation or
ordinance, judgment, decree or order relating to its business, operations,
properties or Assets, including the Occupational Safety and Health Act, the
Americans with Disabilities Act, export control laws, and any Environmental
Laws, except where a violation, action or failure to act would not have, a
Material Adverse Effect, and no notice from any Governmental Entity of any
pending investigation or violation by ANS or any ANS Entity of, non-compliance
by ANS or any ANS Entity with or alleged liability of ANS or any ANS Entity
under, any such law, regulation, ordinance, judgment, decree or order has been
received by AOL, ANS or any ANS Entity, which, if it were determined that a
violation had occurred, would have a Material Adverse Effect.
(b) ANS and each ANS Entity possesses all Material Governmental
Authorizations necessary to enable it to conduct its business, including the ANS
Network Services Business, as presently conducted, except for those Governmental
Authorizations the failure to possess which would not have a Material Adverse
Effect. All such Governmental Authorizations are valid and in full force and
effect, except for those authorizations the failure of which to be valid and in
full force and effect would not have a Material Adverse Effect. ANS and each
ANS Entity is, and at all times since May 1, 1995 has been, in compliance with
the terms and requirements of each such Governmental Authorization, except where
the failure to be so in compliance would not have a Material Adverse Effect.
Since May 1, 1995, neither AOL nor ANS nor any ANS Entity has received any
notice or other communication from any Governmental Entity asserting (a) any
violation of or failure of ANS or any ANS Entity to comply with any term or
requirement of any Governmental Authorization, or (b) any revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization held by ANS nor any ANS Entity, except where any such
violation, failure to comply, revocation, withdrawal, suspension, cancellation,
termination or modification would not have a Material Adverse Effect.
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3.13 Patents, Trademarks, Etc.
(a) Except as disclosed on Schedule 3.13 hereto, ANS and the ANS Entities
own, or will own prior to the Closing, free and clear of all Liens or Other
Encumbrances, or have, or will have prior to the Closing, the right to use,
sell, license or dispose of or otherwise has rights to use, such patents,
copyrights, trademarks, service marks, and applications and registrations
therefor, and trade names, trade secrets, customer lists, proprietary technology
processes and formulae, source code, object code, know-how, inventions, other
confidential and proprietary information, and other intellectual property rights
as are necessary to permit ANS and the ANS Entities to carry on the ANS Network
Services Business as currently conducted, except for failures to own free and
clear, license to use or otherwise have sufficient rights to use as would not
have a Material Adverse Effect (the "ANS Rights"). Schedule 3.13 sets forth all
registered patents, copyrights, trademarks and service marks included in the ANS
Rights, all of which are in full force and effect and are not subject to any
Taxes or maintenance fees, except as set forth on Schedule 3.13 or except where
the failure to be in full force or effect or to be so subject would not have a
Material Adverse Effect. Except as set forth on Schedule 3.13, neither AOL nor
any of the AOL Entities has licensed or granted to anyone the right to use the
name "ANS" or any other name associated with or used by AOL or any of the AOL
Entities in connection with the ANS Network Services Business. Except as set
forth on Schedule 3.13, none of AOL, ANS or any of the AOL Entities (i) has
licensed or granted to anyone rights of any nature to use any ANS Rights that
would limit the exercise of such ANS Rights by ANS or any ANS Entity against
such licensee or grantee if such licensee or grantee were to use the property
protected by such ANS Rights in competition with ANS or any ANS Entity or that
would limit or prevent ANS or any ANS Entity from using, selling, licensing or
disposing of ANS Rights in any market or geographic region, including in direct
competition with any licensee of such ANS Rights in such geographic region; (ii)
is obligated or pays royalties, fees or other payments to anyone for use of any
single ANS Right exceeding $2,000,000 in the aggregate; and (iii) has received
notice from any third party or otherwise has knowledge that any of ANS Rights or
any services or products marketed or sold by ANS or any AOL Entity in connection
with the ANS Network Services Business violates any intellectual property right
of a third party, except for such violations as would not have a Material
Adverse Effect. To the knowledge of either Selling Entity, there exists no
infringement by any third party of any ANS Rights that would have a Material
Adverse Effect and there is no pending or, to the knowledge of either Selling
Entity, threatened claim or litigation against AOL, ANS or any AOL Entity
contesting its use of any of ANS Rights, asserting the misuse of any of ANS
Rights, or asserting the infringement or other violation of any rights of a
third party, nor, to the knowledge of either Selling Entity is there any
reasonable basis for any such claim, where, in any such case, individually or in
the aggregate, such infringement, claim or litigation would have a Material
Adverse Effect.
(b) All copyrightable works, inventions and know-how conceived by employees
or, to AOL's knowledge, independent contractors of AOL, ANS or AOL Entity within
the scope of their employment or retention, as the case may be, and related to
the ANS Network Services Business were and are "works for hire," or if they were
or are not, then all right, title, and interest therein were transferred and
assigned to, or vested in, ANS or an AOL Entity, except where the
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failure to be "works for hire" or to have been so transferred assigned or vested
would not have a Material Adverse Effect.
(c) Except as set forth on Schedule 3.13, the consummation of the
transactions contemplated by this Agreement will not alter, impair or extinguish
any of the ANS Rights, the alteration, impairment or extinguishing of which
would have a Material Adverse Effect. Following the consummation of the
transactions contemplated hereby, ANS and each ANS Entity will own, free and
clear of all Liens or Other Encumbrances, or have the exclusive right to use,
sell, license or dispose of or otherwise will have sufficient rights to use, ANS
Rights, except for failures to own free and clear, license to use or otherwise
have sufficient rights to use as would not have a Material Adverse Effect.
3.14 No Assets Held by AOL or AOL Entities. Except as set forth on Schedule
3.14, except for ANS Excluded Assets and except for assets held by AOL Entities
which are to be used by such entities pursuant to the Transition Services
Agreement in accordance with the terms thereof (none of which is Material to ANS
or the ANS Entities, including the ANS Network Services Business), immediately
after the Closing, (a) neither AOL nor any AOL Entity will hold or possess any
assets or rights (including contractual rights, patents, copyrights, trademarks,
service marks, and applications and registrations therefor, and trade names,
trade secrets, customer lists, proprietary technology processes and formulae,
source code, object code, know-how, inventions, other confidential and
proprietary information, and other intellectual property rights, but excluding
the technical knowledge, expertise and other know-how developed by AOL and the
AOL Entities in the course of their business prior to the Closing) principally
used in or necessary for the business of ANS or the ANS Entities, including the
ANS Network Services Business (all of which, prior to the Closing, will be
transferred and contributed to ANS in accordance with Section 2.1), and (b)
except as expressly provided herein, neither AOL nor any AOL Entity will be a
party to any contract, intellectual property license, lease, agreement or other
binding arrangement (including any intercompany contract, arrangement or
agreement with ANS or an ANS Entity) necessary to the business of ANS or an ANS
Entity.
3.15 Labor Matters. Neither ANS nor any ANS Entity nor AOL (in connection
with the ANS Network Services Business) is the subject of any proceeding (a)
asserting that AOL, ANS or any ANS Entity has committed an unfair labor practice
or (b) seeking to compel AOL, ANS or any ANS Entity to bargain with a labor
union or labor organization, and there are no pending or, to the knowledge of
either Selling Entity, threatened, nor has there been for the past five years
any, labor strike, dispute, walkout, work stoppage, slow-down or lockout
involving ANS or any ANS Entity or (in connection with the ANS Network Services
Business) any AOL Entity, except in each case as would not have a Material
Adverse Effect.
3.16 Insurance. AOL and/or ANS and/or each ANS Entity has obtained and
maintains in full force and effect insurance with responsible and reputable
insurance companies or associations in such amounts, on such terms and covering
such risks, including fire and other risks insured against by extended coverage,
as is reasonably deemed necessary by AOL, and has maintained in full force and
effect public liability insurance, insurance against claims for personal injury
or death or property damage occurring in connection with the activities of ANS
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and each ANS Entity and the ANS Network Services Business or any properties
owned, occupied or controlled by ANS or AOL or any ANS Entity (in connection
with the conduct of the ANS Network Services Business), except for failures to
obtain or maintain as would not have a Material Adverse Effect.
3.17 Commissions and Fees. There are no valid claims for brokerage
commissions, investment bankers' fees or finder's or similar fees in connection
with the transactions contemplated by this Agreement which may be now or
hereafter asserted against WorldCom or ANS or any ANS Entity resulting from any
action taken by AOL, ANS, any ANS Entity or their stockholders, directors,
officers, employees or agents.
3.18 Real Property. ANS and the ANS Entities own no real estate except as
shown on Schedule 3.18. The real estate occupied by ANS and the ANS Entities is
held under leases, which ANS lease obligations are guaranteed by AOL, each as
described on such Schedule, each of which is in full force and effect in
accordance with its terms, and each of AOL, ANS and the ANS Entities are in
compliance in all material respects with their respective obligations
thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING WORLDCOM
WorldCom hereby makes the following representations and warranties to AOL
and ANS:
4.1 Organization, Existence and Good Standing. WorldCom is a corporation
duly organized and validly existing under the laws of the State of Georgia and
has all necessary corporate power and authority to own, lease and operate its
properties and to conduct its business as currently conducted. WorldCom is duly
qualified to do business as a foreign corporation and, to the extent such
concept is applicable in such jurisdictions, is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes qualification necessary, except
where the failure to be so duly qualified and in good standing would not have a
Material Adverse Effect.
4.2 Power and Authority; Non-Contravention; Filings and Consents.
(a) WorldCom has full corporate power and authority to execute, deliver and
perform its obligations under this Agreement and all other agreements and
documents executed and delivered, or to be executed and delivered, by it
pursuant to this Agreement and has taken all action required by law, its Second
Amended and Restated Articles of Incorporation, its Bylaws or otherwise, to duly
and validly authorize the execution and delivery of, and the performance of its
obligations under, this Agreement and such related agreements and documents and
the consummation of the transactions contemplated hereby and thereby. The
execution and delivery of and the performance of its obligations under this
Agreement and such other agreements do not and the consummation of the
transactions contemplated by this Agreement and such other agreements will not
(i) conflict with or violate any provisions of the Second Amended and
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Restated Articles of Incorporation or Bylaws of WorldCom, (ii) constitute a
breach of or default under or result in the creation of any lien, charge or
other encumbrance or Tax on or against any assets, rights or property of
WorldCom or give rise, with or without notice or lapse of time, to any third-
party right of termination, cancellation, material modification or acceleration
under any note, bond, mortgage, pledge, lien, lease, agreement, license,
commitment or instrument applicable to WorldCom, or to which WorldCom is a party
or by which WorldCom is bound, or conflict with or violate any restrictions of
any kind to which it is subject, which breach, default, lien, charge,
encumbrance, Tax, termination, cancellation, modification or acceleration would
have a Material Adverse Effect, or which would prevent or materially delay the
consummation of the transactions contemplated by this Agreement or otherwise
prevent WorldCom from performing its obligations hereunder in any material
respect, or (iii) subject to obtaining the consents, approvals, orders,
authorizations and registrations and making the filings described in Section
4.2(b) below, violate any law, order, writ, judgment, award, statute, rule,
regulation or decree of any Governmental Entity or arbitrator, which, if
violated or accelerated, would have a Material Adverse Effect or which would
prevent or materially delay the consummation of the transactions contemplated by
this Agreement or otherwise prevent WorldCom from performing its obligations
hereunder in any material respect. The execution and delivery of this Agreement
and the transactions contemplated hereby have been approved by the Board of
Directors of WorldCom. This Agreement has been duly executed and delivered by
WorldCom and, assuming this Agreement constitutes the valid and binding
obligations of AOL and ANS enforceable against them in accordance with its
terms, constitutes valid and binding obligations of WorldCom, enforceable
against WorldCom in accordance with its terms.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained,
made or filed by WorldCom in connection with the execution and delivery of this
Agreement by WorldCom or the consummation by WorldCom of the transactions
contemplated hereby, except for (i) the filing of a pre-merger notification and
report form by WorldCom under the HSR Act, (ii) filings with and, where
required, approval by one or more non-U.S. competition or antitrust regulatory
bodies, (iii) filings with the SEC of such reports under the Exchange Act as may
be required in connection with this Agreement and the transactions contemplated
by this Agreement, and (iv) such consents, approvals, orders, authorizations,
registrations, declarations, or filings the failure of which to be obtained,
made or filed would not, (A) impair in any material respect the ability of
WorldCom to perform its obligations hereunder, (B) prevent or impede, in any
material respect, the consummation of the transactions contemplated by this
Agreement, or (C) have a Material Adverse Effect.
4.3 Legal Proceedings. There is no suit, claim, proceeding or investigation
pending or, to the knowledge of WorldCom, threatened against WorldCom or any
WorldCom Entity, CompuServe, CompuServe-Ohio or any other CompuServe Entity
affecting the consummation of the transactions contemplated hereby which, if
resolved adversely to any of them, would have a Material Adverse Effect with
respect to WorldCom or the CompuServe Online Services Business, or which could
prevent or materially delay the consummation of the transactions contemplated by
this Agreement. Except as set forth on Schedule 4.3, there are no Material
judgments, decrees, injunctions or orders of any Governmental Entity or
arbitrator against
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WorldCom or any WorldCom Entity, CompuServe, CompuServe-Ohio or any other
CompuServe Entity.
4.4 No Vote Required. No vote of the holders of any class or series of
WorldCom capital stock is necessary to approve this Agreement or the
consummation of the transactions contemplated hereby.
4.5 Investment Representation. WorldCom acknowledges that the transfer of
the ANS Shares by AOL hereunder will not be registered under the Securities Act
of 1933, as amended, or under any state securities laws, that the ANS Shares
will be transferred in a private placement transaction exempt from the
registration requirements under such Act, and that the ANS Shares may not be
further transferred by WorldCom except pursuant to an effective registration
under such Act or in a transaction exempt from such registration requirements.
WorldCom is acquiring the ANS Shares hereunder for its own account, for
investment and not with the intention of distributing the ANS Shares.
4.6 CompuServe Agreement. The CompuServe Agreement has been duly authorized
by all necessary corporate action of WorldCom and has been duly executed and
delivered by WorldCom on the date of this Agreement, in the form which has been
delivered to AOL. The CompuServe Agreement is the valid and binding obligation
of WorldCom enforceable against WorldCom in accordance with its terms.
4.7 Title to CompuServe Assets. On the Closing Date, WorldCom will transfer
to AOL or its designee(s) good title to the CompuServe Assets and the CompuServe
Online Services Business (except as provided in Section 1.4 in respect of
Delayed Assets, if any), free and clear of any Lien or Other Encumbrances which
would have a Material Adverse Effect with respect to the CompuServe Online
Services Business.
4.8 Representations Relating to CompuServe Assets. Subject to the
limitations hereinafter referred to, each of the representations, warranties and
covenants of Block, Block Group and CompuServe set forth in the CompuServe
Agreement (including related definitions, except for the definitions of
"Material", "Material Adverse Change" and "Material Adverse Effect", which shall
have the meanings given in this Agreement), to the extent, but only to the
extent, that they relate, directly or indirectly, to the CompuServe Assets, the
CompuServe Liabilities or the CompuServe Online Service Business, or to the
transfer to WorldCom pursuant to the CompuServe Agreement of any of the
foregoing, or relating to Block, Block Group or CompuServe to the extent they
may affect any of the items mentioned above in this Section 4.8, are
incorporated herein by this reference and shall be deemed, for purposes of this
Agreement, to be representations, warranties and covenants made by WorldCom to
and for the benefit of AOL and its designee or designees.
4.9 CompuServe Power and Authority; Non-Contravention; Filings and
Consents. As of the Closing Date, each of CompuServe and the applicable
CompuServe Entities will have full corporate power and authority to transfer the
CompuServe Assets as contemplated by this Agreement and will have taken all
action required by its governing documents or otherwise to
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duly and validly authorize such transfers and the consummation of the other
transactions contemplated hereby. Such transfers and such other transactions, in
respect of CompuServe or any such CompuServe Entity, will not (i) conflict with
or violate any provisions of its governing documents, or (ii) constitute a
breach of or default under or result in the creation of any Liens or Other
Encumbrances or Tax on or against any of its assets, rights or property or give
rise, with or without notice or lapse of time (other than under any CompuServe
Stock Plans as contemplated by the CompuServe Agreement), to any third-party
right of termination, cancellation, material modification or acceleration under
any note, bond, mortgage, pledge, lien, lease, agreement, license, commitment or
instrument applicable to it, or to which it is a party or by which it or any of
its assets is bound, or conflict with or violate any restrictions of any kind to
which it is subject, which conflict, violation, breach, default, Lien or Other
Encumbrance, Tax, termination, cancellation, modification or acceleration would
have a Material Adverse Effect with respect to the CompuServe Online Services
Business or which would prevent or materially delay the consummation of the
transactions contemplated by this Agreement or otherwise prevent WorldCom from
causing CompuServe and such CompuServe Entities to perform the transactions
contemplated hereby in any Material respect, or (iii) violate any law, order,
writ, judgment, award, statute, rule, regulation or decree of any Governmental
Entity or arbitrator, which, if violated or accelerated, would have a Material
Adverse Effect with respect to the CompuServe Online Services Business or which
would prevent or materially delay the consummation of the transactions
contemplated by this Agreement or otherwise prevent WorldCom from causing
CompuServe and such CompuServe Entities to perform the transactions contemplated
hereby in any Material respect.
ARTICLE V
COVENANTS
5.1 Interim Conduct of ANS and each ANS Entity and the ANS Network Services
Business. AOL and ANS covenant to use all reasonable efforts to ensure, and to
cause each ANS Entity to use all reasonable efforts to ensure that, except (1)
as contemplated by this Agreement or (2) with the prior written consent of
WorldCom ,which will not unreasonably be withheld, after the date hereof and
until the earlier of the termination of this Agreement pursuant to Article VIII
and the Closing Date:
(a) Subject to the other provisions of this Section 5.1, the business
of ANS, the ANS Entities and the ANS Network Services Business, including
investment practices and policies, will be conducted only in the ordinary course
of business consistent with past practice, and AOL, ANS and the ANS Entities
will use all reasonable efforts to preserve the ANS Network Services Business
and maintain in all material respects its existing relations with its customers,
suppliers, employees, creditors and business partners, in each case taking into
account the existence and announcement of the transactions referred to herein;
(b) AOL (with respect to the ANS Network Services Business), ANS and
each ANS Entity will continue to make capital expenditures, maintain, upgrade
and expand their facilities relating to, and otherwise operate in all material
respects, the ANS Network Services Business in accordance with the budget and
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plan of ANS for the fiscal year ending June 30, 1998, a copy of which has been
delivered to WorldCom prior to the date hereof (the "Budget");
(c) Neither AOL, ANS nor any ANS Entity will permit there to be,
directly or indirectly, any split, combination or reclassification of the
outstanding shares of capital stock of ANS or interest in or securities of any
ANS Entity;
(d) Neither AOL, in connection with the ANS Network Services Business,
nor ANS nor any ANS Entity will: (i) amend the Certificate of Incorporation or
Bylaws of ANS or any ANS Entity; (ii) declare, set aside or pay any dividend or
other distribution with respect to the capital stock of ANS or interest in or
securities of any ANS Entity payable in cash, stock, securities or property;
(iii) issue, sell, transfer, pledge, dispose of or encumber any shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class of ANS or interest in or securities of any ANS Entity; (iv) transfer,
lease, license, sell, mortgage, pledge, dispose of, or encumber any Assets in an
amount in any instance or series of related instances exceeding $1,000,000
(measured in terms of net book value) in the aggregate except pursuant to the
existing terms of the contracts entered into prior to the date hereof and set
forth on Schedule 5.1(d); or (v) redeem, purchase or otherwise acquire, directly
or indirectly, any of the capital stock of ANS or interest in or securities of
any ANS Entity, except in connection with securities issued as compensation to
ANS employees, as described on Schedule 5.1(d);
(e) Except as shown on Schedule 5.1(e), neither AOL, in connection with the
ANS Network Services Business, nor ANS nor any ANS Entity will: (i) hire or
terminate any employees and consultants except in the ordinary course of
business consistent with past practice; (ii) grant any increase in the
compensation or bonus payable or to become payable to any director, officer or
employee except in the ordinary course of business and consistent with past
practice; (iii) adopt any new, or amend or otherwise increase, or accelerate the
payment or vesting of the amounts payable or to become payable under any
existing AOL or ANS Benefit Plan except in the ordinary course of business and
consistent with past practice; (iv) enter into any, or amend any existing,
employment, consulting or severance agreement with, or grant any severance or
termination pay, to any officer, director or employee except in the ordinary
course of business and consistent with past practice; (v) make any additional
contributions to any grantor trust created by AOL or any AOL Entity to provide
funding for non-tax-qualified employee benefits or compensation except as
required by the terms of any grantor trust of AOL existing on the date hereof;
or (vi) provide any new severance program to or increase the benefits under any
existing severance program;
(f) Except as would not be Material, and except for releases of
guarantees by AOL in favor of ANS which are shown on Schedule 7.3(f) hereto,
neither AOL, in connection with the ANS Network Services Business, nor ANS nor
any ANS Entity will in any respect modify, amend or terminate any of its
Contracts, or waive, release or assign any rights or claims thereto or
thereunder;
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(g) Except as would not be Material, neither AOL, in connection with
the ANS Network Services Business, nor ANS nor any ANS Entity will permit any
insurance policy naming either of them as a beneficiary or a loss payable payee
to be canceled or terminated;
(h) Except as set forth on Schedule 5.1(h), neither AOL, in connection
with the ANS Network Services Business, nor ANS nor any ANS Entity will, except
as provided in the Budget, (i) incur or assume any debt; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person except an ANS
Entity in an amount exceeding $1,000,000; (iii) make any loans, advances or
capital contributions to, or investments in, any other Person (other than a
wholly-owned ANS Entity) in an amount exceeding $1,000,000 in the aggregate, or
modify any credit policies or practices granted to customers or make any
concessions or offer any inducements to accelerate payments; (iv) enter into any
financial commitments (including any capital expenditure or asset purchase),
except in the ordinary course of business and consistent with past practice; (v)
other than in the ordinary course and consistent with past practice, enter into
any contract granting any third-party geographic or Material market or
programming or content exclusivity; or (vi) enter into any contract that is not
terminable without penalty on or prior to December 31, 2000 except in the
ordinary course of business consistent with past practice;
(i) Except as would not be Material, neither AOL, in connection with
the ANS Network Services Business, nor ANS nor any ANS Entity will change any of
its Tax or accounting principles or practices (including any changes in
depreciation or amortization policies or rates or any changes in any assumptions
underlying any method of calculating reserves) unless required by GAAP or
applicable law and unless notice thereof is given to WorldCom promptly
thereafter;
(j) Except as expressly provided in this Agreement, neither AOL (in
connection with the ANS Network Services Business), nor ANS nor any ANS Entity
will pay, discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of any such claims, liabilities or
obligations (i) reflected or reserved against in, or contemplated by, the
Balance Sheet in an amount not in excess of that in the Balance Sheet; (ii)
incurred in the ordinary course of business since the date of the Balance Sheet
in a manner consistent with past practice; (iii) which are legally required to
be paid, discharged or satisfied and are in accordance with the terms in
existence as of the date of this Agreement; or (iv) out of insurance proceeds;
(k) Neither AOL, in connection with the ANS Network Services Business,
nor ANS nor any ANS Entity will adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of ANS or any ANS Entity;
(l) Except as contemplated by this Agreement, neither AOL, in connection
with the ANS Network Services Business, nor ANS nor any ANS Entity will engage
in any transaction, or enter into any agreement, arrangement, or understanding
with, directly or indirectly, any Related Party, other than those existing as of
the date hereof which are listed on Schedule 5.1(l)
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hereof and except for arm's-length transactions in the ordinary course of
business consistent with past practice;
(m) Except as would not be Material or as contemplated by Article VI
hereof, neither AOL, in connection with the ANS Network Services Business, nor
ANS nor any ANS Entity will make any Tax election;
(n) Neither AOL, in connection with the ANS Network Services Business,
nor ANS nor any ANS Entity will settle any litigation, other proceeding or
arbitration requiring a payment in excess of $250,000 individually or $1,000,000
in the aggregate or involving any Material limitation on the future actions of
ANS or any ANS Entity or the surrender or compromise of any of their Material
rights;
(o) Neither AOL nor any of the AOL Entities will take any action which
would be prohibited, following Closing, under Section 2 of the Noncompetition
and Nonsolicitation Agreement, the form of which appears as Exhibit E, provided
that the foregoing shall not prohibit the continued ownership and operation of
ANS by AOL as contemplated by this Agreement;
(p) Neither AOL, in connection with the ANS Network Services Business, nor
ANS nor any ANS Entity will increase or establish any reserve for Taxes or any
other liability on its books or otherwise provided therefor which, if paid in
full, would have a Material Adverse Effect;
(q) Neither AOL nor ANS nor any ANS Entity will enter into an agreement,
contract, commitment or arrangement to do any of the foregoing, or to authorize,
recommend, propose or announce an intention to do any of the foregoing; and
(r) Neither AOL nor ANS nor any ANS Entity will act, or fail or omit to
act, so as to cause any Material Adverse Change.
5.2 Indemnification.
(a) Indemnification by AOL. AOL hereby agrees to indemnify, defend and hold
harmless WorldCom and the WorldCom Entities and, after the Closing Date, ANS and
the ANS Entities, each of their respective designees, successors-in-interest and
assigns, and each of their respective past and current directors, officers,
employees, consultants, representatives and agents (the "WorldCom Indemnified
Parties"), from and against any and all Losses and Expenses to the extent such
Losses and Expenses are based on, arise out of or relate to, directly or
indirectly (i) the conduct of the business and affairs of AOL or any claim,
action or proceeding brought by or on behalf of Persons who are or were or
become holders of the capital stock of AOL or ANS at or prior to the Effective
Time, which claim, action or proceeding alleges that any action or failure to
act of the issuer of such capital stock, any Affiliate of such issuer or any
director, officer, employee or agent of such issuer or any Affiliate of such
issuer in connection with this Agreement or any of the transactions contemplated
hereby was wrongful, illegal or constituted a
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breach of duty; (ii) the ownership and operation of the CompuServe Assets and
the CompuServe Online Services Business from and after the Closing, and any
breach by AOL or any AOL Entity of its obligations under the Assignment and
Assumption Agreement; (iii) the CompuServe Liabilities; (iv) any breach of the
representations, warranties and covenants set forth in Sections 3.1, 3.2, 3.4,
3.14, 3.17, 5.6 or 5.10; or (v) any breach of any other representations,
warranties, covenants or agreements of AOL or ANS or any ANS Entity herein,
without regard to any qualification as to materiality stated herein (including
any reference to material, Material, Material Adverse Change or Material Adverse
Effect), if and to the extent that the aggregate of all Losses and Expenses
related to or arising out of all breaches (other than with respect to an
intentional breach of any such representation, warranty, covenant or agreement,
as to which no dollar threshold shall apply) described in this clause (v)
exceeds $25 million; or (vi) any action, claim or proceeding brought in
connection with the enforcement of the foregoing clauses.
(b) Indemnification by WorldCom. WorldCom and, from and after the
Closing, ANS hereby agree, jointly and severally, to indemnify, defend and hold
harmless AOL and each AOL Entity and each of their respective designees,
successors in interest and assigns and each of their respective past and current
directors, officers, employees, consultants, representatives and agents (the
"AOL Indemnified Parties") from and against any Losses and Expenses (or, in the
case of Losses and Expenses relating to any representation, warranty or covenant
incorporated herein pursuant to Section 4.8 hereof, 80.1% of such Losses and
Expenses) which are based on, arise out of or relate to, directly or indirectly,
(i) the conduct by WorldCom or the WorldCom Entities of the business of ANS, the
ANS Entities or the ANS Network Services Business after the Closing, or any
liability in respect of matters referred to in Schedule 8.4(b) to the CompuServe
Agreement; (ii) the conduct by WorldCom or the WorldCom Entities of CompuServe's
businesses other than the CompuServe Online Services Business after the Closing;
(iii) any breach of the representations, warranties and covenants set forth in
Sections 4.6 and 4.7 hereof or Sections 2.1, 2.2, 3.1, 3.2, 3.3, 3.4, 3.14,
3.17, 3.18, 4.1, 4.2, 4.3, 4.5, 4.6, 8.2, 8.3, 8.6, 8.7, 8.10 or 8.14 of the
CompuServe Agreement to the extent incorporated herein under Section 4.8; (iv)
any breach of any other representations, warranties, covenants or agreements of
WorldCom or any WorldCom Entity herein (other than those incorporated by
reference under Section 4.8), without regard to any qualification as to
materiality stated herein or in the CompuServe Agreement (including any
reference to material, Material, Material Adverse Change or Material Adverse
Effect in this Agreement or in the CompuServe Agreement), if and to the extent
that the aggregate of all Losses and Expenses related to or arising out of all
breaches (other than with respect to an intentional breach of any such
representation, warranty, covenant or agreement, as to which no dollar threshold
shall apply) described in this clause (iv) exceeds $10 million; (v) any breach
of any other representations, warranties, covenants or agreements of WorldCom or
any WorldCom Entity to the extent incorporated by reference herein under Section
4.8, without regard to any qualification as to materiality stated herein or in
the CompuServe Agreement (including any reference to material, Material,
Material Adverse Change or Material Adverse Effect in this Agreement or in the
CompuServe Agreement), if and to the extent that 80.1% of the aggregate of all
Losses and Expenses related to or arising out of all breaches (other than with
respect to an intentional breach of any such representation, warranty, covenant
or agreement, as to which no dollar threshold shall apply) described in this
clause (v) exceeds $10 million; or (vi) any action, claim or proceeding brought
in connection with the enforcement of the foregoing
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clauses; provided, that, in connection with any claim made hereunder in respect
of which WorldCom may have a corresponding claim against Block or its Affiliates
under the CompuServe Agreement, AOL shall cooperate with and assist WorldCom
(with WorldCom being responsible for the payment of any related out-of-pocket
expenses) reasonably incurred by AOL in connection with any such claims.
(c) Notification of Claims. For the purpose of this Section 5.2, the
term "Indemnifying Party" shall mean the party having an obligation hereunder to
indemnify the other party or parties pursuant to this Section 5.2, and the term
"Indemnified Party" shall mean the party having the right to be indemnified
pursuant to this Section 5.2. Whenever any claim shall arise for
indemnification under this Section 5.2, the Indemnified Party shall promptly
notify the Indemnifying Party in writing of such claim and, promptly after
becoming known, the facts constituting the basis for such claim (in reasonable
detail). Failure by the Indemnified Party to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of any liability hereunder unless and
only to the extent such failure prejudices the Indemnifying Party. The WorldCom
Indemnified Parties shall not be entitled to indemnification under Section
5.2(a)(iv) and the AOL Indemnified Parties shall not be entitled to
indemnification under Section 5.2(b)(iii) unless, prior to March 15, 1999, a
WorldCom Indemnified Party has notified AOL, or an AOL Indemnified Party has
notified WorldCom, as the case may be, in writing in reasonable detail of the
existence of any Losses and Expenses that may reasonably be expected to give
rise to any such indemnification obligation. Notwithstanding any provision
herein to the contrary, any claim for indemnification related to or arising out
of any ANS Tax matter set forth in Section 6.2(a) and Section 6.2(b) shall be
governed solely by Section 6.2 hereof, any claim for indemnification related to
or arising out of any CompuServe Tax matter incorporated based on Sections
9.2(a) and 9.2(b) to the extent incorporated by reference herein by Section 4.8
shall be governed by the same procedures as set forth in Section 9.2 of the
CompuServe Agreement, substituting WorldCom for Block and AOL for WorldCom.
(d) Indemnification Procedures.
(i) After the giving of notice by an Indemnified Party as required by
paragraph (c) of any claim or the commencement of any action by a Person or
Governmental Entity who is not a party to this Agreement or an Affiliate of
such a party (a "Third-Party Claim"), if the Indemnifying Party undertakes
to defend any such claim, it shall be required to take control of the
defense and investigation with respect to such claim and to employ and
engage reputable attorneys of its own choice reasonably acceptable to the
Indemnified Party to handle and defend the same, at the Indemnifying
Party's cost, risk and expense, upon written notice to the Indemnified
Party of such election, which notice acknowledges the Indemnifying Party's
obligation to provide indemnification hereunder. The Indemnifying Party
shall not settle any Third-Party Claim that is the subject of
indemnification without the written consent of the Indemnified Party, which
consent shall not be unreasonably withheld or delayed. The Indemnified
Party shall cooperate in all reasonable respects with the Indemnifying
Party and its attorneys in the investigation, trial and defense of any
lawsuit or action with respect to such claim and any appeal arising
therefrom (including the filing in the Indemnified
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Party's name of appropriate crossclaims and counterclaims). In connection
with any Third-Party Claim, each Indemnified Party shall use reasonable
efforts to make available to the Indemnifying Party upon written request
and at reasonable times, its and its subsidiaries' officers, directors,
employees and agents to act as witnesses to the extent that such persons
may reasonably be required to be available in connection with any claim
under this Section 5.2. The Indemnified Party may, at its own cost,
participate in any investigation, trial and defense of such lawsuit or
action controlled by the Indemnifying Party and any appeal arising
therefrom. If there are one or more legal defenses available to the
Indemnified Party that conflict with those available to the Indemnifying
Party, the Indemnified Party shall have the right, at the expense of the
Indemnifying Party, to assume the defense of the lawsuit or action;
provided, however, that the Indemnified Party may not settle such lawsuit
or action without the consent of the Indemnifying Party, which consent
shall not be unreasonably withheld or delayed. Notwithstanding anything to
the contrary in this paragraph (d)(i), if a Third-Party Claim is for money
damages asserted in an amount not to exceed $1,000,000 and is principally
for non-monetary relief that would have a continuing Material Adverse
Effect on the Indemnified Party, then the Indemnified Party shall be
entitled to take control of the defense and investigation with respect to
such claim and to employ and engage reputable attorneys of its own choice
reasonably acceptable to the Indemnifying Party to handle and defend the
same, at the Indemnifying Party's cost, risk and expense, upon written
notice to the Indemnifying Party of such election.
(ii) If, within a reasonable time following receipt of a notice
of a Third-Party Claim pursuant to paragraph (d), the Indemnifying Party
does not undertake to defend any such claim, the Indemnified Party may, but
shall have no obligation to, contest at the expense of the Indemnifying
Party to the extent provided in this Section 5.2 any lawsuit or action with
respect to such claim and the Indemnifying Party shall be bound by the
result obtained with respect thereto by the Indemnified Party (including
the settlement thereof without the consent of the Indemnifying Party).
(iii) Any claim of indemnification for Losses and Expenses which
does not result from a Third-Party Claim shall be asserted by written
notice given by the party claiming a right of indemnification
("Indemnitee") to the party from whom indemnification is sought
("Indemnitor") specifying in reasonable detail the nature and basis for the
claim and the Losses and Expenses incurred. Such Indemnitor shall have a
period of 30 days after the receipt of such notice within which to respond
thereto. If the Indemnitor does not respond within such 30-day period,
such Indemnitor shall be deemed to have refused to accept responsibility to
make payment. If such Indemnitor does not respond within such 30-day
period or rejects such claim in whole or in part, the Indemnitee shall be
free to pursue such remedies as may be available to such party, under
applicable law or under this Agreement.
(iv) If the amount of any Losses and Expenses shall, at any time
subsequent to the payment required by this Agreement, be reduced by
recovery, settlement, insurance
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proceeds or otherwise, the amount of such reduction, less any expenses
incurred in connection therewith, shall promptly be repaid by the
Indemnitee to the Indemnitor.
(e) Tax-Related Adjustment. An indemnity payment otherwise due and payable
hereunder (i) shall be decreased (but not below zero) to the extent of any net
actual reduction in federal income Tax liability that is actually realized by
the Indemnified Party at the time of its payment of an indemnifiable loss and
(ii) shall be increased to indemnify the Indemnified Party for any additional
federal income Taxes payable by the Indemnified Party by reason of the receipt
or accrual of such indemnity payment.
5.3 No Contribution. AOL, for itself and on behalf of the AOL Entities,
waives, and acknowledges and agrees that it and they will not have and will not
exercise or assert (or attempt to exercise or assert), any right of
contribution, right of subrogation, right of indemnity or other similar right or
remedy against ANS and the ANS Entities with respect to any action or failure to
act by any AOL Entity, including ANS and the ANS Entities, occurring prior to
the Effective Time in connection with any actual or alleged breach of any
representation, warranty, covenant or other obligation or agreement set forth in
this Agreement or any Losses or Expenses referred to in Section 5.2 or Section
6.2.
5.4 Access to Information. Subject to the provisions of the Confidentiality
Agreement, between the date hereof and the Closing Date, each of AOL and
WorldCom and their respective Entities shall (i) give to each such other party
and its counsel, accountants and other representatives reasonable access, at
reasonable times and after reasonable notice, to all the properties, documents,
contracts, personnel files (subject to applicable law) and other records of such
party reasonably related to the transactions contemplated hereby; (ii) furnish
the other party with copies of such documents and with such information with
respect to the affairs of such party as the other party may from time to time
reasonably request; and (iii) shall disclose and make available to each such
party and its representatives all books, contracts, accounts, personnel records,
letters of intent, papers, records, communications with regulatory authorities
and other documents relating to the business and operations of such party, to
the extent appropriate to AOL's and WorldCom's respective interests in the
transactions contemplated hereby. Nothing contained in this Section 5.4 shall be
deemed to create any duty or responsibility on the part of either party to
investigate or evaluate the value, validity or enforceability of any contract,
lease or other asset included in the Assets of the other party. With respect to
matters as to which any party has made express representations or warranties
herein, the parties shall be entitled to rely upon such express representations
and warranties without regard to any investigations made by such parties. None
of the parties hereto shall have any liability to any other party hereto
resulting from the sharing with such other party of any information obtained in
the course of the due diligence review by the parties relating to CompuServe,
the CompuServe Entities or the CompuServe Assets, or resulting from any
inaccuracy in any such information.
5.5 Confidentiality. AOL and WorldCom acknowledge and confirm that they
have entered into a letter agreement dated August 14, 1997 by and among AOL,
WorldCom and CompuServe (the "Confidentiality Agreement") and that the
Confidentiality Agreement shall remain in full force and effect in accordance
with its terms, notwithstanding AOL's and
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WorldCom's entering into this Agreement and whether or not the transactions
contemplated by this Agreement are consummated or terminated.
5.6 HSR Act Compliance, Etc.
(a) AOL and WorldCom shall promptly make their respective filings, and
shall thereafter use their best efforts to promptly make any required
submissions, under the HSR Act with respect to the transactions contemplated
hereby. AOL and WorldCom shall use their respective reasonable efforts to
promptly make all other required submissions with respect to all other permits,
authorizations, consents and approvals from third parties and Governmental
Entities necessary to consummate the transactions contemplated by this
Agreement.
(b) AOL and WorldCom also agree to take any and all of the following
actions to the extent necessary to obtain the approval of any Governmental
Entity with jurisdiction over the enforcement of any applicable laws regarding
the transactions contemplated by this Agreement: entering into negotiations;
providing information; substantially complying with any second request for
information pursuant to the HSR Act or any similar foreign antitrust law; and
making proposals. The parties hereto will consult, consistent with their
respective legal obligations, and cooperate with each other, and consider in
good faith the views of each other, in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and proposals
made or submitted by or on behalf of any party hereto in connection with
proceedings under or relating to the HSR Act or any other federal, state or
foreign antitrust or fair trade law.
5.7 Public Disclosures. AOL and WorldCom shall consult with each other
before issuing any press release or otherwise making any public statement with
respect to the transactions contemplated by this Agreement, and shall not issue
any such press release or make any such public statement prior to such
consultation except as may be required by applicable law or requirements of the
Exchange Act, NASDAQ or any national securities exchange as advised by counsel,
in which case the parties shall use their reasonable efforts to consult with
each other prior to issuing such a release or making such a statement. WorldCom
and AOL each shall issue a press release and may issue a mutually acceptable
joint press release, promptly upon execution and delivery of this Agreement.
5.8 Resignation of Directors and Officers. At or prior to the Closing, ANS
shall deliver to WorldCom if and as requested by WorldCom evidence satisfactory
to WorldCom of the resignation of the directors and officers, solely in their
capacities as such, of ANS and any ANS Entity, such resignations to be effective
at the Closing.
5.9 Notification of Certain Matters. AOL and ANS shall give prompt notice
to WorldCom, and WorldCom shall give prompt notice to AOL and ANS, of (a) the
occurrence, or non-occurrence of any event the occurrence or non-occurrence of
which would or could reasonably be expected to cause any representation or
warranty respectively made by them and contained in this Agreement to be untrue
or inaccurate at or prior to the Closing, as the case may be, and (b) any
failure of AOL, ANS or WorldCom, as the case may be, to comply with or satisfy
any covenant, agreement or condition to be complied with or satisfied by it
hereunder; provided,
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however, that the delivery of any notice pursuant to this Section 5.9 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
5.10 No Solicitation.
(a) Neither AOL nor ANS shall, nor shall AOL permit any AOL Entity or
authorize or permit any officer, director or employee, investment banker,
attorney, agent or other advisor or representative of any of them to (i)
initiate, solicit, or encourage, directly or indirectly, the submission of, any
ANS Competitive Proposal, or (ii) participate in any discussions or negotiations
regarding, or furnish to any person or entity any information with respect to,
or take any other action to facilitate knowingly the making of any proposal that
constitutes, or may reasonably be expected to lead to, an ANS Competitive
Proposal. For purposes of this Agreement, an "ANS Competitive Proposal" means
any inquiry, proposal or offer from any Person relating to any direct or
indirect acquisition or purchase of all or a significant part of the stock or
assets of ANS or any ANS Entity or of the ANS Network Services Business or any
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving ANS or any ANS Entity, other than
the transactions contemplated by this Agreement.
(b) AOL and ANS shall advise WorldCom of any request for information
from it or the receipt by it of any ANS Competitive Proposal within 24 hours of
such request or receipt, describing in reasonable detail the information
requested, the material terms and conditions of such request or proposal, and
the identity of the Person making any such request or proposal.
(c) Immediately upon the execution of this Agreement, AOL and ANS shall
cease any ongoing discussions or negotiations with any parties previously
conducted with respect to any actual or potential ANS Competitive Proposal and
request each Person which has heretofore executed a confidentiality agreement in
connection with its consideration of an ANS Competitive Proposal to return or
destroy all confidential information heretofore furnished to such Person by or
on behalf of AOL or ANS.
(d) WorldCom shall not, nor shall it permit any WorldCom Entity or
authorize or permit any officer, director or employee, investment banker,
attorney, agent or other advisor or representative of any of them to (i)
initiate, solicit, or encourage, directly or indirectly, the submission of, any
WorldCom Competitive Proposal, or (ii) participate in any discussions or
negotiations regarding, or furnish to any Person any information with respect
to, or take any other action to facilitate knowingly the making of any proposal
that constitutes, or may reasonably be expected to lead to, a WorldCom
Competitive Proposal. For purposes of this Agreement, a "WorldCom Competitive
Proposal" means any inquiry, proposal or offer from any Person relating to any
direct or indirect acquisition or purchase of all or a significant part of the
CompuServe Online Services Business, other than WorldCom's indirect acquisition
thereof pursuant to the CompuServe Agreement.
(e) WorldCom shall advise AOL of any request for information from it
or the receipt by it of any WorldCom Competitive Proposal within 24 hours of
such request or receipt,
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describing in reasonable detail the information requested, the material terms
and conditions of such request or proposal, and the identity of the Person
making any such request or proposal.
(f) Immediately upon the execution of this Agreement, WorldCom shall
cease any ongoing discussions or negotiations with any parties previously
conducted with respect to any actual or potential WorldCom Competitive Proposal
and request each Person which has heretofore executed a confidentiality
agreement in connection with its consideration of a WorldCom Competitive
Proposal to return or destroy all confidential information heretofore furnished
to such Person by or on behalf of WorldCom.
5.11 Other Actions. Unless such action or omission is required by
applicable law, neither AOL nor ANS nor WorldCom shall knowingly or
intentionally take any action or omit to take any action, if such action or
omission would, or reasonably might be expected to, result in any of the
representations and warranties set forth herein being or becoming untrue or
inaccurate or any of the conditions to the Closing set forth in this Agreement
not being satisfied, or would adversely affect the ability of AOL, ANS, or
WorldCom to obtain any consents or approvals required of it for the consummation
of the transactions contemplated by this Agreement, without imposition of a
condition or restriction which would have a Material Adverse Effect, or would,
or might reasonably be expected to, otherwise materially impair the ability of
AOL, ANS or WorldCom to consummate the transactions contemplated by this
Agreement, in accordance with the terms of this Agreement or materially delay
any such consummation. The foregoing shall not limit WorldCom's ability to
exercise its rights under the CompuServe Agreement.
5.12 Cooperation. Each of AOL, ANS and WorldCom shall use its best efforts
(i) to cooperate with each other in determining whether any filings are required
to be made or consents are required to be obtained in any jurisdiction prior to
the Closing, in connection with the consummation of the transactions
contemplated hereby and cooperate in making any such filings promptly and in
seeking to obtain any such consents in a timely manner, (ii) to take, or cause
to be taken, all actions necessary to comply promptly with all legal
requirements which may be imposed by agency or court order on such party (or any
subsidiaries or other Affiliates of such party) with respect to this Agreement,
and (iii) to take, or cause to be taken, all actions necessary to obtain (and to
cooperate with the other party to obtain) any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity and/or any other
public entity which is required to be obtained or made by such party or of the
ANS Entities or other Affiliates in connection with this Agreement and the
transactions contemplated hereby.
5.13 ANS and ANS Network Services Business Employees.
(a) All current employees of ANS and the ANS Entities ("ANS Employees") as
of the Closing shall be employed or offered employment, immediately after the
Effective Time, by ANS or another WorldCom Entity. At and after the Effective
Time, WorldCom shall honor, and cause ANS to honor, all provisions of all
employment or severance agreements or plans (excluding stock option or award
plans, which are separately addressed in Section 1.8) in effect for ANS
Employees (or any former employee of ANS or any ANS Entity that would have been
an ANS Employee had he or she been employed by ANS, an ANS Entity or AOL on the
Closing
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Date) as of the Closing. Schedule 5.13 is a complete list of all ANS Employees
and all such employment and severance agreements and plans existing as of the
date hereof (the "Schedule 5.13 Agreements"), true and complete copies of which
have been provided to WorldCom. Notwithstanding the foregoing, at any time after
the Closing, the employment of any ANS Employee may be terminated and any
Schedule 5.13 Agreement may be amended or terminated in accordance with its
terms.
(b) WorldCom, following the Closing Date, shall permit such ANS Employees
who are retained as employees of ANS or any ANS Entity or become WorldCom
employees thereafter and who were participating in AOL or ANS Benefit Plans
immediately prior to the Closing Date, to participate in corresponding employee
compensation and benefit plans, programs, policies and fringe benefits of
WorldCom in accordance with the eligibility criteria thereof (it being
understood that such plans, programs, policies and fringe benefits after the
Closing will be those of WorldCom immediately before the Closing, as such plans,
programs, policies or fringe benefits may thereafter be amended, terminated,
discontinued or supplemented). In so doing, WorldCom shall credit prior service
of ANS Employees with ANS or any AOL Entity, as applicable, for purposes of
determining the vesting, eligibility, waiting periods or qualification of or
participation of such employees under WorldCom's benefit programs and any
successor benefit programs to the extent that such prior service was recognized
under such ANS Benefit Plans (which shall include vacation pay plans but shall
not include stock option or award plans); such prior service credited under a
WorldCom benefit program shall include service with other entities to the extent
that such service is credited by ANS or any AOL Entity for purposes of any ANS
Benefit Plan similar to such WorldCom benefit plan. Notwithstanding the
preceding sentence, WorldCom may continue (or cause ANS to continue after the
Closing) the participation by ANS employees in one or more of the ANS Benefit
Plans, and WorldCom will be deemed to have satisfied its obligations under this
Section 5.13(b) with respect to the type of benefits provided under such ANS
Benefit Plan(s).
5.14 ANS Name. AOL acknowledges that the name "ANS," whether alone or in
combination with one or more other words, will be an asset solely of ANS or the
ANS Entities immediately following the Closing. Nothing in this Agreement shall
reserve a license or constitute a retention or transfer of rights in or with
respect to the word "ANS" to AOL or any other Person (except ANS and the ANS
Entities) after the Closing and neither AOL nor any such other Person acting by
or through any grant or right from AOL shall use or purport to use, license or
otherwise transfer the word "ANS" for any business purpose after the Closing.
Following the Closing, AOL agrees to take all actions and to execute all
documents and certificates as WorldCom may reasonably request to effectuate the
intention of this Section 5.14.
5.15 CompuServe Name. WorldCom and AOL are entering into an agreement
contemporaneously with the signing of this Agreement (the "Agreement to Form
Business Entity"), providing that both WorldCom and AOL shall form an entity to
hold, maintain, license and defend rights to the use of the CompuServe name,
with WorldCom and its Affiliates having rights of use in the network services
business, and with AOL and its Affiliates having rights of use in the online
services business.
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5.16 Noncompetition and Nonsolicitation Agreement. Subject to the
satisfaction of the conditions to its obligations in Article VII, below, AOL
shall execute and deliver to WorldCom at Closing, without further consideration,
an agreement in substantially the form attached hereto as Exhibit E (the
"Noncompetition and Nonsolicitation Agreement").
5.17 Key-Employee Nondisclosure and Nonsolicitation Agreements. AOL shall
use its best efforts to obtain, at or prior to the Closing, duly executed
nondisclosure and nonsolicitation agreements in substantially the form attached
as Exhibit F (the "Key Employee Agreements") (unless signed prior to the
execution of this Agreement) from the significant employees, officers and
directors of ANS and the ANS Entities designated by WorldCom in writing.
5.18 Board Seat. Promptly after the Effective Time, WorldCom shall cause
the current Chief Executive Officer of AOL, if he so requests within thirty days
after the date hereof, to be appointed to the Board of Directors of WorldCom.
5.19 Services Agreements. AOL and WorldCom shall execute and deliver to
each other at the Closing (a) a services agreement in substantially the form
attached hereto as Exhibit G (the "Transition Services Agreement") and (b)
network services agreements in substantially the forms attached hereto as
Exhibits H and I (the "Network Services Agreements").
5.20 Status of Title to the CompuServe Assets. WorldCom and the WorldCom
Entities shall not cause any lien, encumbrance or other defect in title to any
of the CompuServe Assets to be created prior to the transfer thereof to AOL or
its designee or designees at the Closing.
5.21 Delivery of ANS Shares. AOL shall deliver the ANS Shares, at the
Closing, to WorldCom (or to CompuServe if directed by WorldCom) free and clear
of all Liens and Other Encumbrances.
5.22 Consummation of Merger. WorldCom shall use all reasonable efforts to
cause the conditions to closing under the CompuServe Agreement to be satisfied,
including the exercise of proxy or option rights which may be granted to
WorldCom in connection with the CompuServe Agreement; provided, that this
Section shall not be deemed to require WorldCom (i) to waive any substantive
rights, or (ii) to incur any substantial expense or obligation not otherwise
required of it, or (iii) to cause the Merger or related transactions to proceed
on terms which do not preserve the overall business and economic objectives of
WorldCom as evidenced by this Agreement and the CompuServe Agreement. In
addition, WorldCom shall cause WAC to consummate the Merger if all conditions to
such Merger shall have been satisfied or waived in accordance with the terms of
the CompuServe Agreement.
5.23 Covenants Relating to CompuServe Online Services Business. WorldCom
shall cause Block , the Block Entities (as defined in the CompuServe Agreement),
CompuServe and the CompuServe Entities to perform their respective covenants and
agreements set forth in the CompuServe Agreement as in effect on this date, to
the extent that any of the foregoing may affect the CompuServe Assets, the
CompuServe Online Services Business or the rights of AOL hereunder.
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5.24 Exercise of Option; Negotiation Period. In the event that WorldCom
becomes entitled to exercise the option (the "Option") granted to it pursuant to
the Stockholders Agreement (as such term is defined in the CompuServe
Agreement), WorldCom and AOL shall negotiate with each other in good faith, for
so long as the Option remains exercisable and , if the Option is exercised by
WorldCom, for 180 days following such exercise (the "Negotiation Period") with
the goal of entering into agreements and arrangements and engaging in
transactions which would, as closely as would be commercially reasonable at that
time and in accordance with applicable law (and taking into account the changed
facts and circumstances as they exist at that time), effectuate the intent and
purposes of this Agreement and the transactions contemplated hereby. During the
Negotiation Period, AOL and WorldCom shall each comply with the provisions of
Sections 5.4 and 5.10.
ARTICLE VI
TAX MATTERS
6.1 Section 338 Election. (a) The parties intend that the acquisition of
ANS by WorldCom will constitute a qualified stock purchase within the meaning of
Section 338(d)(3) of the Code. At the request of WorldCom, AOL (as the common
parent of the selling consolidated group within the meaning of Section
338(h)(10) of the Code), WorldCom, and ANS shall jointly make timely and
irrevocable elections under Section 338(h)(10) of the Code (which elections
shall be made with respect to ANS and each of the eligible ANS Entities
requested by WorldCom) and, if permissible, similar elections under any
applicable state, local or foreign income tax laws (jointly, the "Elections").
To the extent WorldCom has requested an Election, AOL agrees to report the
transfer of ANS Shares (and the deemed sale of the shares of the affected ANS
Entities) under this Agreement consistent with such Election and agrees not to
take any action that could cause such Election to be invalid, and shall take no
position contrary thereto unless required to do so pursuant to a determination
(as defined in Section 1313(a) of the Code or any similar state, local or
foreign tax provision).
(b) To the extent WorldCom has requested an Election:
(i) To the extent possible, WorldCom, AOL, and ANS agree to execute at
the Closing any and all forms necessary to effectuate the Election
(including Internal Revenue Service Form 8023-A and any similar forms under
applicable state, local or foreign income tax laws (the "Section 338
Forms")). In the event, however, any Section 338 Forms are not executed at
the Closing, WorldCom, AOL and ANS agree to prepare and complete each such
Section 338 Form no later than ten (10) Business Days prior to the date
such Section 338 Form is required to be filed. AOL and WorldCom shall each
cause the Section 338 Forms to be duly executed by an authorized person for
AOL and WorldCom, in each case, and shall duly and timely file the Section
338 Forms in accordance with applicable tax laws and the terms of this
Agreement.
(ii) As soon as practicable after the Closing Date, WorldCom shall
deliver to AOL a written notice setting forth (with reasonable specificity)
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WorldCom's good faith calculation of (1) the Modified Aggregate Deemed
Sales Price (as defined below) and the allocation thereof among the assets
of ANS and of the affected ANS Entities in accordance with the principles
of Treasury Regulation (S) 1.338(h)(10)-1(f)(1)(ii) and (2) the adjusted
grossed-up basis of the assets of ANS and of the assets of the affected ANS
Entities pursuant to Treasury Regulation (S) 1.338(h)(10)-1(e)(5) (the
"Deemed Purchase Price") (collectively, "Buyer's Allocation"). Within 20
Business Days after receipt thereof, AOL shall deliver to WorldCom written
notice indicating whether AOL agrees or disagrees with Buyer's Allocation.
If AOL agrees with Buyer's Allocation or if AOL fails to deliver such
written notice within such 20 Business Days, Buyer's Allocation shall
constitute the "Agreed Allocation." If AOL provides timely written notice
to WorldCom of any disagreement with Buyer's Allocation, the Agreed
Allocation shall be determined through the Tax Settlement Procedure.
Except as determined to the contrary by the appropriate taxing authority
upon an audit of its (or its Affiliates') Tax Returns, each of AOL, ANS and
the affected ANS Entities shall file all Tax Returns consistent with the
Agreed Allocation. For purposes of this Section 6.1, the term "Modified
Aggregate Deemed Sales Price" shall mean the amount resulting from the
Elections, determined pursuant to Treasury Regulation (S) 1.338(h)(10)-1(f)
without regard to items described in Treasury Regulation (S) 1.338(h)(10)-
1(f)(4)(ii) (it being understood that AOL may take such items into account
in filing Tax Returns).
(c) For purposes of this Agreement, the "Tax Settlement Procedure" is as
follows:
Upon receipt by AOL or by WorldCom, as the case may be (the "Calculating
Party"), of notice from the other party (the "Disputing Party") of disagreement
with any Tax calculation or determination supplied by the Calculating Party, the
Calculating Party and the Disputing Party shall begin good faith negotiations to
resolve such disagreement. If the Calculating Party and the Disputing Party are
able to resolve such disagreement within ten (10) Business Days after the
Calculating Party's receipt of notice of disagreement (or any longer period
mutually agreed to by the parties), the relevant amount will become the amount
agreed upon by the Calculating Party and the Disputing Party. If the
Calculating Party and the Disputing Party are unable to resolve any disagreement
within ten (10) Business Days after the Calculating Party's receipt of notice of
disagreement, the Calculating Party and the Disputing Party shall jointly
request the Tax Settlement Auditor referred to below to resolve any issue in
dispute as soon as possible and shall cooperate with the Tax Settlement Auditor
to resolve such dispute. The Tax Settlement Auditor shall be the national
office of Price Waterhouse; provided that if, Price Waterhouse shall, at the
time, be serving as the independent public accountants of either WorldCom or AOL
or shall otherwise have a material relationship with either of them, then the
Tax Settlement Auditor shall be the national office of KPMG Peat Marwick, or, if
KPMG Peat Marwick shall have such a material relationship, the national office
of another accounting firm mutually satisfactory to WorldCom and AOL. The Tax
Settlement Auditor shall make a determination with respect to all disputed
issues, which determination shall be set forth in a written report delivered to
the Calculating Party and the Disputing Party. The Calculating Party and the
Disputing Party shall each pay one-half of the fees and expenses of the Tax
Settlement Auditor with respect to such determination.
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6.2 Tax Indemnification. (a) AOL and the AOL Entities (other than ANS and
the ANS Entities) jointly and severally shall be responsible for, shall pay or
cause to be paid, and shall indemnify and hold harmless WorldCom and any
WorldCom affiliates and, after the Closing, ANS and the ANS Entities and each of
their respective successors-in-interest from and against any and all Losses and
Expenses for or in respect of each of the following:
(i) Any and all Taxes with respect to any taxable period of ANS or any
of the ANS Entities (or any predecessor) ending on or before the Closing
Date (including any and all Taxes arising as a result of the Elections),
but excluding any transactions occurring after the Closing (other than the
Elections) which are not related to the transfer of ANS Shares and the
other transactions contemplated by this Agreement ("Excluded
Transactions");
(ii) Any and all Taxes resulting from ANS or any of the ANS Entities
(or any predecessor) having been (or ceasing to be) included in any
affiliated, consolidated, combined or unitary Tax Return that included ANS
or any of the ANS Entities (or any predecessor) for any taxable period (or
portion thereof) ending on or before the Closing Date (including any
liability for Taxes resulting from an acceleration of an "intercompany
transaction" within the meaning of Treasury Regulation (S) 1.1502-13(d),
any deferred income triggered by Treasury Regulation (S) 1.1502-14, and any
excess loss accounts taken into income under Treasury Regulation (S)
1.1502-19 or any analogous or similar provisions under state, local or
foreign law or any predecessor provision or regulation) that occurred on or
before the Closing Date (but excluding the Excluded Transactions);
(iii) Any and all Taxes of any member of an affiliated, consolidated,
combined or unitary group (other than ANS or any ANS Entity) of which ANS
or any ANS Entity (or any predecessor) is or was a member on or prior to
the Closing Date, by reason of the liability of ANS or any ANS Entity (i)
pursuant to Treasury Regulation (S) 1.1502-6(a) or any analogous or similar
state, local or foreign law or regulation, (ii) as a transferee or
successor, or (iii) by contract or otherwise (including under any Tax
sharing, Tax indemnity, Tax allocation or similar contracts (whether or not
written) to which ANS or any of the ANS Entities, any predecessor of ANS or
any of the ANS Entities, or any transferor to ANS or any of the ANS
Entities, is a party or is obligated thereunder;
(iv) Any and all Employment and Withholding Taxes;
(v) To the extent not previously paid, any and all real property Taxes
allocable to ANS or any ANS Entity (or any predecessor) pursuant to Section
6.2(c) hereof (excluding real property Taxes resulting from the Excluded
Transactions and any increase in real property Taxes arising from a
revaluation of the property as a result of the sale of ANS Shares or the
Elections);
(vi) Any and all Taxes allocable to AOL, ANS or any ANS Entity
pursuant to Section 6.2(c) hereof and not previously paid thereunder; and
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(vii) Any breach by AOL or any AOL Entity of any representation,
warranty or covenant contained in Section 3.10 or Section 6.2.
(b) WorldCom agrees to indemnify and hold harmless AOL and the other AOL
Entities from and against (and AOL and the other AOL Entities shall have no
liability under Section 6.2(a) on account of) any and all Losses and Expenses
for or in respect of any and all Taxes of ANS or any of the ANS Entities (or any
predecessor) that are not described in Section 6.2(a) (including Taxes resulting
from an Excluded Transaction), except for such Taxes arising from a breach of a
representation or warranty contained in Section 3.10, to the extent such
representation or warranty has not expired pursuant to Section 5.2.
(c) AOL and WorldCom shall, to the extent permitted by applicable law,
elect with the relevant taxing authority to close the taxable period of ANS and
the ANS Entities on the Closing Date. In any case where applicable law does not
permit ANS or any ANS Entity to close its taxable year on the Closing Date (and
in the case of Taxes described in Section 6.2(a)(v)), Taxes attributable to the
taxable period of ANS or a ANS Entity beginning on or before and ending after
the Closing Date shall be allocated (i) to AOL for the period up to and
including the Closing Date (excluding any Excluded Transaction and any increase
in real property Taxes arising from a revaluation of the property as a result of
the sale of ANS Shares or the Elections), and (ii) to WorldCom for the period
subsequent to the Closing Date (including any Excluded Transaction and any
increase in real property Taxes arising from a revaluation of the property as a
result of the sale of ANS Shares or the Elections). Any allocation required to
determine any Taxes attributable to any period beginning on or before and ending
after the Closing Date (including any Taxes resulting from a Tax audit or
administrative or court proceeding) shall be made by means of a closing of the
books and records of ANS and the ANS Entities as of the close of business on the
Closing Date, excluding any Excluded Transaction, and, to the extent not
susceptible to such allocation, by apportionment on the basis of elapsed days,
except that extraordinary items described in Treasury Regulation (S) 1.1502-
76(b)(2)(ii)(C) shall be allocated to the day that they are taken into account.
Real property Taxes (excluding those arising from any Excluded Transaction and
any increase in such Taxes arising from a revaluation of the property as a
result of the sale of ANS Shares or the Elections) shall be allocated on the
basis of elapsed days.
(d) (i) Promptly after receipt by WorldCom, ANS or any of the ANS
Entities of written notice of the assertion or commencement of any claim,
audit, examination, or other proposed change or adjustment by any taxing
authority concerning any Tax covered by Section 6.2(a) (each a "Tax
Claim"), WorldCom shall notify AOL. Such notice shall contain factual
information (to the extent known by WorldCom, ANS or any of the ANS
Entities) describing the asserted Tax Claim in reasonable detail and shall
include copies of any notice or other document received from any taxing
authority in respect of any such asserted Tax Claim. The failure of
WorldCom to give AOL prompt notice as provided herein shall not relieve AOL
of any of its obligations under Section 6.2, except to the extent that AOL
is materially prejudiced by such failure.
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(ii) AOL shall promptly notify WorldCom of the commencement of any
claim, audit, examination or other proposed change or adjustment by any
taxing authority which could reasonably be expected to affect the liability
of ANS or any of the ANS Entities for Taxes. Such notice shall contain
factual information (to the extent known by AOL or any AOL Entity)
describing the asserted Tax Claim in reasonable detail and shall include
copies of any notice or other document received from any taxing authority
in respect of any such asserted Tax Claim. The failure of AOL to give
WorldCom prompt notice as provided herein shall not relieve WorldCom of any
of its obligations under Section 6.2, except and only to the extent that
WorldCom or any of the WorldCom Entities (including ANS and any of the ANS
Entities) is materially prejudiced by such failure.
(iii) AOL shall have the sole right to represent ANS's or any of the
ANS Entities' interests in any Tax audit or administrative or court
proceeding relating to any Tax covered by Section 6.2(a) and to employ
counsel of its choice, provided that (A) with respect to any taxable period
referred to in Sections 6.2(a)(v) or (vi) hereof or ending after the
Closing Date or (B) if the results of such Tax audit or proceeding could
reasonably be expected to be material to WorldCom, ANS, or their Affiliates
for any taxable period including or ending after the Closing Date, then AOL
and WorldCom shall jointly control the defense and settlement of any such
Tax audit or proceeding and each party shall cooperate with the other party
at its own expense and there shall be no settlement or closing or other
agreement with respect thereto without the consent of the other party,
which consent shall not be unreasonably withheld provided; however, for a
Tax audit or proceeding with respect to any Seller Consolidated and
Combined Return, WorldCom shall only be entitled to participate actively
with respect to those issues as to which they have an interest and not
control jointly the settlement of the entire audit. AOL shall promptly
notify WorldCom if it decides not to control the defense or settlement of
any such Tax audit or administrative or court proceeding and WorldCom
thereupon shall be permitted to defend and settle such Tax audit or
proceeding.
(e) (i) AOL shall properly prepare or cause to be properly prepared, and
shall timely file or cause to be timely filed, (x) all Tax Returns which
include ANS or any ANS Entities required to be filed on or before the
Closing Date, and (y) all Tax Returns which include ANS or any ANS Entities
or their assets or operations for all taxable periods of ANS and of the ANS
Entities ending on or before the Closing Date (which Tax Returns shall
include ANS and the ANS Entities and the reportable items from the assets
or operations of ANS and the ANS Entities through and including the Closing
Date). Such Tax Returns (insofar as they relate to ANS or any of the ANS
Entities) shall be prepared in a manner consistent with past practices and
prior audit adjustments and AOL shall pay or cause to be paid all Taxes
shown as due on such Tax Returns or otherwise levied or assessed upon ANS
or any of the ANS Entities or any of their assets on or prior to the
Closing Date. Insofar as they relate to ANS and the ANS Entities, such Tax
Returns shall be provided to WorldCom for WorldCom's review and comment 20
Business Days prior to filing, and WorldCom shall be entitled to suggest to
AOL any reasonable changes to such Tax Returns, which suggestions may be
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rejected by AOL in its discretion. Any disagreement between the parties
will be resolved through the Tax Settlement Procedure. AOL shall,
subsequent to the Closing Date, provide written notice to AOL of its intent
to file any amended Tax Return or claim for refund with respect to any
taxable period ending on or prior to the Closing Date that could reasonably
be expected to be material to WorldCom, ANS, or their Affiliates for any
taxable period including or ending after the Closing Date, and AOL shall
not make such filing without the consent of WorldCom, which consent shall
not be unreasonably withheld.
(ii) Except as set forth in clause (i) above, WorldCom shall be
responsible for the filing and payment (subject to WorldCom's right to
indemnification to the extent provided in Section 6.2(a)) of all other Tax
Returns required to be filed after the Closing Date by or on behalf of ANS
and any of the ANS Entities, or with respect to their assets and
operations. WorldCom shall, subsequent to the Closing Date, provide written
notice to AOL of its intent to file any amended Tax Return that could
reasonably be expected to be material to AOL, and WorldCom shall not make
such filing without the consent of AOL, which consent shall not be
unreasonably withheld.
(iii) With respect to any Tax Return required to be filed by WorldCom
for a taxable period of ANS or any of the ANS Entities beginning on or
before the Closing Date and ending after the Closing Date, WorldCom shall
deliver, at least 20 Business Days prior to the due date for filing such
Tax Return (including extensions), to AOL a statement setting forth the
amount of Tax allocated to AOL pursuant to Section 6.2(c), (the "Tax
Statement") and copies of such Tax Returns, and WorldCom shall cause ANS
and the ANS Entities to pay all Taxes shown as due on such Tax Returns. AOL
shall have the right to review such Tax Return and the Tax Statement prior
to the filing of such Tax Return and to suggest to WorldCom any reasonable
changes to such Tax Returns. Any disagreement between the parties will be
resolved through the Tax Settlement Procedure. If the Tax Settlement
Auditor is unable to make a determination with respect to any disputed
issue within five (5) Business Days prior to the due date (including
extensions) for the filing of the Tax Return in question, then WorldCom may
file such Tax Return on the due date (including extensions) therefor
without such determination having been made and without AOL's consent.
Notwithstanding the filing of such Tax Return, the Tax Settlement Auditor
shall make a determination with respect to any disputed issue, and the
amount of Taxes that are allocated to AOL pursuant to Section 6.2(c) or
Section 6.2(a)(v), as the case may be, shall be as determined by the Tax
Settlement Auditor. The fees and expenses of the Tax Settlement Auditor
shall be paid one-half by WorldCom, on the one hand, and one-half by AOL,
on the other. Nothing in this Section 6.2(e)(iii) shall excuse AOL from
its indemnification obligations pursuant to Section 6.2 hereof if the
amount of Taxes as ultimately determined (on audit or otherwise), for the
periods covered by such Tax Returns and which are allocable to AOL pursuant
to Section 6.2(c) or Section 6.2(a)(v), as the case may be, exceeds the
amount determined under this Section 6.2(e)(iii).
(iv) AOL and WorldCom shall cooperate fully with each other and make
available to each other in a timely fashion such Tax data and other
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information as may be reasonably required by AOL or WorldCom for the
preparation and timely filing of any Tax Returns required to be prepared
and filed by AOL or WorldCom hereunder, or in connection with the
preparation or filing of any election, claim for refund, consent or
certification.
(f) AOL and WorldCom shall provide to each other, and WorldCom shall cause
ANS and the ANS Entities to provide to AOL, full access, at any reasonable time
and from time to time, at the business location at which the books and records
are maintained, after the Closing Date, to such Tax data of ANS and the ANS
Entities as AOL or WorldCom, as the case may be, may from time to time
reasonably request and shall furnish, and request the independent accountants
and legal counsel of AOL, WorldCom, ANS and the ANS Entities to furnish to AOL,
WorldCom, ANS or the ANS Entities as the case may be, such additional Tax and
other information and documents in the possession of such persons as AOL,
WorldCom, ANS or the ANS Entities may from time to time reasonably request.
(g) Any claim for indemnity hereunder may be made at any time prior to 60
Business Days after the expiration of the applicable Tax statute of limitations
with respect to the relevant taxable period (including all extensions obtained,
whether automatic or permissive).
(h) The party seeking indemnification or other payment pursuant to this
Section 6.2 shall give the other party written notice of claim for
indemnification or payment, which notice shall include a calculation of the
amount of the requested indemnity or other payment and shall furnish to the
other party copies of all books, records and other information reasonably
requested by the other party to the extent necessary to substantiate such claim
and verify the amount thereof. If reasonably necessary in order to make or
substantiate a claim (or to determine if a claim should be made), each party
shall be permitted access to the other party's books, records and other
information in connection therewith. The party requested to make any indemnity
or other payment pursuant to this Section 6.2 shall deliver to the party
requesting payment, within 20 Business Days after receiving both the foregoing
notice and all books, records and other information reasonably requested by it,
a detailed statement describing its objections (if any) thereto. Any such
objections will be resolved through the Tax Settlement Procedure.
(i) AOL shall be responsible for, shall pay or cause to be paid, and shall
indemnify and hold harmless WorldCom, ANS, and the ANS Entities, from and
against any Losses and Expenses arising after the Closing Date arising under any
Tax sharing, Tax indemnity, Tax allocation or similar contracts (whether or not
written) to which ANS or any of the ANS Entities, any predecessor of ANS or any
of the ANS Entities, or any transferor to ANS or any of the ANS Entities, is a
party or is obligated thereunder, in each case on or prior to the Closing Date.
None of WorldCom, ANS or any of the ANS Entities shall have any liability
pursuant to any such agreement after the Closing Date.
6.3 Tax Related Adjustments. (a) AOL and WorldCom agree that any indemnity
payment made under this Agreement shall be treated by the parties on their Tax
Returns as an adjustment to the Purchase Price. If, notwithstanding such
treatment by the parties, any indemnity payment is determined to be taxable to
(i) AOL (other than as an adjustment to the
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Purchase Price) or (ii) WorldCom, ANS or any ANS Entity, for federal income Tax
purposes by the IRS, the indemnifying party shall indemnify the indemnified
party for any additional federal income Taxes payable by the indemnified party
by reason of the receipt or accrual of such indemnity payment (including any
payments under this Section 6.3).
(b) An indemnity payment otherwise due and payable hereunder shall be
decreased (but not below zero) to the extent of any net actual reduction in
federal income Tax liability that is actually realized by the indemnified party
at the time of its payment of an indemnifiable loss.
(c) Except as provided in Section 6.3(d), WorldCom shall pay to AOL, any
refund of any Tax for which AOL is responsible under Section 6.2(a) other than
as a result of a carryback of any credit or deduction from a taxable year ending
after the Closing Date. WorldCom shall pay to AOL such refund (including
interest received thereon) (reduced by any actual Tax increase or actual Tax
detriment to WorldCom, ANS or any of the ANS Entities as a result of the receipt
thereof, but increased by any actual Tax benefit resulting from such payment)
promptly upon receipt thereof by the recipient thereof. WorldCom shall, if AOL
requests, cause the relevant entity to file for and obtain any refunds or
equivalent amounts to which AOL is entitled under this Section 6.3(c), and
WorldCom shall permit AOL to principally control the prosecution of any such
refund claim, provided, however, that WorldCom must consent to any such refund
claim, which consent may not be unreasonably withheld, and that any such refund
claim shall be at the sole expense of the AOL.
(d) AOL agrees that to the extent that ANS or any of the ANS Entities
realizes any Tax attribute after the Closing Date that either is required to be
or optionally may be carried back to a taxable period ending on or prior to the
Closing Date, AOL shall, at WorldCom's sole expense, permit such carryback,
shall cooperate in the filing of any required returns or claims for refund and
shall pay WorldCom any Tax refund received (including interest received thereon)
(reduced by any actual Tax increase or Tax detriment to AOL as a result of the
receipt thereof but incurred by any actual Tax benefit resulting from such
payment) or the amount of any reduction in Taxes so obtained by the Seller Group
(as hereinafter defined); provided, however, in the event that any Tax attribute
generated after the Closing Date by WorldCom, ANS or any ANS Entity or any
member of any affiliated group (or other group filing on a combined basis) of
which any thereof is a member (any of the foregoing being referred to herein as
a "Buyer Group Member") is carried back to a taxable year (or portion thereof)
of AOL's affiliated group (or other group filing on a combined basis of which
ANS or any of the ANS Entities is a member) (the "Seller Group") that ended on
or prior to the Closing Date and, as a result of such carryback, any Tax
attribute generated by the Seller Group (whether in the same year or in a prior
or subsequent year) is not capable of being carried back or forward to the same
extent it would have been had no such Buyer Group carryback occurred, such
refund to WorldCom shall be reduced by an amount sufficient to place the Seller
Group in the same position as it would have been in if no such carryback
occurred (except that AOL shall pay WorldCom (when and as actually realized) any
refund of Taxes or actual reduction of Taxes otherwise payable by the Seller
Group that is subsequently realized by the Seller Group as a result of the
Seller Group's use of any Tax attributes that would otherwise have been utilized
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by the Seller Group earlier had the Tax attribute of WorldCom, ANS or any ANS
Entity (or any other Buyer Group Member) not been so carried back.
6.4 Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration and other Taxes and fees (including any penalties and interest)
incurred in connection with the effectuation of the transfer of ANS Shares and
the ANS Network Assets to WorldCom shall be paid by AOL when due; and all
transfer, documentary, sales, use, stamp, registration and other Taxes and fees
(including any penalties and interest) incurred in connection with the
effectuation of the transfer of the CompuServe Assets to AOL or its designee or
designees shall be paid by WorldCom when due. The party obligated to pay such
Taxes and fees shall, at its own expense, file all necessary Tax Returns and
other documentation with respect to the applicable transfer, documentary, sales,
use, stamp, registration and other Taxes and fees. If required by applicable
law, WorldCom and AOL will, and will cause their affiliates to, join in the
execution of any such Tax Returns and other documentation prepared by the other.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Mutual Conditions. The respective obligations of each party to
consummate the Purchase and Sale and the other transactions contemplated hereby
shall be subject to the satisfaction, at or prior to the Closing Date, of the
following conditions:
(a) Any mandatory waiting period (and any extension thereof) applicable to
the consummation of the Purchase and Sale under the HSR Act shall have expired
or been terminated.
(b) Any mandatory waiting period (and any extension thereof) applicable to
the consummation of the Purchase and Sale under any foreign competition law or
similar law shall have expired or been terminated.
(c) The transactions contemplated by the CompuServe Agreement shall have
been consummated.
7.2 Conditions to Obligations of WorldCom. The obligation of WorldCom to
consummate the Purchase and Sale and the other transactions contemplated hereby
shall be subject to the satisfaction, at or prior to the Closing Date of the
following conditions (any of which may be waived prior to the Closing by
WorldCom):
(a) The representations and warranties of AOL and ANS set forth in
this Agreement that are qualified by Material Adverse Effect or otherwise as to
materiality shall be true and correct, and those that are not so qualified shall
be true and correct except for failures to be true and correct as would not have
a Material Adverse Effect with respect to ANS or, after the Closing Date, a
Material Adverse Effect with respect to WorldCom or ANS, as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing,
except to the
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extent that such representations and warranties are expressly related to a
specific earlier date (in which case such representations and warranties that
are qualified by a Material Adverse Effect shall be true and correct, and those
that are not so qualified shall be true and correct except for failures to be
true and correct as would not, individually or in the aggregate have a Material
Adverse Effect with respect to ANS or, after the Closing, a Material Adverse
Effect with respect to WorldCom or ANS, on and as of such earlier date). None of
the representations or warranties regarding CompuServe or any of the CompuServe
Entities contained in Article III, disregarding any qualifications regarding
materiality, Material, Material Adverse Change or Material Adverse Effect, shall
be untrue or incorrect, except for such untrue or incorrect representations or
warranties that, when taken as a whole, do not constitute a Material Adverse
Effect.
(b) Each of the covenants and agreements of AOL and ANS to be
performed or observed at or prior to the Closing Date pursuant to the terms
hereof shall have been duly performed or observed except where such failure
would not have a Material Adverse Effect with respect to ANS or would not
materially impair the ability of WorldCom to consummate the Purchase and Sale
and the other transactions contemplated hereby.
(c) No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, injunction or other order
whether temporary, preliminary or permanent which is in effect or which has or
would have the effect of making the transactions contemplated by this Agreement
illegal or restraining or prohibiting consummation of such transaction or
imposing material restrictions on the conduct of WorldCom's or any WorldCom
Entity's business following the consummation of such transactions.
(d) WorldCom shall have been furnished with certificates, executed by
duly authorized officers of AOL dated the Closing Date, certifying as to the
fulfillment of the conditions set forth in the immediately preceding clauses (a)
and (b).
(e) WorldCom shall have received opinions in form and substance
reasonably acceptable to WorldCom from Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C. as to the due organization, valid existence and good standing and
corporate authority of AOL; as to the due organization, valid existence and good
standing and corporate authority of ANS; and the due authorization of the
execution and delivery of this Agreement and the enforceability of this
Agreement against such of the aforesaid entities in accordance with its terms as
of the Closing Date.
(f) AOL shall have executed and delivered to WorldCom and ANS the
Assignment and Assumption Agreement, the Agreement to Form Business Entity, the
Noncompetition and Nonsolicitation Agreement, the Transition Services Agreement
and the Network Services Agreements and shall have delivered to WorldCom the Key
Employee Agreements as required by Section 5.17.
(g) Neither ANS nor any ANS Entity shall have suffered a Material Adverse
Change from the date of the Balance Sheet to the Closing Date.
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7.3 Conditions to Obligations of AOL and ANS. The respective obligations of
AOL and ANS to consummate the Purchase and Sale and the other transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Closing Date of the following conditions (any of which may be waived by AOL
prior to the Closing Date):
(a) The representations and warranties of WorldCom set forth in this
Agreement that are qualified by Material Adverse Effect or otherwise as to
materiality shall be true and correct, and those that are not so qualified shall
be true and correct except for failures to be true and correct as would not have
a Material Adverse Effect with respect to WorldCom, as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date, except to the extent that such representations and warranties are
expressly restricted to a specific earlier date (in which case such
representations and warranties that are qualified by a Material Adverse Effect
shall be true and correct, and those that are not so qualified shall be true and
correct except for failures to be true and correct as would not, individually or
in the aggregate have a Material Adverse Effect with respect to WorldCom on and
as of such earlier date). None of the representations or warranties regarding
WorldCom or any of the WorldCom Entities contained in Article IV, disregarding
any qualifications regarding materiality, Material, Material Adverse Change or
Material Adverse Effect, shall be untrue or incorrect, except for such untrue or
incorrect representations or warranties that, when taken as a whole, do not
constitute a Material Adverse Effect. Notwithstanding the foregoing, if there
should occur a Material Adverse Change with respect to the CompuServe Online
Services Business, that shall not limit or affect the obligations of AOL to
proceed with the transactions described herein, but the adjustment provision of
Section 1.11 shall be applicable.
(b) WorldCom shall have paid the Cash Consideration, adjusted as provided
in Section 1.3(b)(i), shall have executed and delivered to AOL the Assignment
and Assumption Agreement, shall have executed and delivered to AOL or its
designee or designees the Bill of Sale and other appropriate documents of
transfer relating to the CompuServe Assets, providing for the transfer to AOL or
such designee or designees of all of the CompuServe Assets, subject to the
CompuServe Liabilities, free and clear of any Liens or Other Encumbrances which
would have a Material Adverse Effect on the CompuServe Online Services Business;
provided, that if there shall have occurred a Material Adverse Change with
respect to the CompuServe Online Services Business, that shall not limit or
affect the obligations of AOL to proceed with the transactions described herein,
but the adjustment provision of Section 1.11 shall be applicable.
(c) Each of the covenants and agreements of WorldCom to be performed or
observed at or prior to the Closing Date pursuant to the terms hereof shall have
been duly performed or observed except where such failure would not have a
Material Adverse Effect with respect to ANS or would not materially impair the
ability of AOL or ANS to consummate the Purchase and Sale and the other
transactions contemplated hereby.
(d) No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, or injunction (other than a
temporary restraining order) which would have the effect of making the
transactions contemplated by this Agreement illegal or prohibiting consummation
of such transaction.
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(e) Each of AOL and ANS shall have been furnished with a certificate,
executed by duly authorized officers of WorldCom, dated the Closing Date,
certifying as to the fulfillment of the conditions set forth in clauses (a) and
(c) above.
(f) WorldCom shall have made arrangements for the release of the
obligations of AOL in respect of the lease obligations of ANS or ANS Entities
which are described on Schedule 7.3(f), or for indemnification of AOL by
WorldCom of any liability which may be incurred by AOL subsequent to the Closing
in respect of any such guarantee.
(g) Each of AOL and ANS shall have received opinions in form and
substance reasonably satisfactory to them from Bryan Cave LLP as to the due
incorporation, valid existence and corporate authority of WorldCom, the due
authorization of the execution and delivery of this Agreement by WorldCom, and
the enforceability of this Agreement against WorldCom in accordance with its
terms as of the Closing Date.
(h) WorldCom, ANS and/or any of the other WorldCom Entities shall have
executed and delivered to AOL the Agreement to Form Business Entity, the
Transition Services Agreement and the Network Services Agreements.
(i) If there shall be any Delayed Assets, WorldCom shall confirm to AOL at
the Closing its obligations in respect of such Delayed Assets as provided in
Section 1.4.
(j) The Merger shall have been consummated as provided in the CompuServe
Agreement, and there shall have been no amendments to the CompuServe Agreement
or waivers of any obligations of Block or any other parties thereunder, which
amendment or waiver would materially and adversely affect the interests of AOL
in respect of the CompuServe Assets, the CompuServe Online Services Business or
the transactions contemplated under this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) By mutual written consent of WorldCom and AOL;
(b) By either of WorldCom or AOL:
(i) If the Closing shall not have occurred on or before March 1, 1998,
unless the failure to do so is the result of a breach of this Agreement by
the party seeking to terminate this Agreement (which party shall be deemed
to include AOL and ANS, if AOL is seeking to terminate this Agreement or
(ii) If the CompuServe Agreement is terminated;
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(c) By WorldCom or AOL in the event the non-terminating party breaches
Section 5.10;
(d) By WorldCom, in the event of a breach by AOL or ANS of any
representation, warranty, covenant or other agreement contained in this
Agreement which (i) would result in the failure of a condition set forth Section
7.2(a) or (b) and (ii) cannot be or has not been cured by March 1, 1998 (an "AOL
Material Breach"), provided that there is not then a WorldCom Material Breach
(as hereinafter defined); or
(e) By AOL, in the event of a breach by WorldCom of any representation,
warranty, covenant or other agreement contained in this Agreement which (i)
would result in the failure of a condition set forth in Section 7.3(a) or (c)
and (ii) cannot be or has not been cured by March 1, 1998 (a "WorldCom Material
Breach"), provided that there is not then an AOL Material Breach.
8.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 8.1, this Agreement shall forthwith become void and be of no
further legal effect, without any liability or obligation on the part of any
party, other than the provisions of this Section 8.2 and Sections 5.2, 5.5,
5.24, 8.3, 8.4, 8.5, 9.2, 9.3, 9.4, 9.5, 9.8, 9.9, 9.10, 9.11 and 9.12 and
except that nothing herein shall relieve any party from liability for any
willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
8.3 Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of AOL, ANS and WorldCom by their respective duly
authorized officers.
8.4 Waiver. The parties hereto may waive any provision of this Agreement by
a writing signed by the party against whom the waiver is to be effective by a
duly authorized officer. No failure or delay by any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights
herein provided shall be cumulative.
8.5 Expenses.
(a) At the Closing, AOL shall pay (except as otherwise provided herein) all
costs and expenses incurred by it and by ANS and any AOL Entity (including the
fees, commissions and expenses of all investment bankers, financial advisors,
legal advisors, consultants and accountants) in connection with this Agreement
and the transactions contemplated hereby and in connection with any and all
discussions, negotiations and other activities concerning any previously
contemplated possible merger, acquisition or other similar transaction with
CompuServe or any party affiliated with CompuServe. Notwithstanding the
foregoing, if this Agreement is terminated (i) by WorldCom pursuant to Section
8.1(c) or Section 8.1(d) (if as a result of a willful breach by AOL or ANS), or
(ii) by AOL pursuant to Section 8.1(c) or Section 8.1(e) (if as a result of a
willful breach by WorldCom), then in the case of clause (i) AOL shall
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be obligated to pay, and shall forthwith pay, to WorldCom the amount of
$15,000,000 or in the case of clause (ii), WorldCom shall be obligated to pay,
and shall forthwith pay, to AOL the aggregate amount of $15,000,000.
(b) AOL, ANS and WorldCom acknowledge that the provisions for the
allocation of expenses in Section 8.5 are integral parts of the transactions
contemplated by this Agreement and that, without these provisions, they would
not have entered into this Agreement. Accordingly, if an expense reimbursement
or fee shall become due and payable by either party, and such party shall fail
to pay such expense or fee when due pursuant to Section 8.5, and, in order to
obtain such payment, suit is commenced which results in a judgment against such
party therefor, such party shall pay the other party's reasonable costs, fees
and expenses (including reasonable attorneys' fees) in connection with such
suit, together with interest computed on any such amounts determined to be due
pursuant to Section 8.5 (computed from the date upon which such amounts were due
and payable pursuant to Section 8.5 on the basis of the number of days elapsed)
and such costs (computed from the date incurred) at the prime or base rate of
interest announced from time to time by NationsBank of Texas, N.A. for its most
favored borrowers.
(c) If Block, Block Group or CompuServe pays to WorldCom the fee set forth
in Section 11.5(a) of the CompuServe Agreement, WorldCom shall pay 50 percent of
such amount to AOL within five (5) days of receipt thereof, as a further
reimbursement of expenses incurred by AOL in connection with the transactions
described hereunder.
ARTICLE IX
MISCELLANEOUS
9.1 Representations and Warranties; Survival. The representations and
warranties of any party other than ANS in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Closing and shall remain
in effect for the applicable periods of indemnity provided in Section 5.2; ANS's
representations and warranties, however, in this Agreement or in any instrument
delivered pursuant to this Agreement, shall expire upon the Closing.
9.2 Notices. Any notices or other communications required or desired to be
given hereunder shall be deemed to have been properly given if sent by hand
delivery, facsimile and overnight courier, registered or certified mail, return
receipt requested, postage prepaid, to the parties hereto at the following
addresses, or at such other address as such party may advise the others in
writing from time to time by like notice:
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If to WorldCom:
Charles T. Cannada
Senior Vice President--Corporate Development
WorldCom, Inc.
515 East Amite Street
Jackson, Mississippi 32901-2707
Facsimile: (601) 360-8615
with copies to:
Bryan Cave LLP
One Metropolitan Square, Suite 3600
St. Louis, Missouri 63102-2750
Attention: R. Randall Wang
Facsimile: (314) 259-2020
If to AOL or (prior to the Closing) ANS:
America Online, Inc.
Miles Gilburne
Senior Vice President, Corporate Development
America Online, Inc.
22000 AOL Way
Dulles, VA 20166
Telecopier: (703) 265-3995
with a copy to:
George Vradenburg III
Senior Vice President & General Counsel
America Online, Inc.
22000 AOL Way
Dulles, VA 20166
Facsimile: (703) 265-3995
All such notices or other communications shall be deemed to have been duly given
on the date of hand delivery or telecopy or facsimile, if receipt is confirmed,
or on the next Business Day following timely deposit of such communications with
overnight courier or on the third Business Day following the date of mailing, if
delivered by registered or certified mail.
9.3 Governing Law and Dispute Resolution. This Agreement shall be
interpreted, construed and enforced in accordance with the law of the State of
Delaware, applied without giving effect to any conflicts-of-law principles,
except to the extent that Georgia law is applicable to the internal affairs of
WorldCom. Any dispute relating to this Agreement or the
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transactions contemplated hereby shall be resolved in the state courts of
general jurisdiction, or the Chancery Court if it has subject matter
jurisdiction, of the State of Delaware or in the United States District Court
for the District of Delaware. Each party irrevocably submits to such courts'
exclusive jurisdiction and acknowledges that such courts are a convenient forum
and consents to service of process at the address for such party set forth in
Section 9.2.
9.4 Specific Performance. Each party acknowledges and agrees that, in the
event of an actual or threatened breach of any of the provisions of this
Agreement by such party, the harm to the others will be immediate, substantial
and irreparable and that monetary damages will be inadequate. Accordingly, each
party agrees that, in such an event, the others will be entitled to equitable
relief, including an injunction and an order of specific performance, in
addition to any and all other remedies at law or in equity.
9.5 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
9.6 Financial Information. Following the Closing, WorldCom will cooperate
with AOL in furnishing financial information to AOL relating to the CompuServe
Online Services Business for periods prior to the Closing (to the extent
WorldCom acquires or has access to such information through its acquisition of
CompuServe in the Merger), and shall, if so directed by AOL, request such
information from CompuServe and from Block, and enforce its rights to require
delivery of information under the CompuServe Agreement, to the extent such
information may be required by AOL to prepare financial information required to
be filed with the Securities and Exchange Commission.
9.7 Captions. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
9.8 Entire Agreement. This Agreement, including all exhibits and schedules
attached hereto, contains the entire agreement of the parties and supersedes any
and all prior or contemporaneous agreements between the parties except the
Confidentiality Agreements, written or oral, with respect to the subject matter
hereof and thereof.
9.9 Counterparts. This Agreement may be executed in several counterparts,
each of which, when so executed, shall be deemed to be an original, and such
counterparts shall, together, constitute and be one and the same instrument.
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9.10 Binding Effect; Assignability. This Agreement shall be binding on, and
shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, including, in the case of AOL, any affiliated entity to
which it may assign or transfer any portion of the CompuServe Assets, and
nothing in this Agreement, express or implied (other than the provisions of
Section 5.2, which provisions are intended to benefit the Indemnified Parties
and may be enforced by such beneficiaries), is intended to or shall confer upon
any Person any right, benefit or remedy of nature whatsoever under or by virtue
of this Agreement. No party may assign or delegate any right or obligation
hereunder without the prior written consent of the other parties. Any assignment
of rights or delegation of obligations not in compliance herewith shall be null
and void.
9.11 No Rule of Construction. The parties acknowledge that this Agreement
was initially prepared by WorldCom, and that all parties have read and
negotiated the language used in this Agreement. The parties agree that, because
all parties participated in negotiating and drafting this Agreement, no rule of
construction shall apply to this Agreement which construes ambiguous language in
favor of or against any party by reason of that party's role in drafting this
Agreement.
9.12 Schedules. The Schedules in this Agreement shall be arranged in
separate parts corresponding to the numbered and lettered sections, and the
disclosure in any numbered or lettered part shall be deemed to relate to and to
qualify only the particular representation or warranty set forth in the
corresponding numbered or lettered section, and not any other representation or
warranty (unless an express and specific reference to any other Schedule which
clearly identifies the particular item being referred is set forth therein).
ARTICLE X
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
indicated below:
"Adjustment Factor" has the meaning set forth in Section 1.9(a).
"Affiliate" means, with respect to any Person, at the time in question, any
other Person controlling, controlled by or under common control with such
Person. For purposes of this definition, "control" (including the terms
"controlling," "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities or otherwise.
"Agreed Allocation" has the meaning set forth in Section 6.1(b)(ii).
"Agreement" has the meaning set forth in the first paragraph of this
Purchase and Sale Agreement.
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"Agreement to Form Business Entity" has the meaning set forth in Section
5.15.
"ANS" has the meaning set forth in the first paragraph of this Agreement.
"ANS Benefit Plans" has the meaning set forth in Section 3.11(a).
"ANS Closing Date Balance Sheet" has the meaning set forth in Section 1.6.
"ANS Competitive Proposal" has the meaning set forth in Section 5.10(a).
"ANS Employees" has the meaning set forth in Section 5.13(a).
"ANS Entity" or "ANS Entities" means any corporation, limited liability
company, partnership, limited partnership or other organization whether
incorporated or unincorporated (i) of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by ANS and/or by any one or more of the ANS
Entities, (ii) of which ANS or any one or more of the ANS Entities is a general
partner or managing member or (iii) which ANS or any one or more of the ANS
Entities otherwise controls.
"ANS Excluded Assets" means the assets listed on Schedule 10.1, which are
used in or related to the ANS Network Services Business, but which are not owned
by ANS or an ANS Entity, are not required for the operation of the ANS Network
Services Business and which shall not be transferred to ANS under the provisions
of Section 2.1 (whether because they will be used by AOL or an AOL Entity in
providing services to ANS hereunder or otherwise). Such term shall also include
the assets referred to in clauses (x) and (y) of Section 2.1
"ANS Financial Statements" has meaning set forth in Section 3.5
"ANS Net Asset Consideration" has the meaning set forth in Section 1.6(a).
"ANS Network Assets" shall mean all Assets which are principally used in or
necessary for the ANS Network Services Business, including, without limitation,
the Assets listed on Schedule 10.2, but excluding the ANS Excluded Assets.
"ANS Network Services Business" means the direct or indirect provision by
ANS and the ANS Entities, through resale or otherwise, of public Internet
connectivity services and wide area data network and virtual private data
network services, and related products and services, including, without
limitation, Internet access, security products and services, web hosting and
electronic commerce.
"ANS Rights" has the meaning set forth in Section 3.13(a).
"ANS Shares" has the meaning set forth in the Recitals hereto.
"AOL" has the meaning set forth in the first paragraph of this Agreement.
"AOL Entity" or "AOL Entities" means any corporation, limited liability
company, partnership, limited partnership or other organization whether
incorporated or unincorporated (i) of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or
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controlled by AOL and/or by any one or more of the AOL Entities, (ii) of which
AOL or any one or more of the AOL Entities is a general partner or managing
member or (iii) which AOL or any one or more of the AOL Entities otherwise
controls.
"AOL Indemnified Parties" has the meaning set forth in Section 5.2(a).
"AOL Material Breach" has the meaning set forth in Section 8.1(d).
"AOL Unvested Stock Options" has the meaning set forth in Section 1.9(a).
"Assets" means any and all assets and properties, tangible or intangible,
including, without limitation, the following: (i) certificates of deposit,
bankers' acceptances, stock, debentures, evidences of indebtedness, certificates
of interest or participation in profit-sharing agreements, collateral-trust
certificates, preorganization certificates, investment contracts, voting-trust
certificates; (ii) software, trade secrets, confidential information, registered
and unregistered patents and trademarks, service marks, service names, trade
styles and trade names and associated goodwill; statutory, common law and
registered copyrights; applications for any of the foregoing, rights to use any
of the foregoing and other rights in, to and under any of the foregoing; (iii)
rights under Contracts and permits; (iv) real estate and buildings and other
improvements thereon and timber and mineral rights of every kind; (v) leasehold
improvements, fixtures, trade fixtures, machinery, hardware, equipment
(including modems, transmission facilities and transportation and office
equipment), tools, dies and furniture; (vi) office supplies, production
supplies, spare parts, other miscellaneous supplies and other tangible property
of any kind; (vii) raw materials, work-in-process, finished goods, consigned
goods and other inventories; (viii) prepayments or prepaid expenses; (ix)
claims, causes of action, choses in action, rights of recovery and rights of
set-off of any kind; (x) the right to receive mail and other communications;
(xi) lists of advertisers, records pertaining to advertisers and accounts, lists
and records pertaining to customers, suppliers and agents, and books, ledgers,
files and business records of every kind; (xii) advertising materials and other
recorded, printed or written materials; (xiii) goodwill as a going concern and
other intangible properties; (xiv) personnel records and employee contracts,
including any rights thereunder to restrict an employee from competing in
certain respects; and (xv) licenses and authorizations issued by any
Governmental Entity.
"Assignment and Assumption Agreement" has the meaning set forth in Section
1.3(b)(iii).
"Arbiter" has the meaning set forth in Section 1.5(b).
"Average Trading Price" means, in respect of any shares, the average of
the daily closing prices of the shares of the same class, in its principal
trading market as reported in The Wall Street Journal, Eastern Edition, or if
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not reported thereby, The New York Times, for the twenty consecutive full
------------------
trading days ending on the second full trading day immediately preceding the
Closing Date.
"Balance Sheet" has the meaning set forth in Section 3.5.
"Bill of Sale" has the meaning set forth in Section 1.3(b)(ii).
"Block" means H&R Block, Inc., a Missouri corporation.
"Block Group" means H&R Block Group, Inc., a wholly-owned subsidiary of
Block.
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"Budget" has the meaning set forth in Section 5.1(b).
"Business Day" means a day other than a Saturday, Sunday or a day on which
the banks in New York City are authorized or obligated by law or executive order
to close.
"Buyer's Allocation" has the meaning set forth in Section 6.1(b)(ii).
"Buyer Group Member" has the meaning set forth in Section 6.3(d).
"Calculating Party" has the meaning set forth in Section 6.1(c).
"Cash Consideration" has the meaning set forth in Section 1.3(b)(i).
"Closing" has the meaning set forth in Section 1.2.
"Closing Date" has the meaning set forth in Section 1.2.
"COLS Closing Date Balance Sheet" has the meaning set forth in Section
1.5(a).
"Code" means the Internal Revenue Code of 1986, as amended (including any
successor statute), and the rules and regulations promulgated thereunder.
"Confidentiality Agreement" has the meaning set forth in Section 5.5.
"Contract" means any written or oral contract, agreement, license, lease,
indenture or evidence of indebtedness.
"CompuServe" has the meaning set forth in the recitals hereto.
"CompuServe Agreement" has the meaning set forth in the recitals hereto.
"CompuServe Assets" means all of the Assets principally used in or
necessary for the conduct of the CompuServe Online Services Business, or which
will be required by AOL in its operation of the CompuServe Online Services
Business, excluding the CompuServe Excluded Assets. In event of uncertainty as
to whether any particular Asset constitutes part of the CompuServe Assets,
determinations shall be made in a manner consistent with the allocations
reflected in the Pro Forma Balance Sheet.
"CompuServe Entity" or "CompuServe Entities" means any corporation, limited
liability company, partnership, limited partnership or other organization
whether incorporated or unincorporated (i) of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by CompuServe and/or by any one or more of the
CompuServe Entities, (ii) of which CompuServe or any one or more of the
CompuServe Entities is the general partner or managing member or (iii) which
CompuServe or any one or more of the CompuServe Entities otherwise controls.
"CompuServe Excluded Assets" means assets related to the CompuServe Online
Services Business which are, pursuant to the terms of this Agreement, not to be
transferred to AOL or its designee(s) hereunder, including, without limitation,
the Assets listed on Schedule 10.5.
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"CompuServe Liabilities" means all of the Liabilities arising out of,
relating to or resulting from the ownership, use or possession of the CompuServe
Assets or the operation of the CompuServe Online Services Business, whether
arising prior to or after the Closing Date, including, without limitation, (a)
those set forth on Schedule 10.4(a), (b) obligations to employees of the
CompuServe Online Services Business, including severance and other benefits on
terms no less favorable than the existing CompuServe severance and benefit plans
(subject to the provisions of Section 1.7) and (c) legal and administrative
proceedings relating to the CompuServe Online Services Business, but excluding
Excluded Liabilities.
"CompuServe Net Asset Consideration" has the meaning set forth in Section
1.5(a).
"CompuServe-Ohio" has the meaning set forth in the recitals hereto.
"CompuServe Online Services Business" means the U.S., European and other
international online services businesses of CompuServe, as well as Sprynet.
"Deemed Purchase Price" has the meaning set forth in Section 6.1(b)(ii).
"Delayed Asset" has the meaning set forth in Section 1.4(a).
"Delayed Liability" has the meaning set forth in Section 1.4(a).
"Disputing Party" has the meaning set forth in Section 6.1(c).
"Elections" has the meaning set forth in Section 6.1(a).
"Effective Time" has the meaning set forth in Section 1.2.
"Employment and Withholding Taxes" means all employment, payroll and
withholding Taxes payable with respect to salaries, wages, commissions, other
compensation or other payments actually or constructively made by ANS or any AOL
Entity on or before the Closing Date, except to the extent such Taxes have been
withheld on or prior to the Closing Date and are required to be paid to the
appropriate taxing authority after the Closing Date.
"Environmental Laws" means any federal, state or local, domestic or foreign
statute, regulation, rule or ordinance, and any judicial or administrative
interpretation thereof, regulating the use, generation, handling, storage,
transportation, discharge, emission, spillage or other release of Hazardous
Substances or relating to the protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Liabilities" shall mean all Liabilities arising out of, relating
to or resulting from the ownership, use or possession of the CompuServe Assets
or the operation of the CompuServe Online Business prior to the Closing Date,
including but not limited to those Liabilities described on Schedule 10.6.
"Excluded Transactions" has the meaning set forth in Section 6.2(a)(i).
"Financial Statements" has the meaning set forth in Section 3.5.
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"GAAP" means United States generally accepted accounting principles and its
foreign equivalents.
"Governmental Authorization" means any (a) permit, license, certificate,
franchise, permission, clearance, registration, qualification or authorization
issued, granted, given or otherwise made available by or under the authority of
any Governmental Entity or pursuant to any legal requirement; or (b) right under
any Contract with any Governmental Entity.
"Government Contracts" has the meaning set forth in Section 3.8(e).
"Governmental Entity" means any federal, state or local government or any
court, administrative or regulatory agency or commission or other government
authority or agency, domestic or foreign.
"Hazardous Substances" means any hazardous substances as defined by 42
U.S.C. (S)9601(14), any pollutant or contaminant as defined by 42 U.S.C.
(S)9601(33) or any toxic substance, oil or hazardous materials or other
chemicals or substances regulated by any Environmental Laws which the applicable
party or any predecessor in interest has generated, transported or disposed of
has been found at any property owned or operated by such party.
"HSR Act" means the Hart-Scott Rodino Antitrust Improvements Act of 1976,
as amended, and regulations promulgated thereunder.
"Including" means, when following any general statement, term or matter,
"including but not limited to," "including, without limitation" or words of
similar import and shall not be construed to limit such statement, term or
matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language is used with reference to the word "including" or similar items or
matters, but rather shall be deemed to refer to all other items or matters that
could reasonably fall within the broadest possible scope of the general
statement, term or matter.
"Indemnified Party" or "Indemnified Parties" has the meaning set forth in
Section 5.2(c).
"Indemnifying Party" has the meaning set forth in Section 5.2(c).
"Indemnitee" has the meaning set forth in Section 5.2(d)(iii).
"Indemnitor" has the meaning set forth in Section 5.2(d)(iii).
"International Distribution Agreements" has the meaning set forth in
Section 3.8(c).
"IRS" means the Internal Revenue Service of the United States of America.
"Key Employee Agreements" has the meaning set forth in Section 5.17.
"knowledge" means, with respect to AOL (or an AOL Entity) or WorldCom (or a
WorldCom Entity), the actual knowledge of, or knowledge which could reasonably
be obtained through reasonably diligent investigation or inquiry by, any
director or executive officer of AOL or WorldCom, as the case may be, and, in
the case of ANS or AOL, shall also include the actual knowledge of, or knowledge
which could reasonably be obtained through reasonably diligent investigation or
inquiry by, ANS's Chief Executive Officer or Chief Financial Officer.
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"Liabilities" means all claims, debts, liabilities, royalties, license
fees, losses, costs, expenses, deficiencies, litigation proceedings, taxes,
levies, imposts, duties, deficiencies, assessments, attorneys' fees, charges,
allegations, demands, damages, judgments or obligations, whether absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown and whether or not the same would properly be
reflected on a balance sheet, including all costs and expenses relating thereto.
"Liens or Other Encumbrances" means any lien, pledge, mortgage, security
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any shareholder or other agreement or
encumbrance or any other rights of third parties.
"Losses and Expenses" means any and all damages, liabilities, obligations,
losses, deficiencies, demands, claims, penalties, assessments, judgments, fees,
actions, proceedings and suits of whatever kind and nature, and regardless of
whether or not related to a Third-Party Claim, a direct claim or otherwise, and
all costs and expenses related thereto (including reasonable attorney's fees and
disbursements).
"Material" means, (a) when used in connection with AOL, ANS or any ANS
Entity, material with respect to the business, operations, properties, assets,
liabilities, condition (financial or otherwise) or prospects of ANS and the ANS
Network Services Business, taken as a whole, (b) when used in connection with
WorldCom, material with respect to the business, operations, properties, assets,
liabilities, condition (financial or otherwise) or prospects of WorldCom and the
other WorldCom Entities, taken as a whole, and (c) when used in connection with
CompuServe or any of the CompuServe Entities, material with respect to the
business, operations, properties, assets, liabilities, condition (financial or
otherwise) or prospects of the CompuServe Online Services Business, taken as a
whole.
"Material Adverse Change" means (a) when used in connection with any party
hereto other than AOL, ANS or any AOL Entity, any change which is materially
adverse to the business, operations, properties, assets, liabilities, condition
(financial or otherwise) or prospects, of such party, and its related Entities,
taken as a whole, (b) when used in connection with AOL, ANS or any AOL Entity,
means any change which is, materially adverse to the business, operations,
properties, assets, liabilities or condition (financial or otherwise) of ANS and
the ANS Network Services Business, taken as a whole, and (c) when used in
connection with CompuServe or any of the CompuServe Entities, any change which
is material with respect to the business, operations, properties, assets,
liabilities, condition (financial or otherwise) or prospects of the CompuServe
Online Services Business, taken as a whole. Any determination whether there has
occurred a Material Adverse Change in respect of the CompuServe Online Services
Business shall be made in the context of the declining trends which have
occurred in such business prior to the date hereof, and which WorldCom and AOL
have taken into account in entering into this Agreement and the transactions
contemplated hereby. Without limiting the foregoing, for purposes of Section
1.11, a Material Adverse Change with respect to the CompuServe Online Services
Business shall also mean that (a) there shall have occurred a net loss in the
number of Total CSI plus Spry customers (as defined in the CompuServe Monthly
Key Metrics Report) during the period between the date hereof and the Closing
Date (the "Pre-Closing Period") which exceeds an average of 2,600 per day or (b)
a decrease in the Revenue Per Customer per month (as defined in the CompuServe
quarterly earnings announcement or
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quarterly report to shareholders) for the entire CompuServe Online Services
Business for the Pre-Closing Period exceeding $2.00 or (c) a failure in the
CompuServe Online Services Business host system resulting in a general inability
to provide online services for a period of at least 24 consecutive hours.
"Material Adverse Effect" means (a) when used in connection with any party
hereto other than AOL, ANS or any AOL Entity, any effect that has a material
adverse impact on the business, operations, properties, assets, liabilities,
condition (financial or otherwise) or prospects of such party, and its related
Entities, taken as a whole, and (b) when used in connection with AOL, ANS or any
AOL Entity, any effect that has a material adverse impact on the business,
operations, properties, assets, liabilities or financial condition (financial or
otherwise) of ANS and the ANS Network Services Business, taken as a whole and
(c) when used in connection with CompuServe or any of the CompuServe Entities,
any effect that has a material adverse impact on the business, operations,
properties, assets, liabilities, condition (financial or otherwise) or prospects
of the CompuServe Online Services Business, taken as a whole.
"Merger" has the meaning set forth in the recitals hereto.
"Modified Aggregate Deemed Sales Price" has the meaning set forth in
Section 6.1(b)(ii).
"NASDAQ" means the Nasdaq National Market.
"Network Services Agreements" has the meaning set forth in Section 5.19.
"Noncompetition and Nonsolicitation Agreement" has the meaning set forth in
Section 5.16.
"Notice of Dispute" has the meaning set forth in Section 1.5(b).
"Person" means and includes any natural person, corporation, limited
liability company, partnership, limited partnership, firm, joint venture,
association, joint-stock company, trust, business trust, unincorporated
organization, Governmental or other entity.
"Pro Forma Balance Sheet" means the pro-forma balance sheet of CompuServe-
Ohio as of June 30, 1997, which appears as Schedule 10.3(b).
"Purchase and Sale" has the meaning set forth in Section 1.1
"Related Party" means, with respect to any party, any of such party's or
its parent's or subsidiaries' directors, officers, 50% or greater shareholders,
employees or, except with respect to such party's primary relationship with such
other person or entity, a consultant or agent.
"Schedule 5.13 Agreements" has the meaning set forth in Section 5.13.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Section 338 Forms" has the meaning set forth in Section 6.1(b)(i).
"Seller Group" has the meaning set forth in Section 6.3(d).
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"Seller Consolidated and Combined Return" means any consolidated,
affiliated, combined or unitary income or franchise Tax Return of AOL or ANS
which includes ANS and/or any AOL Entity.
"Selling Entities" has the meaning set forth in the first paragraph of this
Agreement.
"Seller Group" has the meaning set forth in Section 6.3(d).
"Sprynet" has the meaning given in Section 1.5(a).
"Tax" and "Taxes" means all taxes, charges, fees, levies, tariffs, duties
or other similar assessments, including, (i) income, gross receipts, gains,
surtax, severance, payroll, production, ad valorem or value added, surtax,
premium, excise, real property, personal property, windfall profit, sales, use,
transfer, duty, licensing, withholding, employment, payroll, estimated and
franchise taxes imposed by the United States of America, any state, local, or
foreign government, or any subdivision, agency, or other similar Person of the
United States or any such government, and (ii) any interest, fines, penalties,
assessments, or additions to tax resulting from, attributable to or incurred in
connection with any Tax or any contest, dispute or refund thereto; whether or
not imposed on a consolidated combined or unitary basis or as a result of
transferee, joint or several liability.
"Tax Claim" has the meaning set forth in Section 6.2(d)(i).
"Tax Reform Act" means the Tax Reform Act of 1986.
"Tax Return" means any report, return, statement or other information
required to be supplied to a taxing authority in connection with Taxes.
"Tax Settlement Auditor" has the meaning set forth in Section 6.1(c).
"Tax Settlement Procedure" has the meaning set forth in Section 6.1(c).
"Tax Statement" has the meaning set forth in Section 6.2(e)(iii).
"1060 Forms" means forms or reports required to be filed pursuant to
Section 1060 of the Internal Revenue Code, the Treasury Regulations promulgated
thereunder or any provisions of state, local and foreign law.
"Third-Party Claim" has the meaning set forth in Section 5.2(d)(i).
"WAC" has the meaning set forth in the recitals hereto.
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"WorldCom" has the meaning set forth in the first paragraph of this
Agreement.
"WorldCom (ANS) Stock Options" has the meaning given in Section 1.9(b).
"WorldCom Competitive Proposal" has the meaning set forth in Section
5.10(d).
"WorldCom Entity" or "WorldCom Entities" means any corporation, limited
liability company, partnership, limited partnership or other organization
whether incorporated or unincorporated (i) of which at least a majority of the
securities or interests having by the terms thereof ordinary voting power to
elect at least a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by WorldCom and/or by any one or more of the
WorldCom Entities, (ii) of which WorldCom or any one or more of the WorldCom
Entities is the general partner or managing member or (iii) which WorldCom or
any one or more of the WorldCom Entities otherwise controls.
"WorldCom Indemnified Parties" has the meaning set forth in Section 5.2(a).
"WorldCom Material Breach" has the meaning set forth in Section 8.1(e).
"WorldCom Stock Options" has the meaning given in Section 1.9(a).
IN WITNESS WHEREOF, AOL, ANS and WorldCom have caused this Agreement to be
executed by their respective duly authorized officers, and have caused their
respective corporate seals to be hereunto affixed, all as of the day and year
first above written.
AMERICA ONLINE, INC.
By:
----------------------------------
Miles Gilburne
Senior Vice President
Corporate Development
ANS COMMUNICATIONS, INC.
By:
----------------------------------
Shiela A. Clark
Deputy General Counsel
WORLDCOM, INC.
By:
----------------------------------
John W. Sidgmore
Chief Operations Officer
66
