PURCHASE AND SALE AGREEMENT
By and Among
AMERICA ONLINE, INC.,
ANS COMMUNICATIONS, INC.
and
WORLDCOM, INC.
Dated as of
September 7, 1997
TABLE OF CONTENTS
ARTICLE I THE PURCHASE AND SALE
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 10
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 12
2.1 TRANSFER OF ASSETS 12
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 14
3.3 OWNERSHIP OF ANS ENTITIES' CAPITAL STOCK; INVESTMENTS 14
3.4 POWER AND AUTHORITY; NON-CONTRAVENTION; FILINGS AND
CONSENTS 14
3.5 FINANCIAL INFORMATION 16
3.6 SUBSEQUENT EVENTS 16
3.7 LEGAL PROCEEDINGS 17
3.8 CONTRACTS 18
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 25
3.16 INSURANCE 25
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 26
4.2 POWER AND AUTHORITY; NON-CONTRAVENTION; FILINGS AND
CONSENTS 26
4.3 LEGAL PROCEEDINGS 27
4.4 NO VOTE REQUIRED 27
4.5 INVESTMENT REPRESENTATION 27
4.6 COMPUSERVE AGREEMENT 27
4.7 TITLE TO COMPUSERVE ASSETS 28
4.8 REPRESENTATIONS RELATING TO COMPUSERVE ASSETS.] 28
4.9 COMPUSERVE POWER AND AUTHORITY; NON-CONTRAVENTION; FILING
AND CONSENTS 28
ARTICLE V COVENANTS 29
5.1 INTERIM CONDUCT OF ANS AND EACH ANS ENTITY AND THE ANS
NETWORK SERVICES BUSINESS 29
5.2 INDEMNIFICATION 32
5.3 NO CONTRIBUTION 35
5.4 ACCESS TO INFORMATION 36
5.5 CONFIDENTIALITY 36
5.6 HSR ACT COMPLIANCE, ETC. 36
5.7 PUBLIC DISCLOSURES 37
5.8 RESIGNATION OF DIRECTORS AND OFFICERS 37
5.9 NOTIFICATION OF CERTAIN MATTERS 37
5.10 NO SOLICITATION 37
5.11 OTHER ACTIONS 38
5.12 COOPERATION 39
5.13 ANS AND ANS NETWORK SERVICES BUSINESS EMPLOYEES 39
5.14 ANS NAME 40
5.15 COMPUSERVE NAME 40
5.16 NONCOMPETITION AND NONSOLICITATION AGREEMENT 40
5.17 KEY-EMPLOYEE NONDISCLOSURE AND NONSOLICITATION AGREEMENTS 40
5.18 BOARD SEAT 41
5.19 SERVICES AGREEMENTS 41
5.20 STATUS OF TITLE TO THE COMPUSERVE ASSETS 41
5.21 DELIVERY OF ANS SHARES 41
5.22 CONSUMMATION OF MERGER 41
5.23 COVENANTS RELATING TO COMPUSERVE ONLINE SERVICES BUSINESS 41
5.24 EXERCISE OF OPTION; NEGOTIATION PERIOD 41
ARTICLE VI TAX MATTERS 42
6.1 SECTION 338 ELECTION 42
6.2 TAX INDEMNIFICATION 43
6.3 TAX RELATED ADJUSTMENTS 48
6.4 TRANSFER TAXES 49
ARTICLE VII CONDITIONS TO CLOSING 50
7.1 MUTUAL CONDITIONS 50
7.2 CONDITIONS TO OBLIGATIONS OF WORLDCOM 50
7.3 CONDITIONS TO OBLIGATIONS OF AOL AND ANS 51
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 53
8.1 TERMINATION 53
8.2 EFFECT OF TERMINATION 54
8.3 AMENDMENT 54
8.4 WAIVER 54
8.5 EXPENSES 54
ARTICLE IX MISCELLANEOUS 55
9.1 REPRESENTATIONS AND WARRANTIES; SURVIVAL 55
9.2 NOTICES 55
9.3 GOVERNING LAW AND DISPUTE RESOLUTION 56
9.4 SPECIFIC PERFORMANCE 56
9.5 SEVERABILITY 57
9.6 FINANCIAL INFORMATION 57
9.7 CAPTIONS 57
9.8 ENTIRE AGREEMENT 57
9.9 COUNTERPARTS 57
9.10 BINDING EFFECT; ASSIGNABILITY 57
9.11 NO RULE OF CONSTRUCTION 58
9.12 SCHEDULES 58
ARTICLE X DEFINITIONS 58
EXHIBITS
EXHIBIT A FORM OF ▇▇▇▇ 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
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
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;
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 ▇▇▇▇▇ ▇▇▇▇
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 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 ▇▇▇▇ or bills of sale in substantially the form
attached hereto as Exhibit A (the "▇▇▇▇ 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 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"):
(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.
(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 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 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"), 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 1060(e).
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 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 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 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-
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 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.
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 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 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 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);
(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 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.
(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.
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 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 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 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 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 Consent. 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 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
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;
(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) 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 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 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 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
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 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 Officer. 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, 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,
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
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.
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.
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) 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 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 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 1.338(h)(10)-1(f) without
regard to items described in Treasury Regulation
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.
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 1.1502-13(d), any deferred
income triggered by Treasury Regulation 1.1502-14, and any
excess loss accounts taken into income under Treasury
Regulation 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 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
(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 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.
(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 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 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 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
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 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.
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 ▇▇▇▇ 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.
(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 ▇▇▇▇▇
▇▇▇▇ 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;
(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 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:
If to WorldCom:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice
President-Corporate Development
WorldCom, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: R. ▇▇▇▇▇▇▇ ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to AOL or (prior to the Closing) ANS:
America Online, Inc.
Miles Gilburne
Senior Vice President, Corporate Development
America Online, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇
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with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ III
Senior Vice President & General Counsel
America Online, Inc.
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Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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 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.
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.
"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 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 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.
"▇▇▇▇ 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.
"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.
"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.
"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. 9601(14), any pollutant or contaminant as
defined by 42 U.S.C. 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 ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇ 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.
"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 ▇▇▇▇ 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 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).
"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.
"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:/s/Miles Gilburne
Miles Gilburne
Senior Vice President
Corporate Development
ANS COMMUNICATIONS, INC.
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Deputy General Counsel
WORLDCOM, INC.
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Chief Operations Officer