EXHIBIT 10.1
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") dated as of September
7, 1997, by and among H&R BLOCK, INC., a Missouri corporation ("H&R Block"),
H&R BLOCK GROUP, INC., a Delaware corporation ("Block Group"), and WORLDCOM,
INC., a Georgia corporation ("WorldCom"),
WITNESSETH:
WHEREAS, H&R Block owns all of the issued and outstanding shares of
capital stock of Block Group;
WHEREAS, as of the date hereof, H&R Block beneficially owns and Block
Group directly owns approximately 80.13% of the shares of common stock, par
value $0.01 per share (the "Common Shares"), of CompuServe Corporation, a
Delaware corporation ("CompuServe") (all such CompuServe Common Shares which are
now owned by Block Group, together with all shares of capital stock of
CompuServe which are hereafter acquired by Block Group or any of its Affiliates,
are referred to herein as the "Shares");
WHEREAS, WorldCom, Walnut Acquisition Company, L.L.C., a Delaware
limited liability company which is wholly owned by WorldCom ("WAC"), CompuServe,
H&R Block and Block Group have entered into an Agreement and Plan of Merger
dated as of the date hereof (as amended from time to time, the "Merger
Agreement") (capitalized terms used but not otherwise defined in this Agreement
having the meanings assigned to such terms in the Merger Agreement), which
provides for the merger of WAC with and into CompuServe (the "Merger") in
accordance with the laws of the State of Delaware and the provisions of the
Merger Agreement; and
WHEREAS, the parties intend that WorldCom's acquisition of the Shares
shall constitute a qualified stock purchase within the meaning of Section 338
(d)(3) of the Code;
WHEREAS, as a condition to the willingness of WorldCom and WAC to
enter into the Merger Agreement and incur the obligations set forth therein,
WorldCom has required that H&R Block and Block Group agree, and in order to
induce WorldCom to enter into the Merger Agreement, H&R Block and Block Group
have agreed, to enter into this Agreement and undertake the obligations set out
herein.
NOW, THEREFORE, in consideration of the foregoing premises and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
VOTING OF SHARES AND APPOINTMENT AS PROXY
1.1. Voting Agreement. H&R Block and Block Group hereby agree that
during the term hereof, at any meeting of the stockholders of CompuServe,
however called, and in any action by consent of the stockholders of CompuServe,
Block Group shall vote, and H&R Block shall cause Block Group to vote, the
Shares: (A) in favor of the Merger, the Merger Agreement and this Agreement and
the transactions contemplated by the Merger Agreement and this Agreement, (B)
against any proposal for any recapitalization, merger (other than the Merger),
share exchange, exchange offer, tender offer, sale of assets or other business
combination between CompuServe or any CompuServe Entity and any person or entity
(other than WorldCom or WAC) or any liquidation, dissolution or any other action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of CompuServe, H&R Block or Block
Group under the Merger Agreement or this Agreement or which would result in any
of the conditions to the Merger Agreement or this Agreement not being fulfilled;
and (C) in favor of any other matter necessary for the transactions contemplated
hereby or the Merger Agreement with respect to which Block Group may be entitled
to vote.
1.2. No Disposition or Encumbrance of Shares. H&R Block and Block
Group, jointly and severally, hereby covenant and agree that, from the date
hereof until the termination of this Agreement, they shall not, and shall not
offer or agree to, directly or indirectly, sell, transfer, tender, assign,
hypothecate or otherwise dispose of, or create or permit to exist any
Encumbrance (as hereinafter defined) on, the Shares, or any interest in the
Shares, at any time prior to the expiration of the term of this Agreement.
1.3. Voting of Shares; Further Assurances.
(a) H&R Block and Block Group, by this Agreement, with respect
to the Shares, do hereby constitute and appoint WorldCom, or any nominee of
WorldCom, with full power of substitution, from the date hereof until the
termination of this Agreement, as its true and lawful attorney, agent and proxy
(its "Proxy"), for and in its name, place and stead, to vote the Shares in such
manner as it or its nominee shall in its sole discretion deem proper, and
otherwise act with respect to the Shares, at any meeting (whether annual or
special and whether or not an adjourned meeting) of CompuServe's stockholders,
including the right to sign its name (as stockholder) to any consent,
certificate or other document relating to CompuServe that the law of the State
of Delaware may permit or require, regardless of the subject matter of such vote
or other action:
(i) in favor of the Merger, the Merger Agreement and this
Agreement and the transactions contemplated by the Merger Agreement and this
Agreement;
(ii) against any proposal for any recapitalization, merger
(other than the Merger), share exchange, exchange offer, tender offer, sale of
assets or other business combination between CompuServe or any CompuServe Entity
and any person or
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entity (other than WorldCom or WAC) or any liquidation, dissolution or
any other action or agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or
agreement of CompuServe, H&R Block or Block Group under the Merger
Agreement or this Agreement or which could result in any of the
conditions to the Merger Agreement or this Agreement not being
fulfilled; and
(iii) in favor of any other matter necessary for
the transactions contemplated hereby or by the Merger Agreement with
respect to which Block Group may be entitled to vote.
(b) In addition, upon WorldCom's exercise of the Option in accordance
with the terms hereof, the power of attorney and proxy granted in Section 1.3(a)
shall automatically and without the necessity of any additional action, consent,
other writing or agreement on the part of WorldCom, H&R Block or Block Group be
expanded in scope to permit WorldCom or its nominee to act for Block Group as
its Proxy, for and in its name, place and stead, with full power of
substitution, to vote the Shares in such manner as it or its nominee shall in
its sole discretion deem proper, and otherwise act with respect to the Shares,
at any meeting and to exercise the full rights of the owner or holder of the
Shares, including the right to request or call and attend any and all meetings
(whether annual or special and whether or not an adjourned meeting) of
CompuServe's stockholders, including the right to sign its name (as stockholder)
to any consent, certificate or other document relating to CompuServe that the
law of the State of Delaware may permit or require, regardless of the subject
matter of such vote or other action .
(c) SUBJECT ONLY TO THE EXPIRATION OF THE TERM OF THIS AGREEMENT, THE
FOREGOING PROXY AND POWER OF ATTORNEY IS IRREVOCABLE, IS GRANTED IN
CONSIDERATION OF WORLDCOM AND WAC ENTERING INTO THE MERGER AGREEMENT AND THIS
AGREEMENT AND IS COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN
IRREVOCABLE POWER. This appointment shall revoke all prior powers of attorney
and proxies appointed by H&R Block or Block Group at any time with respect to
the Shares and no subsequent powers of attorney or proxies will be appointed by
H&R Block or Block Group, or be effective with respect thereto, during the term
of this Agreement.
(d) H&R Block and Block Group shall each perform such further acts and
execute such further documents and instruments as may reasonably be required to
vest in WorldCom the power to carry out and give effect to the provisions of
this Article I, including applying a legend reasonably satisfactory to WorldCom
promptly after the date hereof to the certificates evidencing the Shares
reflecting the provisions of this Agreement and, at the request of WorldCom, to
deliver such certificates to WorldCom to hold in custody.
ARTICLE II
GRANT OF OPTION
2.1 Grant of Option.
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(a) Subject to the terms and conditions hereof, H&R Block and Block
Group hereby grant to WorldCom an irrevocable option (the "Option") to purchase
(the "Purchase") all (but not less than all) of the Shares, whether before or
after any transfer of such Shares, for and in consideration of the payment of
the Purchase Price described below to Block Group. WorldCom shall not be under
any obligation to elect to purchase the Shares and may allow this Agreement to
terminate without effecting the purchase of Shares hereunder.
(b) The per Share price for each Share shall equal a fraction of a
share of WorldCom Common Stock equal to the Exchange Ratio (defined below),
subject to the payment of cash in lieu of any fractional share as provided in
paragraph (d) below (the aggregate of such shares of WorldCom Common Stock,
together with such cash payment in lieu of fractional shares, is referred to
herein as the "Purchase Price"). The "Exchange Ratio" shall be determined as
follows: (i) if the Average Trading Price of a WorldCom Common Share is greater
than or equal to $29.54, the Exchange Ratio shall equal 0.40625; (ii) if the
Average Trading Price of a WorldCom Common Share is greater than or equal to
$24.00 but less than $29.54, the Exchange Ratio shall equal a fraction (rounded
to the nearest hundred-thousandth) determined by dividing $12.00 by the Average
Trading Price of a WorldCom Common Share; and (iii) if the Average Trading Price
of a WorldCom Common Share is less than $24.00, the Exchange Ratio shall equal
0.5. The Exchange Ratio shall be subject to appropriate adjustment in the event
of a stock split, stock dividend or recapitalization after the date of this
Agreement applicable to shares of the WorldCom Common Stock or the CompuServe
Common Stock.
(c) In order to allow the transaction that would result from the
exercise of the Option to constitute a qualified stock purchase under Section
338 of the Code and not a tax-free reorganization, Block Group shall have the
right to elect to (1) reduce the aggregate Purchase Price otherwise payable to
Block Group hereunder by such number of shares of WorldCom Common Stock the
aggregate value of which, based on the Average Trading Price, is equal to
$1,100,000, subject to appropriate adjustment in the event of a stock split,
stock dividend or recapitalization after the date of this Agreement applicable
to shares of the WorldCom Common Stock and not reflected in the Average Trading
Price, and (2) in lieu of such shares, receive $1,000,000 in cash.
(d) No fractional shares of WorldCom Common Stock shall be issued
hereunder nor will any fractional share interest involved entitle the holder
thereof to vote, to receive dividends or to exercise any other rights of a
shareholder of WorldCom. In lieu thereof, if Block Group would otherwise be
entitled to a fractional share of WorldCom Common Stock pursuant to the
provisions hereof, it shall receive in lieu of such fractional share an amount
in cash equal to the value of such fractional share. The value of such
fractional share shall be the product of such fraction multiplied by the Average
Trading Price, subject to appropriate adjustment in the event of a stock split,
stock dividend or recapitalization after the date of this Agreement applicable
to shares of the WorldCom Common Stock and not reflected in the Average Trading
Price.
(e) For purposes of this Agreement, the "Average Trading Price" shall
mean the average of the daily closing prices per WorldCom Common Share, as
quoted by NASDAQ as reported in The Wall Street Journal, Eastern Edition, or if
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not reported thereby, The
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New York Times, for the twenty consecutive full NASDAQ trading days ending on
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the date immediately prior to the third full NASDAQ trading day immediately
preceding the day on which the Closing (as defined below) occurs.
2.2 Exercise of Option. Upon the occurrence of one or more of the
events set forth below (the "Triggering Events"), WorldCom may exercise the
Option, in whole but not in part, at any time during the term of this Agreement
as set forth in Section 7.2 hereof:
(a) the Board of Directors of CompuServe or any committee thereof
shall have withdrawn or modified in a manner adverse to WorldCom its approval or
recommendation of the CompuServe Proposal, or failed to reconfirm its
recommendation within fifteen business days after a written request to do so, or
the Board of Directors of CompuServe or any committee thereof shall have
resolved to take any of the foregoing actions;
(b) CompuServe shall fail to call, give notice of, convene and
hold the CompuServe Stockholders Meeting as soon as practicable pursuant to
Section 8.6 of the Merger Agreement; or
(c) Any party to the Merger Agreement shall have terminated such
agreement pursuant to Section 11.1(b) thereof or WorldCom shall have terminated
the Merger Agreement pursuant to Section 11.1(c), (d) or (f) thereof and, in any
such case, H&R Block, Block Group or CompuServe shall have breached one of its
covenants or agreements thereunder or a condition to WorldCom's obligations
thereunder that is within the control of H&R Block, Block Group or CompuServe
shall not have been satisfied at the time of such termination, including,
without limitation, the failure of the CompuServe stockholders to approve the
CompuServe Proposal.
H&R Block and Block Group shall notify WorldCom promptly in writing of the
occurrence of any Triggering Event, it being understood that the giving of such
notice by H&R Block or Block Group shall not be a condition to the right of
WorldCom to exercise its Option or obtain the expanded proxy rights described in
Section 1.3(b).
2.3. Notice of Exercise; Conditions to Closing. If WorldCom desires to
exercise the Option, it shall notify Block Group in writing of its election.
Once WorldCom has delivered its notice of exercise of the Option, it shall be
obligated to consummate the Purchase, except that, notwithstanding the delivery
of any such notice:
(a) WorldCom's obligation to close the Purchase shall be subject to the
following conditions being fulfilled on or prior to the date of Closing,
any of which may be waived by WorldCom, in its discretion:
(i) Representations and Warranties of H&R Block. The
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representations and warranties of H&R Block, Block Group and CompuServe set
forth in this Agreement that are qualified by Material Adverse Effect or
otherwise as to materiality shall be true and correct, and those that are not
so qualified shall be true and correct except for failures to be true and
correct as would not have a Material Adverse
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Effect on CompuServe, as of the date of this Agreement and as of the Closing as
though made at and as of the Closing, except to the extent that such
representations and warranties expressly relate to a specific earlier date (in
which case such representations and warranties that are qualified by a Material
Adverse Effect shall be true and correct, and those that are not so qualified
shall be true and correct except for failures to be true and correct as would
not, individually or in the aggregate, have a Material Adverse Effect on
CompuServe, on and as of such earlier date). None of the representations or
warranties regarding CompuServe or any of the CompuServe Entities incorporated
herein from Article III of the Merger Agreement, disregarding any qualifications
regarding materiality (including any reference to Material, Material Adverse
Change or Material Adverse Effect), shall be untrue or incorrect, except for
such untrue or incorrect representations or warranties that, when taken together
as a whole, do not constitute a Material Adverse Effect .
(ii) Performance of this Agreement. Each of the covenants and
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agreements of H&R Block and Block Group to be performed or observed at or prior
to the Closing pursuant to the terms hereof shall have been duly performed or
observed, except where such failure would not have a Material Adverse Effect on
CompuServe or would not materially impair the ability of H&R Block, Block Group
or CompuServe to consummate the Purchase and the other transactions
contemplated hereby.
(iii) No Material Adverse Change. Neither CompuServe nor any
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CompuServe Entity shall have suffered a Material Adverse Change from the date of
the CompuServe Balance Sheet to the Closing.
(b) Block Group's obligation to close the Purchase shall be subject to
the following conditions being fulfilled on or prior to the date of Closing, any
of which may be waived by WorldCom, in its discretion:
(i) Representations and Warranties of WorldCom. The representations and
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warranties of WorldCom set forth in this Agreement that are qualified by
Material Adverse Effect or otherwise as to materiality shall be true and
correct, and those that are not so qualified shall be true and correct except
for failures to be true and correct as would not have a Material Adverse Effect
on WorldCom as of the date of this Agreement and as of the Closing as though
made at and as of the Closing, except to the extent that such representations
and warranties expressly relate to a specific earlier date (in which case such
representations and warranties that are qualified by a Material Adverse Effect
shall be true and correct, and those that are not so qualified shall be true and
correct except for failures to be true and correct as would not, individually or
in the aggregate, have a Material Adverse Effect on WorldCom, on and as of such
earlier date).
(ii) Performance of this Agreement. Each of the covenants and
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agreements of WorldCom to be performed or observed at or prior to the Closing
pursuant to the terms hereof shall have been duly performed or observed except
where such failure would not have a Material Adverse Effect on WorldCom or would
not materially impair the ability of WorldCom to consummate the Merger and the
other transactions
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contemplated hereby.
(iii) Minimum Average Trading Price. The Average Trading Price
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shall be no less than $24.00, after appropriate adjustment in the event of a
stock split, stock dividend or recapitalization after the date of this Agreement
applicable to shares of the WorldCom Common Stock.
(c) WorldCom's and Block Group's obligations to close the Purchase
shall be subject to the following conditions being fulfilled on the date of
Closing, to the extent applicable to such party:
(i) No Injunction or Action. No Governmental Entity shall have
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enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
injunction or other order, whether temporary, preliminary or permanent, which is
in effect and which has or would have the effect of making the transactions
contemplated by this Agreement illegal or restraining or prohibiting
consummation of such transactions.
(ii) Hart-Scott-Rodino Act. Any mandatory waiting period (and any
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extension thereof) applicable to the consummation of the Purchase under the HSR
Act, any foreign competition law or similar law shall have expired or been
terminated .
(d) WorldCom and H&R Block and Block Group will cooperate in
filing any notifications or applications required and shall otherwise cooperate
promptly in taking any actions necessary to satisfy the conditions referred to
in this Section.
(e) Upon the giving by WorldCom to Block Group of the written
notice of exercise of the Option provided for under this Section 2.3 and the
tender of the applicable Purchase Price, WorldCom shall be deemed to be the
holder of record of the Shares issuable upon such exercise, notwithstanding that
the stock transfer books of CompuServe shall then be closed or that certificates
representing such Shares shall not then have actually been delivered to
WorldCom. H&R Block shall pay all expenses, and any and all United States
federal, state, and local taxes and other charges that may be payable in
connection with the preparation, issuance and delivery of stock certificates
under this Section in the name of WorldCom or its assignee, transferee, or
designee.
2.4. Closing.
(a) Date of Closing. Subject to the terms and conditions hereof,
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the closing (the "Closing") for the purchase of Shares hereunder shall occur on
the date designated by WorldCom in its written notice to Block Group of its
desire to purchase its Shares as provided in Section 2.2 above, subject to the
fulfillment or waiver of the conditions to the parties obligations hereunder,
provided that the Closing shall take place no earlier than two Business Days
after and no later than five Business Days after the satisfaction or waiver of
such conditions. Unless otherwise agreed by the parties, the Closing shall take
place at the offices of Bryan Cave LLP, Washington, D.C. at 10:00 a.m. local
time.
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(b) Closing Procedure. At the Closing, (i) H&R Block and Block Group
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shall deliver or cause to be delivered to WorldCom all of the certificates
evidencing the Shares to be sold hereunder, with appropriate stock powers
attached, properly signed, with any necessary documentary or transfer tax stamps
duly affixed and (ii) WorldCom shall deliver, or cause to be delivered such
certificates evidencing such number of shares of WorldCom Common Stock (and such
cash to be paid in lieu of fractional shares of such WorldCom Common Stock and
to be paid pursuant to Block Group's election to receive cash, if any, under
Section 2.1(c)) in order to satisfy its obligation to pay the Purchase Price to
Block Group.
(c) Closing Deliveries. H&R Block and Block Group, on the one hand,
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and WorldCom, on the other hand, will use reasonable efforts to deliver or cause
to be delivered to the other at or prior to the Closing hereunder the
certificates, opinions and other documents contemplated by Article X of the
Merger Agreement, provided that references therein to the Merger, the Merger
Agreement, the Closing Date or the Effective Time shall be deemed modified as
contemplated by Section 3.4, Section 5.2 and Article VI hereof; and provided
further that H&R Block and Group agree to execute and deliver the Standstill
Agreement and the Noncompete/Nonsolicitation Agreement, the Registration Rights
Letter, and a Registration Rights Letter for the benefit of WorldCom with
respect to the Shares purchased hereunder in substantially the form contemplated
by the Merger Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF H&R BLOCK AND BLOCK GROUP
H&R Block and Block Group, jointly and severally, hereby make the
following representations and warranties to WorldCom, each of which shall be
true and correct on the date hereof, on the date on which WorldCom delivers
notice of its exercise of the Option, if it does so, and on the date of the
Closing, if any.
3.1. Representations and Warranties Under the Merger Agreement
Restated. Subject to the Schedules to the Merger Agreement, H&R Block and Block
Group, jointly and severally, hereby make the representations and warranties to
WorldCom contained in Articles III, IV and V of the Merger Agreement, except
that (a) any such representation and/or warranty as to the effect of the Merger
Agreement or the Merger on any of H&R Block, Block Group or CompuServe (or any
of their associated Entities) shall be considered a representation and/or
warranty as to the effect of this Agreement or the Purchase, as the case may be,
on any such entity or entities, as appropriate, and (b) the following
representations and warranties are not hereby repeated: Sections 3.19 and 4.11.
H&R Block and Block Group further jointly and severally represent and warrant
that Block Group has, and the transfer of the Shares upon exercise of the Option
will pass to WorldCom, good and marketable title to the Shares, free and clear
as provided in Section 5.2 of the Merger Agreement.
3.2 Rights Agreement . CompuServe has effected an amendment to the
CompuServe Rights Agreement with the effect that (a) (i) WorldCom will not be
deemed to be an "Acquiring Person" (as defined in the CompuServe Rights
Agreement), (ii) neither the
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"Shares Acquisition Date" nor the "Distribution Date" (each as defined in the
CompuServe Rights Agreement) will be deemed to occur, and (iii) the "Rights" (as
defined in the CompuServe Rights Agreement) will not separate from the
CompuServe Common Shares, in any such event as a result of the execution,
delivery or performance of this Agreement or any other agreement provided for
herein or the taking of any action provided for herein.
3.3 Takeover Statutes. The Board of Directors of CompuServe has
taken all necessary actions so that the restrictions contained in Section 203 of
the DGCL will not apply to the execution, delivery or performance of this
Agreement by CompuServe, H&R Block or WorldCom or the consummation of the
transactions contemplated hereby.
ARTICLE IV
SECURITIES LAWS MATTERS
Each of WorldCom and Block Group hereby makes the following
representations and warranties to the other, solely with respect to matters
relating to itself, each of which shall be true and correct on the date hereof,
on the date on which WorldCom delivers notice of its exercise of the Option, if
it does so, and on the date of the Closing, if any:
4.1 Qualification. Each of WorldCom and Block Group has such knowledge
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and experience in financial and business matters that it is capable of
evaluating the merits and risks of the agreements and obligations entered into
by them hereunder and bearing the economic risks associated therewith. The
information provided by WorldCom and Block Group to the other concerning its
knowledge and experience is correct in all material respects. Each of WorldCom
and Block Group has received and reviewed such information concerning the
securities which may be issued to it hereunder (the "Securities") as it has
deemed appropriate, including the filings with the Securities and Exchange
Commission made by CompuServe and WorldCom, respectively, since January 1, 1995,
and has had the opportunity to ask questions and receive answers thereto
concerning CompuServe, WorldCom and the Merger and the transactions contemplated
hereby, and to obtain such further information as it has determined desirable.
Each of WorldCom and Block Group has been advised by counsel and financial
advisors with respect to this Agreement and the agreements and obligations
contained herein. Each of WorldCom and Block Group is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act of 1933, as amended (the "Securities Act").
4.2 Not Registered Under Securities Act. Each of WorldCom and Block
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Group understands that the Securities will not, when delivered hereunder, be
registered under the Securities Act, in reliance on an exemption thereunder for
transactions not involving a public offering and that the Securities have not
been approved or disapproved by the Securities and Exchange Commission or any
other federal or state agency. Each of WorldCom and Block Group acknowledges
that the other has relied upon its representations and warranties contained in
this Agreement as a basis for such exemption.
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4.3 Investment Purpose. Each of WorldCom and Block Group will be
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acquiring any Securities which it may acquire hereunder for its own account, for
investment purposes only, and not with a view to the sale or other distribution,
in whole or in part, except as permitted by law.
4.4 Restrictions on Transfers. Each of WorldCom and Block Group
-------------------------
understands that the Securities may not be assigned, pledged, hypothecated,
sold, made subject to a security interest, or otherwise transferred without (i)
an effective registration statement for such Securities under the Securities Act
and such applicable state securities laws, or (ii) delivery to the issuer of
such Securities of an opinion of counsel prepared at the expense of the holder
thereof, which form of opinion and counsel shall be reasonably satisfactory to
the issuer and its counsel, that an exemption from registration is available
under the Securities Act or under any applicable state securities laws. Each of
WorldCom and Block Group further understands that there will be placed on the
certificate(s) representing the Securities a legend stating in substance:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED
UNTIL A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD
THERETO, OR, IN THE OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER OF THESE
SHARES, REGISTRATION UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WORLDCOM
WorldCom hereby makes the following representations and warranties to
H&R Block and Block Group, each of which shall be true and correct on the date
hereof, on the date on which WorldCom delivers notice of its exercise of the
Option, if it does so, and on the date of the Closing, if any:
5.1. Representations and Warranties Under the Merger Agreement
Restated. Subject to the Schedules to the Merger Agreement, WorldCom hereby
makes the representations and warranties to H&R Block and Block Group contained
in Article VI of the Merger Agreement, except that any such representation
and/or warranty as to the effect of the Merger Agreement or the Merger on
WorldCom or any WorldCom Entity shall be considered a representation and/or
warranty as to the effect of this Agreement or the Purchase on any such entity
or entities, as appropriate.
ARTICLE VI
COVENANTS
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The parties hereto each hereby agree to their respective covenants
contained in Articles II, VIII (other than Sections 8.17, 8.24 and 8.25) and IX
and the first sentence of Section 11.5(a) of the Merger Agreement as independent
obligations of such parties under this Agreement, it being agreed that H&R Block
and Block Group further agree to cause CompuServe and the CompuServe Entities to
perform their covenants under the Merger Agreement, which covenant of H&R Block
and Block Group shall be considered a separate obligation under this Agreement,
provided that (a) no such covenant is repeated herein to the extent it relates
solely to the mechanics required to effectuate a merger, (b) any covenant that
refers to the Merger Agreement shall be deemed to refer to this Agreement, as
appropriate, and (c) any covenant that refers to the "Closing Date" or the
"Effective Time" shall be deemed to refer to the Closing hereunder, as
appropriate. Without limiting the foregoing, the parties agree that (a) the
indemnification covenants under Section 8.4 of the Merger Agreement are hereby
agreed to as applicable to breaches of representations, warranties and covenants
under this Agreement, and (b) Section 9.1(a)(i) of the Merger Agreement is
hereby agreed to as applicable to the Purchase. The parties agree to make the
Elections described in Article IX of the Merger Agreement, as they apply to the
Purchase, if the Purchase is consummated.
ARTICLE VII
TERM OF AGREEMENT
7.1 Commencement of Agreement. The rights and obligations of the
parties under this Agreement are effective as of the date hereof.
7.2 Term.
(a) This Agreement and the rights granted hereunder shall remain in
effect until the earlier of (i) the Closing hereunder, (ii) the Closing under
the Merger Agreement, and (iii) thirty (30) business days following the
termination of the Merger Agreement pursuant to Section 11.1 thereof.
(b) Notwithstanding the foregoing paragraph (a), upon exercise of the
Option, the rights and obligations of the parties shall remain in effect
following termination of the Merger Agreement, provided that, after exercise,
the Option and this Agreement shall terminate if the Closing does not take place
within one year following the date of termination of the Merger Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 Representations and Warranties; Survival"""". The
representations, warranties, covenants and agreements contained in this
Agreement, including those referenced from the Merger Agreement, or in any
instrument delivered pursuant to this Agreement shall
11
survive the termination of the Merger Agreement and the Option and the Closing
hereunder.
8.2 Notices"""". Any notices or other communications required or
desired to be given hereunder shall be deemed to have been properly given if
sent by hand delivery, facsimile and overnight courier, registered or certified
mail, return receipt requested, postage prepaid, to the parties hereto at the
following addresses, or at such other address as such party may advise the
others in writing from time to time by like notice:
If to WorldCom:
WorldCom, Inc.
515 East Amite Street
Jackson, Mississippi 39201
Attention: Charles T. Cannada
Facsimile: (601) 360-
with copies to:
WorldCom, Inc.
10777 Sunset Office Drive
Suite 330
St. Louis, Missouri 63127
Attention: P. Bruce Borghardt
Facsimile: (314) 909-4101
and
Bryan Cave LLP
One Metropolitan Square, Suite 3600
St. Louis, Missouri 63102-2750
Attention: R. Randall Wang
Facsimile: (314) 259-2020
If to H&R Block or Block Group:
H&R Block, Inc.
World Headquarters
4400 Main Street
Kansas City, MO 64111
Attention: Frank L. Salizzoni
12
with a copy to:
H&R Block, Inc.
World Headquarters
4400 Main Street
Kansas City, MO 64111
Attention: James Ingraham
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attention: Benjamin F. Stapleton
Facsimile: (212) 558-3588
All such notices or other communications shall be deemed to have been duly given
on the date of hand delivery or telecopy or facsimile, if receipt is confirmed,
or on the next Business Day following timely deposit of such communications with
overnight courier or on the third Business Day following the date of mailing, if
delivered by registered or certified mail.
8.3 Governing Law and Dispute Resolution. This Agreement shall
be interpreted, construed and enforced in accordance with the law of the State
of Delaware, applied without giving effect to any conflicts-of-law principles,
except to the extent that Missouri law is applicable to the internal affairs of
H&R Block or Georgia law is applicable to the internal affairs of WorldCom. Any
dispute relating to this Agreement or the transactions contemplated hereby shall
be resolved in the state courts of general jurisdiction, or the Chancery Court
if it has subject matter jurisdiction, of the State of Delaware or in the United
States District Court for the District of Delaware. Each party irrevocably
submits to such courts' exclusive jurisdiction and acknowledges that such courts
are a convenient forum and consents to service of process at the address for
such party set forth in Section 8.2.
8.4 Specific Performance. Each party acknowledges and agrees
that, in the event of an actual or threatened breach of any of the provisions of
this Agreement by such party, the harm to the others will be immediate,
substantial and irreparable and that monetary damages will be inadequate.
Accordingly, each party agrees that, in such an event, the others will be
entitled to equitable relief, including an injunction and an order of specific
performance, in addition to any and all other remedies at law or in equity.
8.5 Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If
any provision of this Agreement or the application thereof to any Person or any
circumstance is invalid or unenforceable, (a) a suitable and equitable provision
shall be substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such provision to
other persons, entities or
13
circumstances shall not be affected by such ginvalidity or unenforceability, nor
shall such invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other jurisdiction.
8.6 Captions. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
8.7 Entire Agreement. This Agreement, together with the Merger
Agreement and the Standstill Agreement, and any documents delivered by the
parties in connection therewith and herewith, constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
8.8 Counterparts. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
8.9 Binding Effect; Assignability. This Agreement shall be binding
on, and shall inure to the benefit of, only the parties hereto, and their
respective successors and assigns, and nothing in this Agreement, express or
implied is intended to or shall confer upon any Person any right, benefit or
remedy of nature whatsoever under or by virtue of this Agreement. No party may
assign or delegate any right or obligation hereunder without the prior written
consent of the other party; provided, however, that WorldCom may assign any or
all of its rights to a direct or indirect subsidiary of WorldCom or, with the
prior written consent of Block Group, which shall not be unreasonably withheld,
to any other Person. Any assignment of rights or delegation of obligations not
in compliance herewith shall be null and void.
8.10 No Rule of Construction. The parties acknowledge that all
parties have read and negotiated the language used in this Agreement. The
parties agree that, because all parties participated in negotiating and drafting
this Agreement, no rule of construction shall apply to this Agreement which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting this Agreement.
8.11 Adjustment upon Changes in Capitalization.
(a) In the event of any change in capitalization of CompuServe prior to
purchase of the Shares by reason of any stock dividend, split-up, merger,
recapitalization, combination, exchange of shares or the like, the price and the
number and kind of securities subject to the Option and the Purchase Price
therefor shall be appropriately adjusted and proper provision shall be made in
the agreements governing such transaction so that WorldCom shall receive, upon
exercise of the Option, the number and class of shares or other securities or
property that WorldCom would have received in respect of the Shares if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable. If, on or after the date hereof, CompuServe should
declare or pay any cash or stock dividend or other
14
distribution or issue any rights with respect to the Shares, payable or
distributable to shareholders of record on a date prior to the transfer to the
name of WorldCom or its nominee on the stock transfer records of CompuServe of
any Shares or other securities purchased hereunder, then the amount of any such
cash dividend or cash distribution, and the whole of any such non-cash dividend
distribution or right which would have been payable with respect to each Share
purchased by WorldCom, will be promptly remitted and transferred by Block Group
to WorldCom. Upon the purchase of the Shares, to the extent consistent with law,
pending remittance, WorldCom will be entitled to all rights and privileges as
owner of any such non-cash dividend, distribution or right.
(b) In the event that CompuServe shall enter into an agreement (i) to
consolidate with or merge into any person, other than WorldCom or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than WorldCom or one
of its subsidiaries, to merge into CompuServe and CompuServe shall be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding Common Shares shall be changed into or exchanged for stock or
other securities of CompuServe or any other person or cash or any other property
or the outstanding Common Shares immediately prior to such merger shall after
such merger represent less than 50% of the outstanding Common Shares and share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than WorldCom or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option to acquire the number and
class of shares or other securities or property that WorldCom would have
received in respect of Shares if the Option had been exercised immediately prior
to such consolidation, merger, sale or transfer, or the record date therefor, as
applicable. Notwithstanding the foregoing, H&R Block and Block Group covenant
and agree to take any and all actions within their power to prevent any such
agreement from being entered into by CompuServe during the term of this
Agreement.
(c) If any event described in paragraph (a) or (b) above shall occur in
respect of WorldCom or the WorldCom Common Stock to be issued to Block Group on
exercise of the Option, corresponding adjustments to the rights of Block Group
and the obligations of WorldCom shall be made on terms corresponding to those
set forth in such paragraphs.
[The remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to
be executed by its officer thereunto duly authorized as of the date first
written above.
H&R BLOCK, INC.
By /s/Frank L. Salizzoni
------------------------------
Name: Frank L. Salizzoni
Title: President and Chief
Execuitve Officer
H&R BLOCK GROUP, INC.
By /s/Frank L. Salizzoni
------------------------------
Name: Frank L. Salizzoni
Title: President
WORLDCOM, INC.
By /s/Charles T. Cannada
------------------------------
Name: Charles T. Cannada
Title: Senior Vice President
16