PURCHASE AND CONTRIBUTION AGREEMENT
BY AND AMONG
CMGI, INC.,
and
ZOOM NEWCO INC.,
and
COMPAQ COMPUTER CORPORATION,
DIGITAL EQUIPMENT CORPORATION,
and
ALTAVISTA COMPANY
JUNE 29, 1999
PURCHASE AND CONTRIBUTION AGREEMENT
ARTICLE I
PURCHASE AND SALE; CONTRIBUTION; MERGER; CLOSING 1
1.1 Purchase and Sale of Assets 1
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1.2 Contributions by CMGI and Digital 1
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1.3 Merger of AV and Newco 2
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1.4 Options 3
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1.5 No Further Rights 3
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1.6 Dilution Protection 3
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1.7 Closing. 4
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CMGI TO NEWCO AND REPRESENTATIONS AND
WARRANTIES OF NEWCO TO COMPAQ 4
2.1 Organization; Qualification of CMGI 4
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2.2 Subsidiaries and Affiliates 5
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2.3 Capitalization 5
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2.4 Authorization of Agreement 6
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2.5 Consents and Approvals; No Violations 6
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2.6 Financial Statements 7
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2.7 Absence of Certain Changes or Events 7
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2.8 Litigation 7
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2.9 Compliance with Laws 8
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2.10 Environmental Matters 8
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2.11 Intellectual Property 11
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2.12 Year 2000 11
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2.13 ERISA Compliance 12
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2.14 Brokers 12
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2.15 Opinion of Financial Advisor 12
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2.16 Taxes 12
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2.17 Information in Proxy Statement 13
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPAQ, DIGITAL AND AV TO NEWCO;
REPRESENTATIONS AND WARRANTIES OF NEWCO TO CMGI 13
3.1 Organization Qualification of AV 13
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3.2 Subsidiaries 14
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3.3 Capitalization 14
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3.4 Authorization of Agreement 15
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3.5 Consents and Approvals No Violations 16
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3.6 Financial Statements 16
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3.7 Absence of Certain Changes or Events 17
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3.8 Litigation 17
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3.9 Compliance with Laws 17
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3.10 Environmental Matters 17
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3.11 Intellectual Property 19
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3.12 Year 2000 20
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3.13 ERISA Compliance 21
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3.14 Brokers 22
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3.15 Opinion of Financial Advisor 23
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3.16 Taxes 23
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3.17 Information in Proxy Statement 24
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3.18 Undisclosed Liabilities 24
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3.19 Assets 25
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3.20 Owned Real Property 25
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3.21 Contracts 25
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS 26
4.1 Funding of the AV Business 26
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4.2 Conduct of the AV Business 26
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ARTICLE V
SALE OF SHARES; BOARD MEMBERSHIP; VOTING AGREEMENT; STANDSTILL 28
5.1 Lock-Up 29
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5.2 Rights of First Offer 29
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5.3 Registration Rights 30
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5.4 Board Designee 30
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5.5 Voting Agreement 30
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5.6 Standstill 31
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5.7 Investment Company Act 31
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ARTICLE VI
ADDITIONAL AGREEMENTS 31
6.1 Stockholders' Meeting 31
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6.2 Access and Information 32
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6.3 HSR Act Filing 33
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6.4 Reasonable Best Efforts 33
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6.5 Publicity 33
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6.6 Employee Benefit Plans 34
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6.7 Restriction on Transfer of AV Shares 34
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6.8 Funding 35
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ARTICLE VII
CLOSING CONDITIONS 35
7.1 Conditions to Each Party's Obligation to Complete the Transaction 35
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7.2 Additional Conditions to the Obligation of CMGI and Newco 35
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7.3 Additional Conditions to the Obligation of Compaq Digital and AV 36
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ARTICLE VIII
TERMINATION, AMENDMENT AND EXPENSES 37
8.1 Termination 37
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8.2 Effect of Termination 38
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8.3 Amendment 38
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8.4 Waiver 38
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8.5 Expenses 39
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ARTICLE IX
TAX MATTERS 39
9.1 Preparation and Filing of Tax Returns 39
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9.2 Payment of Taxes 40
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9.3 Tax Indemnification 40
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9.4 Allocation of Certain Taxes 41
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9.5 Cooperation on Tax Matters 41
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9.6 Termination of Tax-Sharing Agreements 42
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9.7 Certain Tax Elections 42
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9.8 Tax Claims 43
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9.9 Refunds 44
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9.10 Treatment of the Contributions 44
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9.11 Allocation of Considerations 44
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9.12 Tax Disputes 44
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9.13 Adjustment to Consideration 44
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ARTICLE X
DEFINITIONS AND INTERPRETATION 45
10.1 Certain Definitions 45
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10.2 Interpretation 49
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ARTICLE XI
GENERAL PROVISIONS 50
11.1 Survival of Representations 50
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11.2 Notices 50
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11.3 Entire Agreement No Assignment Governing Law 51
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11.4 Parties in Interest 51
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11.5 Counterparts 51
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11.6 Headings 52
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11.7 Severability 52
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Exhibit A - Terms of Promissory Note
Exhibit B - Terms of Series D Preferred Stock
Exhibit C - Form of Assignment Agreement
Exhibit D - Form of Registration Rights Agreement
53
PURCHASE AND CONTRIBUTION AGREEMENT
PURCHASE AND CONTRIBUTION AGREEMENT dated as of June 29, 1999 (the
"Agreement") by and among Compaq Computer Corporation, a Delaware corporation
("Compaq"), Digital Equipment Corporation, a Massachusetts corporation and a
wholly owned subsidiary of Compaq ("Digital"), AltaVista Company, a Delaware
corporation and a wholly owned subsidiary of Digital ("AV"), CMGI, Inc., a
Delaware corporation ("CMGI"), and Zoom Newco Inc., a Delaware corporation and a
wholly owned subsidiary of CMGI ("Newco").
WHEREAS, for federal income tax purposes, the contribution by CMGI of the
Digital Assets (as defined below) and the contribution by Compaq and Digital of
the Assigned Assets (as defined below) shall together constitute a transaction
described in Section 351 of the Code.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties,
intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE AND SALE; CONTRIBUTION; MERGER; CLOSING
1.1 Purchase and Sale of Assets . Subject to and upon the terms and
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conditions of this Agreement, at the closing of the transactions contemplated by
this Agreement (the "Closing"), Digital or Compaq shall sell, transfer, convey,
assign and deliver to CMGI, and CMGI shall purchase from Digital or Compaq, such
number of shares of capital stock of Shopping.com, a California corporation
("SDC"), and, if necessary, such number of shares of capital stock of ZIP2
Corporation, a California corporation ("ZIP2") (collectively, the "Digital
Assets"), as have an aggregate fair market value, as of the Closing, as
determined by an independent appraiser mutually acceptable to the parties
hereto, equal to $220,000,000. In consideration for the Digital Assets, CMGI
shall deliver to Compaq or Digital, as directed, a promissory note, on
substantially the terms set forth on Exhibit A attached hereto, in the principal
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amount of $220,000,000.
1.2 Contributions by CMGI and Digital . Subject to and upon the terms
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and conditions of this Agreement, at the Closing, immediately following the
consummation of the transaction contemplated by Section 1.1:
(a) CMGI shall contribute to Newco (i) the Digital Assets, (ii)
18,994,975 shares of common stock, par value $0.01, of CMGI ("CMGI Common
Stock"), and (iii) 18,090.45 shares of preferred stock of CMGI to be designated
as Series D Preferred Stock, par value $.01 per share (the "Series D Preferred
Stock"), which shall have the rights and preferences described on Exhibit B
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attached hereto, in exchange for the issuance by Newco to CMGI of 81,495,116
shares of common stock, par value $0.01, of Newco ("Newco Common Stock"); and
(b) Compaq and Digital shall contribute to Newco (i) the
properties, assets and other rights and interests to be transferred pursuant to
the Assignment Agreement attached hereto as Exhibit C (the "Assignment
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Agreement") and (ii) all of the outstanding shares of capital stock of SDC and
ZIP2 not owned by Newco, if any, after giving effect to the transaction
described in Sections 1.1 and 1.2(a) (collectively, the "Assigned Assets"), in
exchange for (A) the issuance by Newco to Digital or Compaq, as directed, of
18,504,884 shares of Newco Common Stock, (B) the transfer by Newco to Digital or
Compaq, as directed, of 18,994,975 shares of CMGI Common Stock and (C) the
transfer by Newco to Digital or Compaq, as directed, 18,090.45 shares of Series
D Preferred Stock.
1.3 Merger of AV and Newco .
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(a) Immediately following the consummation of the transactions
described in Section 1.2, AV and Newco shall consummate a merger (the "Merger")
pursuant to which (i) AV shall be merged with and into Newco and the separate
corporate existence of AV shall thereupon cease, (ii) Newco shall be the
successor or surviving corporation in the Merger (the "Surviving Corporation")
and shall continue to be governed by the Laws of the State of Delaware and (iii)
the separate corporate existence of Newco with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger. The
Merger shall have the effects set forth in the Delaware General Corporation Law
(the "DGCL"). As a result of the Merger, all shares of outstanding capital
stock of AV shall be canceled without payment of any consideration therefor.
(b) Immediately following the Closing, the Surviving Corporation
will cause the Merger to be consummated by filing a Certificate of Ownership and
Merger (the "Certificate of Merger") with the Secretary of the State of
Delaware, in such form as required by, and executed in accordance with, the
relevant portions of the DGCL. The Merger shall become effective at the time at
which the Certificate of Merger has been duly filed with the Secretary of State
of the State of Delaware, and such time is hereinafter referred to as the
"Effective Time."
(c) The Certificate of Incorporation of the Surviving Corporation
immediately following the Effective Time shall be the same as the Certificate of
Incorporation of Newco immediately prior to the Effective Time, except that (1)
the name of the corporation set forth therein shall be changed to the name of AV
and (2) the identity of the incorporator shall be deleted. The By-laws of the
Surviving Corporation immediately following the Effective Time shall be the same
as the By-laws of Newco immediately prior to the Effective Time, except that the
name of the corporation set forth therein shall be changed to the name of AV.
1.4 Options .
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(a) As of the Effective Time, all options to purchase common
stock, par value $0.01 per share, of AV ("AV Common Stock") issued by AV
pursuant to its stock option plans or otherwise ("AV Options"), whether vested
or unvested, shall be assumed by Newco. Immediately after the Effective Time,
each AV Option outstanding immediately prior to the Effective Time shall be
deemed to constitute an option to acquire, on the same terms and conditions as
were applicable under such AV Option at the Effective Time, such number of
shares of Newco Common Stock as is equal to the number of shares of AV Common
Stock subject to the unexercised portion of such AV Option. The exercise price
per share of each AV Option assumed in accordance with this Section 1.4 ("Newco
Options") shall be equal to the exercise price of such Newco Option immediately
prior to the Effective Time. The term, exercisability, vesting schedule, status
as an "incentive stock option" under Section 422 of the Code, if applicable, and
all of the other terms of the Newco Options shall otherwise remain unchanged.
(b) As soon as practicable after the Effective Time, the Surviving
Corporation shall deliver to the holders of Newco Options appropriate notices
setting forth such holders' rights pursuant to such Newco Options, and the
agreements evidencing such Newco Options shall continue in effect on the same
terms and conditions (subject to the terms provided for in this Section 1.4 and
such notice).
(c) The Surviving Corporation shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Newco Common
Stock for delivery upon exercise of the Newco Options.
1.5 No Further Rights . From and after the Effective Time, no shares
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of AV Common Stock shall be deemed to be outstanding, and holders of
certificates evidencing such shares shall cease to have any rights with respect
thereto, except as provided herein or by law.
1.6 Dilution Protection . If between the date of this Agreement and
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the Effective Time the outstanding shares of the common stock of CMGI or AV
shall have been changed into a different number of shares or a different class,
by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, conversion, consolidation, combination or exchange of
shares or similar transaction, then appropriate adjustments to reflect any such
action shall be made to the numbers and implied exchange ratios contained in
Section 1.2 and/or Section 1.4.
1.7 Closing. Compaq and CMGI shall as promptly as possible notify
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each other when the conditions to such party's obligations to complete the
transactions contemplated by this Agreement have been satisfied or waived. The
Closing shall take place at the offices of Hale and Dorr LLP, 60 State Street,
Boston, Massachusetts at 10:00 a.m. Boston time on the second business day
following the satisfaction or waiver of the conditions set forth in Article VII
(other than conditions involving actions which will take place at the Closing)
or at such other time, date and place as CMGI and Compaq shall agree in writing.
The date on which the Closing occurs is hereafter referred to as the "Closing
Date."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CMGI TO NEWCO AND REPRESENTATIONS
AND WARRANTIES OF NEWCO TO COMPAQ
Except as specifically set forth in the CMGI Disclosure Schedule delivered
to Compaq and Newco simultaneously with the execution hereof, CMGI represents
and warrants to Newco, and Newco represents and warrants to Compaq, that all of
the statements contained in this Article II are true and complete as of the date
of this Agreement (or, if made as of a specified date, as of such date), and
will be true and complete as of the Closing Date as though made on the Closing
Date. Each exception and each other response set forth in the CMGI Disclosure
Schedule is identified by reference to, or has been grouped under a heading
referring to, a specific section of this Agreement and, except as otherwise
specifically stated with respect to such exception, relates only to such
referenced section. CMGI guarantees to Compaq the accuracy of the
representations and warranties of Newco in this Article II.
2.1 Organization; Qualification of CMGI . CMGI (a) is a corporation
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duly organized, validly existing and in good standing under the laws of the
state of Delaware; (b) has all required Permits and full corporate power and
authority to carry on its business as it is now being conducted and to own the
properties and assets it now owns; and (c) is duly qualified to do business as a
foreign corporation and is in good standing in every jurisdiction in which
ownership of property or the conduct of its business requires such qualification
or, if CMGI is not so qualified in any such jurisdiction, it can become so
qualified in such jurisdiction without causing a CMGI Material Adverse Effect.
CMGI has heretofore delivered to Compaq complete and correct copies of the
certificate of incorporation and by-laws of CMGI as presently in effect.
2.2 Subsidiaries and Affiliates . Section 2.2 of the CMGI Disclosure
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Schedule sets forth, as of the date hereof, the name and jurisdiction of
incorporation of each CMGI Subsidiary and, as of the date hereof, the
approximate percent of the outstanding shares of each CMGI Subsidiary owned by
CMGI. Section 2.2(a) of the CMGI Disclosure Schedule lists each other entity of
which, as of the date hereof, CMGI has a direct or indirect equity ownership
interest. Each CMGI Subsidiary (a) is a corporation or limited liability
company duly organized or formed, validly existing and in good standing under
the laws of its state of incorporation; (b) has all required Permits and full
corporate or limited liability company power and authority to carry on its
business as it is now being conducted and to own the properties and assets it
now owns; and (c) is duly qualified to do business as a foreign corporation or
limited liability company in good standing in every jurisdiction in which
ownership of property or the conduct of its business requires such qualification
or, if a CMGI Subsidiary is not so qualified in any such jurisdiction, it can
become so qualified in such jurisdiction without causing a CMGI Material Adverse
Effect. CMGI has heretofore made available to Compaq complete and correct
copies of the Organizational Documents, of each CMGI Subsidiary, as presently in
effect.
2.3 Capitalization .
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(a) The authorized capital stock of CMGI consists of (i)
400,000,000 shares of CMGI Common Stock, of which, as of the date hereof,
95,364,292 shares were issued and outstanding, all of which are duly authorized,
validly issued, fully paid and nonassessable and were not issued in violation of
any preemptive or similar rights of any Person and (ii) 5,000,000 shares of
preferred stock, par value $0.01 per share, of which, as of the date hereof, 250
are designated as Series A Convertible Preferred Stock, of which none are issued
and outstanding, and 50,000 are designated as Series B Convertible Preferred
Stock, of which 35,000 are issued and outstanding.
(b) Except as set forth above and except for the transactions
contemplated by this Agreement and the issuance of shares under employee and
director stock option plans and employee stock purchase plans of CMGI and its
affiliates, as of the date hereof, (i) there are no securities outstanding which
are convertible into or exercisable or exchangeable for shares of capital stock
of CMGI, and (ii) there are no outstanding options, rights, Contracts, warrants,
subscriptions, conversion rights or other agreements or commitments pursuant to
which CMGI may be required to purchase, redeem, issue or sell any shares of
capital stock or other securities of CMGI.
(c) The issued and outstanding shares of capital stock of, or
other equity interests in, each of the CMGI Subsidiaries that are owned by CMGI
or any of its Subsidiaries have been duly authorized and are validly issued,
and, with respect to capital stock, are fully paid and nonassessable, and were
not issued in violation of any preemptive or similar rights of any Person. All
such issued and outstanding shares or other equity interests that are indicated
as owned by CMGI or one of the CMGI Subsidiaries in Section 2.2 of the CMGI
Disclosure Schedule are owned beneficially by CMGI or such Subsidiaries as set
forth therein and free and clear of all Liens.
(d) As of the date hereof, the authorized capital stock of Newco
consists of (i) 100 shares of Newco Common Stock of which 100 shares are issued,
outstanding and owned by CMGI, all of which are duly authorized, validly issued,
fully paid and nonassessable and were not issued in violation of any preemptive
or similar rights of any Person.
2.4 Authorization of Agreement . CMGI and Newco (collectively, the
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"Buyers") have all requisite corporate power and authority to execute and
deliver this Agreement and each instrument required hereby to be executed and
delivered by them at the Closing, to perform their obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The Board of Directors of CMGI has approved the Transaction. The execution and
delivery by the Buyers of this Agreement and each instrument required hereby to
be executed and delivered by them at the Closing and the performance of their
obligations hereunder and thereunder have been duly and validly authorized by
all requisite corporate action on the part of the Buyers. This Agreement has
been duly executed and delivered by the Buyers and, assuming due authorization,
execution and delivery hereof by CDA, constitutes the legal, valid and binding
obligation of the Buyers, enforceable against the Buyers in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium or similar
Laws now or hereafter in effect relating to creditors' rights generally or to
general principles of equity.
2.5 Consents and Approvals; No Violations . Except for the Consents as
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may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "HSR Act") and the filing of the Certificate of Merger as required by the
DGCL, none of the execution, delivery or performance of this Agreement by the
Buyers, or the consummation by the Buyers of any of the transactions
contemplated hereby, will (i) conflict with or result in any breach of any
provision of the Organizational Documents of the Buyers or any CMGI Subsidiary,
(ii) require any Consent of any Governmental Entity, (iii) require any Consent
of any other Person (including consents from parties to loans, Contracts, leases
and other agreements to which CMGI or any affiliate of CMGI is a party), (iv)
result in a violation or breach of, or constitute (with or without due notice or
the passage of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any Contract, or (v) violate any Law, Order or
Permit applicable to CMGI or any affiliate of CMGI or any of their properties or
assets, excluding from the foregoing clauses (iii), (iv) and (v) such absences
of required consents, violations, breaches or defaults which would not,
individually or in the aggregate, have a CMGI Material Adverse Effect or
adversely affect the Buyers' ability to consummate the Transaction.
2.6 Financial Statements .
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(a) Since February 1, 1998, CMGI has timely filed as of the date
hereof and will file as of the Effective Time all reports required to be filed
by it with the Securities and Exchange Commission (the "SEC") pursuant to the
federal securities Laws and the SEC rules and regulations thereunder. Each of
such reports complied in all material respects with applicable requirements of
the Exchange Act (collectively, the "CMGI SEC Reports"). None of the CMGI SEC
Reports, as of their respective dates, contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(b) The consolidated statements of financial position and the
related consolidated statements of operations, stockholders' equity and cash
flows (including the related notes thereto) of CMGI included in the CMGI SEC
Reports (the "CMGI Financial Statements") complied in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in conformity with United
States generally accepted accounting principles ("GAAP") (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a basis
consistent with prior periods (except as otherwise noted therein), and present
fairly the consolidated financial position of CMGI as at their respective dates,
and the consolidated results of its operations and its cash flows for the
periods presented therein subject, in the case of the unaudited interim
financial statements, to normal and recurring year-end adjustments.
2.7 Absence of Certain Changes or Events . Since April 30, 1999 (i)
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the business of CMGI and its Subsidiaries has been carried on only in the
ordinary and usual course consistent with past practice and (ii) there has not
occurred any event, development or change which, individually or in the
aggregate, has resulted in or is reasonably likely to result in a CMGI Material
Adverse Effect.
2.8 Litigation . There is no Litigation pending, or to the Knowledge
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of CMGI, threatened, against or involving CMGI or any CMGI Subsidiary or any of
their respective assets as to which there is a reasonable possibility of an
adverse determination and that, if determined adversely to CMGI or any CMGI
Subsidiary, would reasonably be expected, individually or in the aggregate, to
have a CMGI Material Adverse Effect or, as of the date hereof, which in any way
may prevent, enjoin, alter or delay the Transaction.
2.9 Compliance with Laws . CMGI and each CMGI Subsidiary is and since
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February 1, 1997 has been in compliance with all applicable Laws, except for
violations which do not, and would not reasonably be expected to have,
individually or in the aggregate, a CMGI Material Adverse Effect. Since January
1, 1997, neither CMGI nor any CMGI Subsidiary has received any notice or other
communication (whether written or oral) from any Person regarding any actual,
alleged, possible or potential violation of or failure to comply with any Law,
except for violations which do not, and would not reasonably be expected to
have, individually or in the aggregate, a CMGI Material Adverse Effect. Neither
CMGI, any person controlling, controlled by or under common control with CMGI,
nor any Venture Fund is now or at any time since February 1, 1995 has been an
investment company as defined in the Investment Company Act of 1940, as amended
(the "Investment Company Act"), or required to be registered under the
Investment Company Act, in each case, after giving effect to Rule 3a-2
thereunder. Immediately after giving effect to the closing of the Transaction,
none of CMGI, Newco nor any Person controlling, controlled by or under common
control with, CMGI will be an investment company as defined in Section 3(a) of
the Investment Company Act, without giving effect to Rule 3a-2 thereunder.
2.10 Environmental Matters . Except as is not reasonably likely to
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result in a CMGI Material Adverse Effect:
(a) CMGI and each of the CMGI Subsidiaries (i) has been and is in
compliance with all applicable Environmental Laws; (ii) has obtained all Permits
required for the operation of its businesses by any applicable Environmental Law
(collectively "Environmental Permits") and all such Environmental Permits are in
full force and in effect, no appeal nor any other action is pending to revoke
any such Environmental Permit; and (iii) is in compliance with all such
Environmental Permits, and has filed in a timely manner all applications to
renew such Environmental Permits or to obtain new Environmental Permits to the
extent such applications are currently required.
(b) There has been no Release of any Hazardous Material that would
reasonably be likely to form the basis of any Environmental Claim against CMGI
or any CMGI Subsidiary at the properties owned or leased by CMGI or any CMGI
Subsidiary (the "CMGI Properties"). To the Knowledge of CMGI, CMGI Properties
are not adversely affected by any Release or threatened Release of a Hazardous
Material originating or emanating from any other property. There were no
Releases of Hazardous Materials on properties formerly owned or operated by CMGI
or any CMGI Subsidiary, or any predecessors thereof, during the period of such
operation or ownership, that would reasonably be likely to result in an
Environmental Claim against CMGI or any CMGI Subsidiary.
(c) Neither CMGI nor any CMGI Subsidiary has manufactured, used,
generated, stored, treated, transported, disposed of, released, or otherwise
managed any Hazardous Material at any of the CMGI Properties.
(d) Neither CMGI nor any CMGI Subsidiary: (i) has any liability
for response or corrective action for natural resources damage, or any other
harm pursuant to any Environmental Law, (ii) is subject to, or has Knowledge of,
any Environmental Claim involving CMGI or any CMGI Subsidiary, or (iii) has any
Knowledge of any condition or occurrence at any of the CMGI Properties which
could form the basis of an Environmental Claim against CMGI or any CMGI
Subsidiary, or any of the CMGI Properties.
(e) The CMGI Properties are not subject to any, and neither CMGI
nor any CMGI Subsidiary has any Knowledge of any, imminent restriction on the
ownership, occupancy, use or transferability of the CMGI Properties in
connection with any (i) Environmental Law or (ii) Release or threatened Release
of any Hazardous Material.
(f) There are no conditions or circumstances at the CMGI
Properties that pose a risk to the environment or the health and safety of any
Person, or would require any remedial action.
(g) Neither CMGI nor any CMGI Subsidiary has been subject to any
inquiry or request for information related to its disposal, treatment, storage
or recycling, or the arrangement for said activities, of any Hazardous Material
or waste, at any property other than the CMGI Properties.
(h) To the Knowledge of CMGI, neither CMGI nor any CMGI Subsidiary
or any predecessor thereto has disposed, recycled, treated, stored, or arranged
for said activities, at any property that is listed or proposed for listing on
the Federal National Priorities List, the Federal CERCLIS list, or any list
compiled pursuant to state statutes or Laws that are analogous to the Federal
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601 et seq.
(i) The CMGI Properties do not contain any underground storage
tanks, landfills, electrical equipment containing polychlorinated biphenyls,
surface impoundments, friable asbestos-containing materials, or hazardous waste
treatment, storage or disposal units that either have or require a Permit
pursuant to any Law.
(j) Since January 1, 1997, neither CMGI nor any CMGI Subsidiary
has received a communication (written or oral) that alleges that CMGI or any
CMGI Subsidiary is not in compliance with any Environmental Law.
(k) As used in this Agreement:
(i) "Environmental Claim" means any investigation, notice of
violation, demand, allegation, action, suit, Order, consent decree, penalty,
fine, Lien, proceeding or claim (whether administrative, judicial or private in
nature) arising: (i) pursuant to, or in connection with, an actual or alleged
violation of any Environmental Law; (ii) in connection with any Hazardous
Material or actual or alleged activity associated with any Hazardous Material;
(iii) from any abatement, removal, remedial, corrective or other response action
in connection with any Hazardous Material, Environmental Law or Order; or (iv)
from any actual or alleged damage, injury, threat or harm to health, safety,
natural resources or the environment.
(ii) "Environmental Law" means any Law pertaining to: (i) the
protection of health, safety and the indoor or outdoor environment; (ii) the
conservation, management or use of natural resources and wildlife; (iii) the
protection or use of surface water and ground water; (iv) the management,
manufacture, possession, presence, use, generation, transportation, treatment,
storage, disposal, release, threatened release, abatement, removal, remediation
or handling of, or exposure to, any Hazardous Material; or (v) pollution
(including any release to air, land, surface water and ground water); and
includes the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. 9601 et seq., and the Solid Waste Disposal Act, 42
U.S.C. 6901 et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
5101, et seq. The Clean Water Act, 33 U.S.C. 1251 et seq., the Clean Air Act,
42 U.S.C. 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. 2601 et
seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C. 1986,
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. 136 et seq.,
the Occupational Safety and Health Act, 29 U.S.C. 651 et seq., any similar
state laws and the regulations related thereto or other Laws.
(iii) "Hazardous Material" shall mean any substance,
chemical, compound, product, solid, gas, liquid, waste, by-product, pollutant,
contaminant or material which is hazardous or toxic, and includes asbestos or
any substance containing asbestos, polychlorinated biphenyls, petroleum
(including crude oil or any fraction thereof), and any hazardous or toxic waste,
material or substance regulated under any Environmental Law.
(iv) "Release" means any release, spill, emission, leak,
injection, deposit, disposal, discharge, dispersal, leaching, or migration into
the atmosphere, soil, surface water, groundwater or property (indoors or
outdoors).
2.11 Intellectual Property .
----------------------
(a) To the Knowledge of CMGI, CMGI and its Subsidiaries own or
otherwise have valid rights to use all Intellectual Property (as defined in
Section 3.11(a)) material to their business and operations as currently
conducted.
(b) There is no pending or, to the Knowledge of CMGI, threatened
(in writing) claim, suit, arbitration or other adversarial proceeding
(collectively, "Claims") before any court, agency, arbitral tribunal, or
registration authority in any jurisdiction (i) involving any item of material
Intellectual Property owned by CMGI or a CMGI Subsidiary, (ii) alleging that the
activities or the conduct of CMGI's or a CMGI Subsidiary's business does or will
infringe upon, violate or constitute the unauthorized use of the intellectual
property rights of any third party or (iii) challenging the ownership, use,
validity, enforceability or registrability of any material Intellectual Property
by CMGI or a CMGI Subsidiary. There are no settlements, forebearances to sue,
consents, judgments, or orders or similar obligations (other than license
agreements in the ordinary course of business) which (a) restrict CMGI's or a
CMGI Subsidiary's rights to use any material Intellectual Property, (b) restrict
CMGI's or a CMGI Subsidiary's business in order to accommodate a third party's
intellectual property rights or (c) permit third parties to use any Intellectual
Property owned by CMGI or a CMGI Subsidiary, except for such Claims as have not
resulted, and could not reasonably be expected to result, in a CMGI Material
Adverse Effect.
(c) To the Knowledge of CMGI, no third party is making
unauthorized use of or infringing in any material respect upon any material
Intellectual Property owned by CMGI or a CMGI Subsidiary.
(d) CMGI and its Subsidiaries have taken commercially reasonable
actions to protect each item of material Intellectual Property owned by any of
them, except where the failure to take such actions has not resulted and could
not reasonably be expected to result in a CMGI Material Adverse Effect.
(e) Neither CMGI nor any CMGI Subsidiary is in material violation
of any agreement relating to any Intellectual Property material to its business
or operations, except for such violations as have not resulted, and could not
reasonably be expected to result, in a CMGI Material Adverse Effect. The
consummation of the transactions contemplated hereby will not result in the loss
or material impairment of CMGI's or a CMGI Subsidiary's rights to own or use any
Intellectual Property material to its business or operations, except where such
loss or impairment could not reasonably be expected to result in a CMGI Material
Adverse Effect.
2.12 Year 2000 . All software, hardware, databases and embedded
----------
control systems (collectively, "Systems") used by CMGI and its Subsidiaries are
Year 2000 Compliant (as defined in Section 3.12) and, to the Knowledge of CMGI,
all Systems used by its material suppliers and facilities providers are Year
2000 Compliant, except in each case for failures to be Year 2000 Compliant that,
individually or in the aggregate, have not resulted and would not reasonably be
likely to result in a CMGI Material Adverse Effect.
2.13 ERISA Compliance . All "employee benefit plans," as defined in
-----------------
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained or contributed to by CMGI or its Subsidiaries are in
compliance with all applicable provisions of ERISA and the Code, and CMGI and
its Subsidiaries do not have any liabilities or obligations with respect to
employee benefit plans, arrangement, agreements or programs, whether or not
accrued, contingent or otherwise, except (a) as previously disclosed in writing
to Compaq and (b) for instances of noncompliance or liabilities or obligations
that would not, individually or in the aggregate, have a CMGI Material Adverse
Effect.
2.14 Brokers . No broker, finder, investment banker or other Person
-------
(other than BancBoston Robertson Stephens Inc.) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
CMGI.
2.15 Opinion of Financial Advisor . The Board of Directors of CMGI has
----------------------------
received the opinion of BancBoston Robertson Stephens Inc., CMGI's financial
advisor, substantially to the effect that the consideration to be paid by CMGI
for the shares which it is to receive pursuant to this Agreement is fair to CMGI
from a financial point of view.
2.16 Taxes .
-----
(a) Except as set forth in Section 2.16 of the CMGI Disclosure
Schedule, each of CMGI and its Subsidiaries has (i) duly and timely filed
(including all applicable extensions granted without penalty) all material Tax
Returns required to be filed, and such Tax Returns are true, correct and
complete in all material respects, and (ii) paid in full or made adequate
provision in the financial statements of CMGI (in accordance with GAAP) for all
material Taxes shown to be due on such Tax Returns.
(b) Except as set forth in Section 2.16 of the CMGI Disclosure
Schedule, (i) neither CMGI nor its Subsidiaries has requested any extension of
time within which to file any Tax Return in respect of any taxable period and no
request for waivers of the time to assess any Taxes are pending or outstanding,
(ii) with respect to each taxable period of CMGI and its Subsidiaries, the
federal and state income Tax Returns of CMGI and its Subsidiaries have been
audited by the Internal Revenue Service or the appropriate state Tax Authorities
or the time for assessing and collecting income Tax with respect to such taxable
period has closed and such taxable period is not subject to review, (iii) all
Taxes due with respect to completed and settled examinations or concluded
litigation relating to CMGI or any of its Subsidiaries have been paid in full or
adequate provision has been made for any such amounts in the financial
statements of CMGI (in accordance with GAAP) and (iv) there are no material
liens for Taxes upon the assets or property of any of CMGI or its Subsidiaries
except for statutory liens for Taxes not yet due.
(c) CMGI does not know of any fact and has not taken any action
that could reasonably be expected to prevent the contributions referenced in
Section 1.2 from constituting a transaction described in Section 351 of the
Code.
2.17 Information in Proxy Statement . The proxy statement with respect
------------------------------
to the Conversion (as defined in Section 6.1) ( the "Proxy Statement") at the
date to be mailed to CMGI's shareholders and at the time of the special meeting
provided for in the Proxy Statement (i) will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading and (ii) will comply in
all material respects with the provisions of applicable federal securities laws;
provided, however, that no representation is made by CMGI with respect to
-------- -------
statements made therein based on information furnished by Compaq for inclusion
in the Proxy Statement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPAQ, DIGITAL AND AV TO NEWCO;
REPRESENTATIONS AND WARRANTIES OF NEWCO TO CMGI
Except as specifically set forth in the Compaq Disclosure Schedule
delivered to Newco and CMGI simultaneously with the execution hereof, Compaq,
Digital and AV represent and warrant to Newco, and Newco represents and warrants
to CMGI, that all of the statements contained in this Article III are true and
complete as of the date of this Agreement (or, if made as of a specified date,
as of such date), and will be true and complete as of the Closing Date as though
made on the Closing Date. Each exception and each other response set forth in
the Compaq Disclosure Schedule is identified by reference to, or has been
grouped under a heading referring to, a specific section of this Agreement and,
except as otherwise specifically stated with respect to such exception, relates
only to such referenced section. Compaq hereby guarantees to CMGI the accuracy
of the representations and warranties of Newco in this Article III.
3.1 Organization Qualification of AV . AV (a) is a corporation duly
-----------------------------------
organized, validly existing and in good standing under the laws of the state of
Delaware; (b) has all required Permits and full corporate power and authority to
carry on its business as it is now being conducted and to own the properties and
assets it now owns; and (c) is duly qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in which ownership of
property or the conduct of its business requires such qualification or, if AV is
not so qualified in any such jurisdiction, it can become so qualified in such
jurisdiction without any AV Material Adverse Effect. AV has heretofore
delivered to CMGI complete and correct copies of the certificate of
incorporation and by-laws of AV as presently in effect.
3.2 Subsidiaries . Section 3.2 of the Compaq Disclosure Schedule sets
------------
forth the name, jurisdiction of incorporation, capitalization, and the name of
each record holder of the capital stock of each Subsidiary which is part of the
AV Business and, for each Subsidiary which is material to the AV Business, the
jurisdictions in which each such Subsidiary is qualified to do business.
Section 3.2(a) of the Compaq Disclosure Schedule lists each entity which is part
of the AV Business and in which Compaq or any of its Subsidiaries has a direct
or indirect equity ownership interest and sets forth the approximate percent of
outstanding shares or other equity interests owned by Compaq, Digital and AV.
Each AV Subsidiary (a) is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation; (b) has all required
Permits and full corporate power and authority to carry on its business as it is
now being conducted and to own the properties and assets it now owns; and (c) is
duly qualified to do business as a foreign corporation in good standing in every
jurisdiction in which ownership of property or the conduct of its business
requires such qualification or, if an AV Subsidiary is not so qualified in any
such jurisdiction, it can become so qualified in such jurisdiction without any
AV Material Adverse Effect. AV has heretofore made available to CMGI and Newco
complete and correct copies of the Organizational Documents, of each AV
Subsidiary, as presently in effect.
3.3 Capitalization .
--------------
(a) As of the date hereof, the authorized capital stock of AV
consists of (i) 1,000 shares of AV Common Stock of which 1,000 shares are
issued, outstanding and owned by Digital, all of which are duly authorized,
validly issued, fully paid and nonassessable and were not issued in violation of
any preemptive or similar rights of any Person.
(b) Except as set forth above and except for, the transactions
contemplated by this Agreement and the options set forth in Section 3.3(f) of
the Compaq Disclosure Schedule, as of the date hereof, (i) there are no
securities outstanding which are convertible into or exercisable or exchangeable
for shares of capital stock of AV or any AV Subsidiary, and (ii) there are no
outstanding options, rights, Contracts, warrants, subscriptions, conversion
rights or other agreements or commitments pursuant to which AV or any AV
Subsidiary may be required to purchase, redeem, issue or sell any shares of
capital stock or other securities of AV or any AV Subsidiary (collectively,
"Options").
(c) The authorized, issued and outstanding capital stock of, or
other equity interest in, each of the AV Subsidiaries and the names of the
holders of record of the capital stock or other equity interest in each such AV
Subsidiary, in each case as of the date hereof, are set forth in Section 3.3(c)
of the Compaq Disclosure Schedule. The issued and outstanding shares of capital
stock of, or other equity interest in, each of the AV Subsidiaries have been
duly authorized and validly issued, and, with respect to capital stock, are
fully paid and non-assessable, and were not issued in violation of any
pre-emptive or similar rights of any Person. All the issued and outstanding
shares or other equity interests of the AV Subsidiaries are owned beneficially
as set forth therein, free and clear of all Liens.
(d) Except as set forth in Section 3.3(d) of the Compaq Disclosure
Schedule, there are no outstanding or authorized stock appreciation, phantom
stock or similar rights with respect to AV or any AV Subsidiary.
(e) There are no agreements to which AV or any AV Subsidiary are
party or by which it is bound with respect to the voting (including without
limitation voting trusts, or proxy), registration under the Securities Act, or
sale or transfer (including without limitation agreements relating to
pre-emptive rights, rights of first refusal, co-sale rights or "drag along"
rights) of any securities of AV or any AV Subsidiary.
(f) Section 3.3(f) of the Compaq Disclosure Schedule sets forth a
complete list of (i) all outstanding Options to purchase shares of capital stock
of AV or any AV Subsidiary, indicating the holder thereof, the number of shares
subject to each such Option, the exercise price, date of grant, vesting
schedule, expiration date and terms regarding the acceleration of vesting, and
(ii) all stock option plans and other equity-related plans of AV or any AV
Subsidiary.
(g) As of the date hereof, Options to purchase an aggregate of
9,794,554 shares of AV Common Stock are outstanding.
3.4 Authorization of Agreement . Compaq, Digital and AV (collectively,
--------------------------
"CDA") have all requisite corporate power and authority to execute and deliver
this Agreement and each instrument required hereby to be executed and delivered
by them at the Closing, to perform their obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery by CDA of this Agreement and each instrument required
hereby to be executed and delivered by them at the Closing and the performance
of their obligations hereunder and thereunder have been duly and validly
authorized by all requisite corporate action on the part of CDA. This Agreement
has been duly executed and delivered by CDA and, assuming due authorization,
execution and delivery hereof by the Buyers, constitutes legal, valid and
binding obligations of CDA, enforceable against CDA in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium or similar
Laws now or hereafter in effect relating to creditors' rights generally or to
general principles of equity.
3.5 Consents and Approvals No Violations . Except for the Consents as
-------------------------------------
may be required under the HSR Act and the filing of the Certificate of Merger as
required by the DGCL, none of the execution, delivery or performance of this
Agreement by CDA, or the consummation by CDA of any of the transactions
contemplated hereby will (i) conflict with or result in any breach of any
provision of the Organizational Documents of CDA, (ii) require any Consent of
any Governmental Entity, (iii) require any Consent of any other Person
(including consents from parties to loans, Contracts, leases and other
agreements to which AV, Digital or any affiliate of AV is a party), (iv) or
result in a violation or breach of, or constitute (with or without due notice or
the passage of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any Contract, or (v) violate any Law, Order or
Permit applicable to CDA or any of their properties or assets, excluding from
the foregoing clauses (iii), (iv) and (v) such absences of consents, violations,
breaches or defaults which would not, individually or in the aggregate, have an
AV Material Adverse Effect or adversely affect CDA's ability to consummate the
Transaction.
3.6 Financial Statements . Compaq has delivered to CMGI and Newco
---------------------
copies of the following draft financial statements prepared by management on a
carve-out basis which have not been reviewed or audited by independent
accountants (collectively the "AV Financial Statements"):
(a) statements of operations and cash flows for the years ended
December 31, 1996 and December 31, 1997 and the period commencing January 1,
1998 and ending June 11, 1998 for the AltaVista division of Digital;
(b) a balance sheet as at December 31, 1997 for the AltaVista
division of Digital; and
(c) a balance sheet as at December 31, 1998 and statements of
operations and cash flows for the period commencing June 12, 1998 and ending
December 31, 1998 for the AltaVista division of Digital.
Except for (a) the fact that the AV Financial Statements do not contain all of
the required adjustments relating to the final allocation of purchase price in
connection with the acquisitions by Compaq of Digital, (b) any non-cash
compensatory charges related to stock compensation arrangements, (c) other final
adjustments, which other final adjustments will not be material in amount, and
(d) the fact that the notes are in draft form and not complete, the AV Financial
Statements have been prepared in conformity with GAAP on a carve-out basis and
present fairly the financial position of the AltaVista division as at their
respective dates and the statements of operations and cash flows for the periods
presented therein.
3.7 Absence of Certain Changes or Events . Since December 31, 1998 (i)
------------------------------------
the AV Business has been carried on only in the ordinary and usual course
consistent with past practice and (ii) there has not occurred any event,
development or change which, individually or in the aggregate, has resulted in
or is reasonably likely to result in an AV Material Adverse Effect.
3.8 Litigation . There is no Litigation pending, or to the Knowledge
----------
of Compaq, Digital or AV, threatened, against or involving AV, any AV Subsidiary
or any of their respective assets or the AV Business, which is not a Retained
Liability (as defined in the Assignment Agreement).
3.9 Compliance with Laws . Each of CDAS is, and since January 1, 1997
---------------------
has been, in compliance, with respect to AV Business, with all applicable Laws,
except for any violations which would not reasonably be expected to have an AV
Material Adverse Effect. Since January 1, 1997, none of CDAS has received any
notice or other communication (whether written or oral) from any Person
regarding any actual, alleged, possible or potential violation of or failure to
comply with any Law with respect to the AV Business, except in connection with
Retained Liabilities (as defined in the Assignment Agreement) and for violations
which do not, and would not reasonably be expected to have, individually or in
the aggregate, an AV Material Adverse Effect.
3.10 Environmental Matters . Except as is not reasonably likely to
----------------------
result in an AV Material Adverse Effect:
(a) AV, each of the AV Subsidiaries and the AV Business (i) have
been and are in compliance with all applicable Environmental Laws; (ii) have
obtained all Permits required for the operation of their businesses by any
applicable Environmental Law (collectively "Environmental Permits") and all such
Environmental Permits are in full force and effect, no appeal nor any other
action is pending to revoke any such Environmental Permit; and (iii) are in
compliance with all such Environmental Permits, and have filed in a timely
manner all applications to renew such Environmental Permits or to obtain new
Environmental Permits to the extent such applications are currently required.
(b) There has been no Release of any Hazardous Material that would
reasonably be likely to form the basis of any Environmental Claim against AV or
any AV Subsidiary at the properties owned or leased by AV, any AV Subsidiary or
the AV Business (the "AV Properties"). AV Properties are not, to the Knowledge
of CDAS adversely affected by any Release or threatened Release of a Hazardous
Material originating or emanating from any other property. There were no
Releases of Hazardous Materials on properties formerly owned or operated by AV,
any AV Subsidiary or the AV Business, or any predecessors thereof, during the
period of such operation or ownership, that would reasonably be likely to result
in an Environmental Claim against AV or any AV Subsidiary.
(c) Neither AV, any AV Subsidiary nor AV Business has
manufactured, used, generated, stored, treated, transported, disposed of,
released, or otherwise managed any Hazardous Material at any of the AV
Properties.
(d) Neither AV, any AV Subsidiary nor AV Business: (i) has any
liability for response or corrective action for natural resources damage, or any
other harm pursuant to any Environmental Law, (ii) is subject to, or has
Knowledge of, any Environmental Claim involving AV or any AV Business, or (iii)
has any Knowledge of any condition or occurrence at any of the AV Properties
which could form the basis of an Environmental Claim against AV, any AV
Subsidiary or any AV Business, or any of the AV Properties.
(e) The AV Properties are not subject to any, and AV has no
Knowledge of any, imminent restriction on the ownership, occupancy, use or
transferability of the AV Properties in connection with any (i) Environmental
Law or (ii) Release or threatened Release of any Hazardous Material.
(f) There are no conditions or circumstances at the AV Properties
that pose a risk to the environment or the health and safety of any Person, or
would require any remedial action.
(g) Neither AV, any AV Subsidiary nor AV Business has been subject
to any inquiry or request for information related to its disposal, treatment,
storage or recycling, or the arrangement for said activities, of any Hazardous
Material or waste, at any property other than the AV Properties.
(h) To the Knowledge of AV, neither AV, any AV Subsidiary nor AV
Business or any predecessor thereto has disposed, recycled, treated, stored, or
arranged for said activities, at any property that is listed or proposed for
listing on the Federal National Priorities List, the Federal CERCLIS list, or
any list compiled pursuant to state statutes or Laws that are analogous to the
Federal Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. 9601 et seq.
(i) The AV Properties do not contain any underground storage
tanks, landfills, electrical equipment containing polychlorinated biphenyls,
surface impoundments, friable asbestos-containing materials, or hazardous waste
treatment, storage or disposal units that either have or require a Permit
pursuant to any Law.
(j) Since January 1, 1997, neither AV nor any AV Business has
received communication (written or oral) that alleges that AV or any AV Business
is not in compliance with any Environmental Law.
3.11 Intellectual Property .
----------------------
(a) To the Knowledge of CDAS, CDAS with respect to the AV Business
own or otherwise have the right to use all Intellectual Property necessary to
(a) provide the services currently provided, and currently planned to be
provided, by the AV Business, AV and its Subsidiaries to third parties; (b) use,
manufacture, copy, modify, market and distribute the products currently, and
currently planned to be, manufactured, marketed, sold, licensed or otherwise
distributed by the AV Business, AV and its Subsidiaries; and (c) to operate the
internal systems of the AV Business, AV and its Subsidiaries that are material
to the business or operations of the AV Business, AV and its Subsidiaries,
including without limitation, computer hardware systems and software
applications. Except for third party licenses that are not assignable, each item
of such Intellectual Property will be owned or available for use by Newco
immediately following the Closing on substantially identical terms and
conditions as it was available to the AV Business immediately prior to the
Closing, except where the failure to own or have available for use such item,
individually or in the aggregate, could not reasonably be expected to result in
an AV Material Adverse Effect. For purposes of this Agreement, "Intellectual
Property" shall mean any and all of the following: trademarks, service marks,
trade names, Internet domain names, designs, logos, slogans, and general
intangibles of like nature, together with all goodwill, registrations and
applications related to the foregoing; patents and patent applications
(including any continua-tions, divisions, continuations-in-part, renewals,
reissues, and applications for any of the foregoing), industrial design
registrations and applications (including any renewals thereof); copyrights
(including any registrations and applications therefor ); software; data;
documentation; "mask works" (as defined under 17 USC 901) and any
registrations and applications for "mask works"; technology, trade secrets and
other confidential information, know-how, proprietary processes, formulae,
algorithms, models and methodologies; and other property of like nature.
(b) To the Knowledge of CDAS, the activities and the conduct of
the AV Business do not infringe upon, violate or constitute the unauthorized use
of the intellectual property rights of any third party. There is no pending
or, to the Knowledge of CDAS, threatened (in writing) Claim before any court,
agency, arbitral tribunal, or registration authority in any jurisdiction (i)
involving any item of Intellectual Property owned or used by CDAS with respect
to the AV Business, (ii) alleging that the activities or the conduct of the AV
Business does or will infringe upon, violate or constitute the unauthorized use
of the intellectual property rights of any third party or (iii) challenging the
ownership, use, validity, enforceability or registrability of any Intellectual
Property by CDAS with respect to the AV Business, except for such Claims as have
not resulted and could not reasonably be expected to result, individually or in
the aggregate, in an AV Material Adverse Effect. There are no settlements,
forebearances to sue, consents, judgments, or orders or similar obligations
(other than license agreements in the ordinary course of business) which (a)
restrict the rights of CDAS to use any material Intellectual Property with
respect to the AV Business, (b) restrict the AV Business in order to accommodate
a third party's intellectual property rights or (c) permit third parties to use
any material Intellectual Property owned by CDAS with respect to the AV
Business.
(c) To the Knowledge of CDAS, no third party is making
unauthorized use of or infringing in any material respect upon any material
Intellectual Property owned by CDAS with respect to the AV Business.
(d) CDAS have taken commercially reasonable actions to protect
each item of material Intellectual Property owned by any of them with respect to
the AV Business, except where the failure to take such actions has not resulted
and could not reasonably be expected to result, individually or in the
aggregate, in an AV Material Adverse Effect.
(e) None of CDAS is in violation of any agreement relating to any
Intellectual Property with respect to the AV Business, except for such
violations as have not resulted, and could not reasonably be expected to result,
individually or in the aggregate, in an AV Material Adverse Effect. The
consummation of the transactions contemplated hereby will not result in the loss
or impairment of the rights of any of CDAS to own, use or enforce any
Intellectual Property used in its business or operations with respect to the AV
Business, except where such loss or impairment could not reasonably be expected
to result, individually or in the aggregate, in an AV Material Adverse Effect.
(f) To the Knowledge of CDAS, none of CDAS has disclosed the
source code for any of the software owned by any of CDAS and used in the AV
Business (the "Software") or other confidential information constituting,
embodied in or pertaining to the Software to any person or entity, except
pursuant to nondisclosure agreements, and CDAS have taken reasonable
commercially reasonable measures to prevent disclosure of such source code.
3.12 Year 2000 . All Systems used in the AV Business or used by AV or
----------
its Subsidiaries are, or will be prior to August 31, 1999, Year 2000 Compliant
and, to the Knowledge of CDAS, all Systems used by the material suppliers and
facilities providers of the AV Business are Year 2000 Compliant, except in each
case for failures to be Year 2000 Compliant that, individually or in the
aggregate, have not resulted and could not reasonably be expected to result in
an AV Material Adverse Effect. For purposes of this Agreement, "Year 2000
Compliant" means that the Systems (i) accurately receive, record, store,
provide, recognize and process date data (including calculating, comparing and
sequencing) from, into and between the twentieth and twenty-first centuries, the
years 1999 and 2000, and leap year calculations, (ii) operate accurately with
otherwise compatible software and hardware that use four-digit date format for
representation of the year, and (iii) will not malfunction, cease to function or
provide invalid or incorrect results as a result of (x) the change of years from
1999 to 2000, (y) date data, including date data which represents or references
different centuries, different dates during 1999 and 2000, or more than one
century or (z) the occurrence of any particular date.
3.13 ERISA Compliance .
-----------------
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) "Employee Benefit Plan" means any "employee pension
benefit plan" (as defined in Section 3(2) of ERISA), any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and any other written or
oral plan, agreement or arrangement (excluding agreements with individual
employees) involving compensation, including without limitation insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement compensation maintained
or contributed to by AV, any AV Subsidiary, or any ERISA Affiliate with respect
to present or former employees of AV or any AV Subsidiary.
(ii) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
(iii) "ERISA Affiliate" means any entity which is, or at any
applicable time was, a member of (1) a controlled group of corporations (as
defined in Section 414(b) of the Code), (2) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (3) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or included
AV or any of its Subsidiaries.
(b) Section 3.13(b) of the Compaq Disclosure Schedule contains a
complete and accurate list of all Employee Benefit Plans. All Employee Benefit
Plans are in compliance with all applicable provisions of ERISA and the Code.
AV, the AV Subsidiaries, and the Employee Benefit Plans do not have any
liabilities or obligations with respect to the Employee Benefit Plans, whether
or not accrued, contingent or otherwise, except (a) as previously disclosed in
writing to CMGI, and (b) for instances of noncompliance or liabilities or
obligations that would not, individually or in the aggregate, have an AV
Material Adverse Effect. Other than acceleration of vesting of options, no
employee of AV or any of its Subsidiaries will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any Employee Benefit Plan as a result of the transactions contemplated by
this Agreement, either alone or in combination with another event.
(c) Neither AV, any of its Subsidiaries, nor any ERISA Affiliate
has ever maintained an Employee Benefit Plan subject to Section 412 of the Code
or Title IV of ERISA.
(d) No Employee Benefit Plan is funded by, associated with or
related to a "voluntary employee's beneficiary association" within the meaning
of Section 501(c)(9) of the Code.
(e) Section 3.13(e) of the Compaq Disclosure Schedule discloses
each: (i) agreement with any director, executive officer or other key employee
of AV or any of the AV Subsidiaries (A) the benefits of which are contingent, or
the terms of which are materially altered, upon the occurrence of a transaction
involving AV or any of the AV Subsidiaries of the nature of any of the
transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such director, executive
officer or key employee; (ii) agreement, plan or arrangement under which any
person may receive payments from AV or any of the AV Subsidiaries that may be
subject to the tax imposed by Section 4999 of the Code or included in the
determination of such person's "parachute payment" under Section 280G of the
Code; and (iii) agreement or plan binding AV or any of the AV Subsidiaries,
including without limitation any stock option plan, stock appreciation right
plan, restricted stock plan, stock purchase plan, severance benefit plan or
Employee Benefit Plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(f) All Options are subject to a right of first refusal and a
buyback right upon termination of employment of the optionee.
3.14 Brokers . No broker, finder, investment banker or other Person
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(other than Greenhill & Co., LLC and Morgan Stanley & Co. Incorporated) is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of any of CDAS.
3.15 Opinion of Financial Advisor . The Board of Directors of Compaq
------------------------------
has received the opinions of Greenhill & Co., LLC and Morgan Stanley & Co.
Incorporated, Compaq's financial advisor, substantially to the effect that the
consideration to be paid by CDAS for the shares which Digital is to receive
pursuant to this Agreement is fair to Compaq from a financial point of view.
3.16 Taxes .
-----
(a) Each of the Companies has timely filed all material Tax
Returns that it was required to file, and all such Tax Returns were correct and
complete in all material respects. Each group of corporations with which any of
the Companies has filed (or was required to file) consolidated, combined,
unitary or similar Tax Returns, other than the Compaq Group (an "Affiliated
Group") has timely filed all material Tax Returns that it was required to file
with respect to any period in which any of the Companies was a member of such
Affiliated Group (an "Affiliated Period"), and all such Tax Returns were true,
correct and complete in all material respects. Each of the Companies has paid
all material Taxes (whether or not shown on such Tax Returns) that were due and
payable and each Affiliated Group has paid all material Taxes (whether or not
shown on such Tax Returns) that were due and payable with respect to all
Affiliated Periods. All Taxes that any of the Companies is or was required by
law to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper taxing authority, except where the
failure to withhold or collect could not reasonably be expected to have an AV
Material Adverse Effect.
(b) Compaq's taxable year ends November 30. Each of AV, SDC and
ZIP2 joined the Compaq Group in the taxable year beginning December 1, 1998. No
examination or audit of any Tax Return of the Companies or any Affiliated Group
with respect to an Affiliated Period by any Governmental Entity is currently in
progress or, to the Knowledge of the Companies and the members of any Affiliated
Group, threatened or contemplated. None of the Companies nor the members of any
Affiliated Group has been informed by any jurisdiction that the jurisdiction
believes that any of the Companies or the Affiliated Group was required to file
any Tax Return that was not filed.
(c) None of the Companies or any Affiliated Group has waived any
statute of limitations with respect to Taxes or agreed to an extension of time
with respect to a Tax assessment or deficiency.
(d) None of the Companies is a "consenting corporation" within the
meaning of Section 341(f) of the Code, and none of the assets of any of the
Companies is subject to an election under Section 341(f) of the Code.
(e) None of the assets, or any beneficial interest therein, to be
transferred to Newco pursuant to this Agreement, has been transferred by Digital
to any of its Subsidiaries prior to the Closing.
(f) None of the Companies has any actual or potential liability
for any Taxes of any person (other than the Companies) under Treasury Regulation
Section 1.1502-6 (or any similar provision of federal, state, local, or foreign
law), or as a transferee or successor, by contract, or otherwise.
(g) None of the Companies has undergone a change in its method of
accounting resulting in an adjustment to its taxable income pursuant to Section
481(h) of the Code.
(h) None of the Companies is or has been required to make a basis
reduction pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury
Regulation Section 1.337(d)-2(b).
(i) None of Compaq, Digital or the Companies knows of any fact or
has taken any action that could reasonably be expected to prevent the
contributions referenced in Section 1.2 from constituting a transaction
described in Section 351 of the Code.
3.17 Information in Proxy Statement . The information to be provided
--------------------------------
to CMGI by Compaq for inclusion in the Proxy Statement to be mailed to CMGI's
shareholders with respect to the Conversion will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made in the
information to be provided by Compaq, in the light of the circumstances under
which they were made, not misleading.
3.18 Undisclosed Liabilities . None of CDAS, with respect to the AV
------------------------
Business, has any liability (whether absolute or contingent), except for (a)
liabilities shown on the most recent balance sheet referred to in Section 3.6
(the "Most Recent Balance Sheet"), (b) liabilities which have arisen since the
date of the Most Recent Balance Sheet in the ordinary course of business, (c)
contractual and other liabilities incurred in the ordinary course of business
which are not required by GAAP to be reflected on a balance sheet, (d)
liabilities of SDC and ZIP2, (e) compensation expense in connection with the
issuance of Options and (f) liabilities which would not reasonably be expected,
individually or in the aggregate, to have an AV Material Adverse Effect.
3.19 Assets . Except as would reasonably not be expected to have an AV
------
Material Adverse Effect, Newco, after the consummation of the Transaction, will
own or lease all tangible assets necessary for the conduct of the AV Business as
presently conducted. Each such tangible asset which is personal property is
free from material defects, has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear) and is suitable for the purposes for which it is presently used,
other than defects and failures which would not, individually or in the
aggregate, have an AV Material Adverse Effect. Except as would reasonably not
be expected to have an AV Material Adverse Effect, no material asset of CDAS
with respect to the AV Business is subject to any Lien.
3.20 Owned Real Property . Section 3.20 of the Compaq Disclosure
---------------------
Schedule lists all real property owned by any of CDAS which is used primarily in
the AV Business. With respect to each parcel of such owned real property,
Newco, after the consummation of the Transaction, will have good and clear
record and marketable title to such parcel, free and clear of any Lien, except
for easements, covenants and other restrictions which do not materially impair
the uses and occupancy of such parcel, and a lease to a portion of property
referenced in the Compaq Disclosure Schedule.
3.21 Contracts .
---------
(a) Section 3.21 of Compaq Disclosure Schedule lists the following
agreements (written or oral) to which any of CDAS with respect to the AV
Business is a party as of the date of this Agreement:
(i) any agreement, or group of related agreements, which
involves more than $1,000,000;
(ii) any agreement under which the AV Business, AV or any AV
Subsidiary has incurred, assumed or guaranteed, or may assume or guarantee,
indebtedness for borrowed money (including capitalized lease obligations) of
more than $1,000,000;
(iii) any agreement restricting the AV Business, AV or any AV
Subsidiary from competing in any manner;
(iv) any agreement with an officer or director of the AV
Business; and
(v) any agreement under which the consequences of a default
or termination would be reasonably expected to have an AV Material Adverse
Effect.
(b) Compaq has made available to CMGI a copy of each agreement
listed in Section 3.21 of the Compaq Disclosure Schedule. None of CDAS, nor, to
the Knowledge of CDAS, any other party, is in breach or violation of, or default
under, any such agreement, which would reasonably be expected to result in an AV
Material Adverse Effect.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Funding of the AV Business .
------------------------------
(a) During the period prior to the Closing Date, Compaq will
provide cash for the AV Business in monthly amounts equal to one-third of the AV
Budget (as previously furnished to CMGI) for the applicable quarter. Any
funding in excess of that amount shall be subject to agreement by CMGI and
Compaq.
(b) On the Closing Date and prior to the Effective Time, Compaq
will make a cash capital contribution to the AV Business or the AV Business will
pay a cash dividend (or otherwise transfer cash) to Compaq such that the
remainder of the cash and cash equivalents of the AV Business minus its
indebtedness for borrowed money will be equal to zero.
4.2 Conduct of the AV Business . Except as set forth in Section 4.2 of
--------------------------
the Compaq Disclosure Schedule, during the period from the date of this
Agreement to the Closing Date (unless CMGI shall otherwise agree in writing and
except as otherwise contemplated by this Agreement), CDAS will conduct the
operations of the AV Business in the ordinary course of business consistent with
past practice and shall use all reasonable efforts to preserve intact its
current business organizations, keep available the services of their current
officers and employees, maintain its material contracts and preserve its
relationships with customers, suppliers and others having business dealings with
it. Without limiting the generality of the foregoing, and except as otherwise
contemplated by this Agreement, or as set forth in Section 4.2 of the Compaq
Disclosure Schedule, or as agreed to in writing by CMGI, CDAS with respect to
the AV Business agree that:
(a) Issuance of Securities. Except for issuing options to
------------------------
purchase up to 500,000 shares of stock under the AltaVista 1999 Stock Option
Plan (upon terms to be mutually approved by CMGI), neither AV nor any AV
Subsidiary shall issue, sell, grant, dispose of or authorize or propose the
issuance, sale or disposition of (i) any additional shares of capital stock of
any class, or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for any shares of capital stock, or any
rights, warrants, options, calls, commitments or any other agreements of any
character to purchase or acquire any shares of capital stock or any securities
or rights convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of capital stock or (ii) any other securities in
respect of, in lieu of, or in substitution for, shares outstanding on the date
hereof.
(b) Restructuring. Neither AV nor any AV Subsidiary shall adopt a
-------------
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization.
(c) Governing Documents. Except for an amendment to the AV
--------------------
Certificate of Incorporation to increase its authorized common stock, AV shall
not adopt any amendments to its Organizational Documents, or alter through
merger, liquidation, reorganization, restructuring or in any other fashion its
corporate structure or ownership of any AV Subsidiary.
(d) No Acquisitions. None of CDAS, with respect to the AV
----------------
Business, shall acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, limited liability company, partnership,
association or other business organization or division thereof or (ii) any
assets that, individually or in the aggregate, are material to the AV Business.
(e) No Dispositions. Except in the ordinary course of business
----------------
consistent with past practice, neither AV nor any AV Subsidiary shall sell,
lease, license or otherwise encumber or subject to any Lien or otherwise dispose
of any of its properties or assets with respect to the AV Business.
(f) Capital Expenditures. None of CDAS shall commit to make any
---------------------
capital expenditures with respect to the AV Business relating to a single
project in excess of $1,000,000 or in the aggregate in excess of $15,000,000.
(g) Employee Matters. Except as required by Law or in accordance
-----------------
with this Agreement, none of CDAS, with respect to the AV Business, shall (i)
increase the compensation of any of its respective employees, other than
non-officer employees in the ordinary course of business consistent with past
practice as to both frequency and amount, (ii) amend or enter into any Contract
with any of its respective employees regarding his or her employment,
compensation or benefits, other than offer letters to prospective employees in
the ordinary course of business and stock options permitted by Section 4.2(a),
or (iii) adopt any employee benefit plan as defined in Section 3(3) of ERISA
("Plan"), arrangement or policy which would become a Plan or amend any Plan.
(h) Liens. None of CDAS shall create, incur or assume any
-----
material Lien on any of their material assets with respect to the AV Business.
(i) Claims. None of CDAS shall settle any material claim, action
------
or proceeding involving money damages or waive or release any material rights or
claims with respect to the AV Business, except in the ordinary course of
business.
(j) Representations and Warranties. Neither Compaq nor AV shall
--------------------------------
(i) take, or agree or commit to take any action that would make any
representation and warranty of Compaq and AV hereunder inaccurate in any
material respect on the Closing Date, or (ii) omit, or agree to omit, to take
any action necessary to prevent any such representation or warranty from being
inaccurate in any material respect on the Closing Date; provided, however, that
-------- -------
Compaq and AV shall be permitted to take or omit to take such action which can
be cured, and in fact is cured, at or prior to the Closing Date.
(k) Intellectual Property. None of CDAS shall transfer or license
---------------------
to any Person any rights to Intellectual Property used primarily in the AV
Business, other than to customers in the ordinary course of business.
(l) Contracts. None of CDAS shall enter into (i) any Contract
---------
which, if entered into prior to the date of this Agreement, would have been
required to be disclosed in Section 3.21 of the Compaq Disclosure Schedule or
(ii) any Contract with a party other than a majority-owned CMGI Subsidiary for
services to be used in the AV Business that could be provided on reasonably
comparable terms from a majority-owned CMGI Subsidiary.
(m) No Agreements. None of CDAS shall enter into any Contract to
--------------
do any of the foregoing.
4.3 Conduct of Business of CMGI. CMGI shall not (i) take, or agree or
----------------------------
commit to take any action that would make any representation and warranty of
CMGI hereunder inaccurate in any material respect on the Closing Date, or (ii)
omit, or agree to omit, to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect on the
Closing Date; provided, however, that CMGI shall be permitted to take or omit to
-------- -------
take such action which can be cured, and in fact is cured, at or prior to the
Closing Date.
ARTICLE V
SALE OF SHARES; BOARD MEMBERSHIP; VOTING AGREEMENT; STANDSTILL
5.1 Lock-Up . Without the prior written consent of CMGI, neither
-------
Compaq nor any of its Subsidiaries may offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge, transfer or grant any rights with
respect to, or enter into any short sale or otherwise hedge against
(collectively, a "Share Disposition") any Acquisition Shares on or prior to the
first anniversary of the Closing Date; provided, however, that the provisions of
-------- -------
this Section 5.1 shall not prohibit any Share Disposition among Compaq and its
Subsidiaries, provided that any such transferee agrees to be bound by the terms
--------
of this Agreement, including without limitation this Section 5.1. After the
first anniversary of the Closing Date, Compaq or its Subsidiaries may transfer
or otherwise dispose of the Acquisition Shares only: (i) pursuant to the
Registration Rights Agreement, (ii) pursuant to Rule 144 promulgated under the
Securities Act, to the extent applicable, or (iii) pursuant to privately
negotiated sales; provided that (A) neither Compaq nor any of its Subsidiaries
--------
shall knowingly sell a number of Acquisition Shares equal to more than 5% of the
then outstanding shares of Common Stock of CMGI to any single Person (or
affiliates of such Person) other than to a broker-dealer for resale, (B) during
the period from twelve months to eighteen months after the Closing, Compaq and
its Subsidiaries shall not sell more than 50% of the Acquisition Shares and
during the period from eighteen months to twenty-four months after the Closing,
Compaq and its Subsidiaries shall not sell more than 50% of the Acquisition
Shares, and (C) Compaq and its Subsidiaries shall not, other than pursuant to an
underwritten public offering pursuant to the Registration Rights Agreement, sell
a number of Acquisition Shares on any day equal to more than 10% of the average
daily trading volume for CMGI Common Stock during the prior week.
5.2 Rights of First Offer . In the event of a proposed Share
------------------------
Disposition to any single Person (or affiliates of such Person) of 3,000,000 or
more Acquisition Shares (subject to appropriate adjustment in the case of a
stock split, stock dividend, reclassification or similar event) by (i) Compaq,
(ii) Subsidiaries of Compaq who shall have acquired Acquisition Shares from
Compaq or any other Subsidiaries of Compaq or (iii) Compaq and one or more of
such Subsidiaries together, other than in connection with a registration
pursuant to the Registration Rights Agreement, Compaq or such Subsidiary shall
first offer such Acquisition Shares to CMGI by delivery of a written notice (the
"Offer Notice") to CMGI specifying the number of Acquisition Shares proposed to
be sold or transferred, the price to be paid for such shares and the other
material terms and conditions of the proposed sale. CMGI shall have the right to
purchase all but not less than all of the Acquisition Shares specified in the
Offer Notice, which right may be exercised only by delivery to Compaq within 10
business days after the Offer Notice shall have been delivered to CMGI of a
written notice (the "Acceptance Notice) setting forth its acceptance of Compaq's
offer. In the event that CMGI does not deliver an Acceptance Notice to Compaq
by the close of business on the tenth business day following Compaq's delivery
of an Offer Notice (the "Last Acceptance Day"), Compaq (or Compaq's Subsidiaries
or Compaq and its affiliates) shall be free to sell or transfer up to the number
of Acquisition Shares specified in the Offer Notice for a period of 90 days
after the Last Acceptance Day to one or more Persons; provided, however, that
-------- -------
any Acquisition Shares not sold within such 90 day period shall, if proposed to
be sold or transferred in sale or transfer of 3,000,000 or more Acquisition
Shares (subject to appropriate adjustment in the case of stock split, stock
dividend, reclassification or similar event), shall thereafter be offered to
CMGI in accordance with this Section 5.2. In the event that CMGI delivers an
Acceptance Notice prior to the Last Acceptance Day, the closing of the purchase
of Acquisition Shares by CMGI shall take place 30 days after the date of
Acceptance Notice.
5.3 Registration Rights . Compaq and CMGI will at the Closing enter
--------------------
into a Registration Rights Agreement substantially in the form attached hereto
as Exhibit D (the "Registration Rights Agreement").
----------
5.4 Board Designee .
---------------
(a) The Board of Directors of CMGI (the "Board"), shall elect,
effective as of the Effective Time, a member of the Board designated by Compaq
(the "Compaq Designee"). In connection with any meeting of the stockholders of
Newco at which members of the Board are to be elected and at which the term of
the Compaq Designee expires, the Board, or the applicable committee, shall
nominate and recommend to its stockholders one Compaq Designee. In the event
that a Compaq Designee dies, retires, or is otherwise removed from the Board,
the Board shall elect as a replacement a new Compaq Designee. If at any time
Compaq or an affiliate of Compaq owns less than 5% of the issued and outstanding
stock of CMGI, the Compaq Designee shall resign from the Board, and Compaq shall
no longer have any rights under this section to designate a member of the Board.
(b) The Board of Directors of Newco (the "AV Board"), shall elect,
effective as of the Effective Time, a member of the AV Board designated by
Compaq (the "Compaq AV Designee"). In connection with any meeting of the
stockholders of Newco at which members of the AV Board are to be elected and at
which the term of the Compaq AV Designee expires, the Board or the applicable
committee shall nominate and recommend to its stockholders one Compaq AV
Designee. In the event that a Compaq AV Designee dies, retires, or is otherwise
removed from the AV Board, the AV Board shall elect as a replacement a new
Compaq AV Designee. If at any time Compaq or an affiliate of AV Compaq owns
less than 5% of the issued and outstanding stock of Newco, the Compaq AV
Designee shall resign from the AV Board and Compaq shall no longer have any
rights under this section to designate a member of the AV Board.
5.5 Voting Agreement . On the date hereof David S. Wetherell is
-----------------
entering into a Voting Agreement.
5.6 Standstill . Until June 30, 2009, neither Compaq nor any of its
----------
Subsidiaries shall, alone with others, in any manner (i) acquire or agree to
acquire, or make any proposal (or request permission to make any proposal) to
acquire any securities or indirect rights, warrants to acquire any securities,
or any significant portion of the assets of, CMGI (other than property
transferred in the ordinary course of CMGI's business), (ii) solicit or propose
to solicit proxies from stockholders of CMGI, (iii) form, join or in any way
participate in "group" (within the meaning of Section 13d(3) of the Exchange
Act) with respect to any voting securities of CMGI, (iv) publicly announce or
refer to any possible business combination with CMGI or disclose any intention,
plan or arrangement for such a business combination, (v) participate in any
discussions or negotiations with any third party regarding, or furnish a third
party with information with respect to, any such business combination, (vi) make
any request or proposal to amend, modify or waive any provisions of this Section
5.6 except in a non-public and confidential matter or (vi) assist any other
person in doing any of the foregoing; provided, however, that the provisions of
-------- -------
this Section 5.6 shall cease to be binding on Compaq and its Subsidiaries in the
event that (a) any competitor of Compaq acquires more than 10% of the
outstanding voting securities of CMGI, (b) a third party makes a bona fide
unsolicited offer, which is publicly announced, to acquire more than 10% of the
outstanding voting securities of CMGI, or (c) CMGI enters into an agreement
providing for a merger or combination as a result which all or substantially all
the individuals and entities that are holders of voting securities of CMGI
immediately prior to such merger or combination own less than a majority of the
outstanding voting securities of the surviving or acquiring entity immediately
after such merger or consolidation.
5.7 Investment Company Act . For so long as Compaq and its
------------------------
Subsidiaries own 5% or more of the outstanding common stock of CMGI, CMGI shall
use its reasonable best efforts to avoid becoming an investment company (as
defined in Section 3(a) of the Investment Company Act).
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Stockholders' Meeting .
----------------------
(a) CMGI, acting through its Board of Directors, shall, in
accordance with applicable law, as promptly as practicable following the
execution of this Agreement:
(i) duly call, give notice of, convene and hold a special
meeting of its stockholders for the purpose of considering and taking action
upon the approval of the conversion of the Series D Preferred Stock into CMGI
Common Stock (the "Conversion");
(ii) prepare and file with the SEC a preliminary form of the
Proxy Statement relating to the Conversion and use its best efforts to obtain
and furnish the information required by the SEC to be included in the Proxy
Statement and, after consultation with Compaq, to respond promptly to any
comments made by the SEC with respect to the preliminary form of the Proxy
Statement;
(iii) file a definitive form of the Proxy Statement
reflecting compliance with comments and requests of the SEC in accordance with
the Exchange Act as CMGI and Compaq shall deem appropriate;
(iv) cause a definitive Proxy Statement, including any
amendment or supplement thereto to be mailed to its stockholders, provided that
--------
no amendment or supplement to such Proxy Statement will be made by CMGI without
consultation with Compaq and its counsel;
(v) the Proxy Statement shall include therein (x) the
recommendation of CMGI's Board of Directors that stockholders of CMGI vote in
favor of the Conversion; and
(vi) use all reasonable efforts to solicit from its
stockholders proxies in favor of the Conversion.
(b) Compaq will provide CMGI with the information concerning
Compaq and AV required by the Exchange Act to be included in the Proxy
Statement.
(c) Each of CMGI and Compaq shall consult and confer with the
other and the other's counsel regarding the Proxy Statement and each shall have
the opportunity to comment on such Proxy Statement and any amendments and
supplements thereto before the Proxy Statement, and any amendments or
supplements thereto, are filed with the SEC or mailed to CMGI stockholders.
Each of CMGI and Compaq will provide to the other copies of all correspondence
between it (or its advisors) and the SEC relating to the Proxy Statement.
6.2 Access and Information . Each of the parties will, and will cause
-----------------------
its Subsidiaries to (i) afford to the other party and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, the "Representatives") full access, at reasonable
times upon reasonable prior notice, to the officers, employees, agents,
properties, offices and other facilities of such party and its Subsidiaries and
to their books and records, (ii) furnish promptly to the other party and its
Representatives such information concerning the business, properties, contracts,
records and personnel of such party and its Subsidiaries (including financial,
operating and other data and information) as may be reasonably requested, from
time to time, by or on behalf of the other party; provided, however, that Compaq
and its Subsidiaries shall provide information and documents only with respect
to the AV Business. No investigation by any party hereto shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto. All information obtained by
Compaq or CMGI pursuant to this Section 6.2 shall be kept confidential in
accordance with the Confidentiality Agreement.
6.3 HSR Act Filing . Each party hereto shall, as promptly as
----------------
practicable, file, or cause to be filed, any required notification and report
forms under the HSR Act with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the United States Department of Justice (the "Antitrust
Division") in connection with the transactions contemplated by this Agreement,
and will use their respective reasonable best efforts to respond as promptly as
practicable to all inquiries received from the FTC or the Antitrust Division for
additional information or documentation and to cause the waiting periods under
the HSR Act to terminate or expire at the earliest possible date. Each party
hereto will each furnish to the other such necessary information and reasonable
assistance as the other may reasonably request in connection with its
preparation of necessary filings or submissions to any governmental or
regulatory agency, including, without limitation, any filings necessary under
the provisions of the HSR Act.
6.4 Reasonable Best Efforts . Upon the terms and subject to the
-------------------------
conditions set forth in this Agreement, each of the parties agrees to use
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement including (i) the obtaining of all necessary
actions or nonactions, waivers or Consents from Governmental Entities and the
making of all necessary registrations and filings and the taking of all steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all necessary
Consents or waivers from third parties, (iii) the defending of any lawsuits or
other legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated by this
Agreement, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed, and (iv)
the execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, this
Agreement.
6.5 Publicity . The parties will consult with each other and will
---------
mutually agree upon any press releases pertaining to the Transaction and shall
not issue any such press releases prior to such consultation and agreement,
except as may be required by applicable Law or by obligations pursuant to any
listing agreement with any national securities exchange, in which case the party
proposing to issue such press release shall use its reasonable efforts to
consult in good faith with the other party before issuing any such press
releases.
6.6 Employee Benefit Plans .
------------------------
(a) CMGI agrees that individuals who are employed by AV
immediately prior to the Effective Time shall become employees of the Surviving
Corporation following the Effective Time (each such employee, an "Affected
Employee"); provided, however, that this Section 6.6(a) shall not be construed
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to limit the ability of the applicable employer to terminate the employment of
any Affected Employee at any time.
(b) CMGI will, or will cause the Surviving Corporation to, give
Affected Employees full credit for purposes of eligibility (including service
and waiting period requirements), vesting, benefit accrual and determination of
the level of benefits under any employee benefit plans or arrangements
maintained by CMGI or the Surviving Corporation for such Affected Employees'
service with AV or any affiliate of AV to the same extent recognized by AV
immediately prior to the Effective Time.
(c) CMGI will, or will cause the Surviving Corporation to, (i)
waive all limitations as to preexisting conditions, exclusions and waiting
periods and service requirements with respect to participation and coverage
requirements applicable to the Affected Employees under any welfare benefit
plans that such employees may be eligible to participate in after the Effective
Time, other than limitations or waiting periods that are already in effect with
respect to such employees and that have not been satisfied as of the Effective
Time under any welfare plan maintained for the Affected Employees immediately
prior to the Effective Time, and (ii) provide each Affected Employee with credit
for any co-payments and deductibles paid prior to the Effective Time in
satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such employees are eligible to participate in after the
Effective Time.
(d) For a period of one year immediately following the Effective
Time, the coverage and benefits provided to Affected Employees pursuant to
employee benefit plans or arrangements maintained by CMGI or AV shall be, in the
aggregate, not less favorable than those provided to such employees immediately
prior to the Effective Time.
6.7 Restriction on Transfer of AV Shares . In no event shall Compaq or
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any of its Subsidiaries knowingly transfer any AV Shares to any competitor of
AV, the AV Business or the Surviving Corporation.
6.8 Funding . To the extent that Newco, after the Closing and prior to
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an initial public offering of Newco Common Stock, requires funding for its
operations and CMGI is willing to provide such funds, CMGI shall provide such
funding in exchange for shares of convertible preferred stock or convertible
secured notes of Newco upon terms equivalent to the terms upon which CMGI
typically provides funds to CMGI Subsidiaries; provided that, Compaq shall have
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the right to purchase from Newco a pro rata portion of such preferred stock or
convertible notes, as the case may be, based on the relative voting securities
then held by CMGI and Compaq except to the extent CMGI is required to purchase
such securities to be able to consolidate the results of Newco for tax purposes.
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to Each Party's Obligation to Complete the Transaction .
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The respective obligations of each party to complete the Transaction are subject
to the satisfaction at or prior to the Closing Date of the following conditions:
(a) Injunction. There shall not be in effect any Law or Order of
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a court or governmental or regulatory agency of competent jurisdiction directing
that the transactions contemplated hereby not be consummated; provided, however
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that prior to invoking this condition each party shall use its reasonable
efforts to have any such Order vacated.
(b) HSR Governmental Consents. The applicable waiting period under
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the HSR Act shall have expired or terminated.
7.2 Additional Conditions to the Obligation of CMGI and Newco . The
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obligation of CMGI and Newco to complete the Transaction is subject to the
satisfaction at or prior to the Closing Date of the following conditions, any or
all of which may be waived in whole or in part by CMGI to the extent permitted
by applicable Law:
(a) Representations and Warranties. The representations and
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warranties of Compaq and AV contained in Article III of this Agreement shall be
true and correct on the date of this Agreement and on the Closing Date as though
made on and as of the Closing Date (except to the extent that a representation
or warranty expressly speaks as of a specified date or period of time);
provided, however, that for purposes of this Section 7.2(a), such
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representations and warranties shall be deemed to be true and correct unless the
failure or failures of such representations and warranties to be so true and
correct, without regard to any materiality qualifiers contained therein,
individually or in the aggregate, results or would reasonably be likely to
result in an AV Material Adverse Effect.
(b) Performance. Except as would not be reasonably likely to have
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an AV Material Adverse Effect, CDAS shall have performed and complied with or
caused to be performed or complied with their covenants and agreements under
this Agreement to be performed or complied with at or prior to Closing.
(c) Officer's Certificate. CMGI shall have received on the
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Closing Date a certificate dated the Closing Date and executed by an executive
officer of Compaq and an executive officer of AV certifying to the fulfillment
of the conditions specified in Sections 7.2(a) and (b) hereof.
(d) Material Adverse Effect. There shall not have occurred any
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event or condition which individually or in the aggregate has resulted in, or is
reasonably likely to result in, an AV Material Adverse Effect.
(e) Assignment Agreement. The Assignment Agreement shall have
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been executed and delivered by Compaq.
7.3 Additional Conditions to the Obligation of Compaq Digital and AV .
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The obligation of Compaq, Digital and A