Exhibit 2.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BETWEEN
CMGI, INC.
AND
MARKETING SERVICES GROUP, INC.
DATED AS OF MARCH 9, 1999
RELATING TO THE
CAPITAL STOCK OF
CMG DIRECT CORPORATION
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of March 9, 1999 (the
"Agreement"), is between CMGI, Inc. (the "Seller"), a Delaware corporation and
Marketing Services Group, Inc. (the "Buyer"), a Nevada corporation.
WHEREAS, Seller owns all of the issued and outstanding shares of capital
stock of CMG Direct Corporation ("Direct"), a Delaware corporation;
WHEREAS, Seller desires to sell and transfer to Buyer, and Buyer desires
to purchase from Seller, all of the issued and outstanding shares of common
stock, par value $0.01 per share, of Direct (the "Shares"), all as more
specifically provided herein;
NOW, THEREFORE, in consideration of the representations, warranties and
agreements contained herein, the parties hereto agree as follows:
Article 1
PURCHASE AND SALE OF SHARES
1.1 Purchase and Sale of Shares.
Buyer agrees to purchase from Seller, and Seller agrees to sell to Buyer the
Shares for the consideration specified in Section 1.2 hereof.
1.2 Purchase Price.
(a) The purchase price for the Shares (the "Purchase Price") is $26,000,000
adjusted by the Purchase Price Adjustment (as defined below) payable as follows:
(i) $14,000,000 in cash, less the sum with respect to all the Direct Options (as
defined below) outstanding immediately prior to the Closing, of the product of
(x) the number of shares of Direct Common Stock with respect to which each such
option is then exercisable without acceleration multiplied by (y) the excess, if
positive, of (i) the Purchase Price divided by the total number of shares
outstanding of Direct as of the Closing giving effect to the exercise of the
vested Direct Options (as defined below) less (ii) the exercise price with
respect to such shares, adjusted by the Purchase Price Adjustment (the "Cash
Portion") and (ii) $12,000,000 in shares (the "Stock Portion") of common stock,
$0.01 par value per share, of the Buyer ("Buyer Common Stock"). The number of
shares constituting the Stock Portion shall equal $12,000,000 divided by the
Market Value of a share of Buyer Common Stock, rounded up to the nearest whole
number. For purposes of this Agreement, "Market Value" of a share of Buyer
Common Stock shall mean $5.17. Notwithstanding the foregoing, (x) if, on the
Closing Date (as defined below), the Market Value indicates a number of shares
representing the Stock Portion of the Purchase Price in excess of 19.99% of the
outstanding Buyer Common Stock prior to issuance, then the Cash Portion of the
Purchase Price shall be increased, and the Stock Portion of the Purchase Price
decreased, so that the Purchase Price remains at $26,000,000 but the number of
shares representing the Stock Portion of the Purchase Price equals a whole
number of shares representing between 19.50% and 19.99% of the number of shares
of Buyer Common Stock outstanding prior to issuance and (y) the Buyer shall pay
an amount specified by the Seller in cash by wire transfer of immediately
available funds to ING Baring Xxxxxx Xxxx LLC to an account designated by such
firm prior to the Closing and such amount shall be deducted from the Cash
Portion of the Purchase Price.
(b) The "Purchase Price Adjustment" shall mean the excess, if any, of the Net
Working Capital (as defined below) of Direct reflected on the Direct Balance
Sheet (as defined below) over the Net Working Capital of Direct as of the
Closing Date reflected on the Closing Date Balance Sheet (in which case the
Purchase Price would be decreased) or the excess, if any, of the Net Working
Capital of Direct as of the Closing Date reflected on the Closing Balance Sheet
over the Net Working Capital of Direct reflected on the Direct Balance Sheet (in
which case the Purchase Price would be increased). The Purchase Price Adjustment
shall be made to the Cash Portion of the Purchase Price. "Net Working Capital"
shall mean current assets minus current liabilities as such terms are used in
generally accepted accounting principles, excluding any intercompany accounts.
"Direct Balance Sheet" shall mean Direct's Balance Sheet as of September 30,
1998.
(c) For purposes of determining the amount to be paid by the Buyer to the Seller
on the Closing Date, the Seller shall prepare an initial calculation of the Cash
Portion of the Purchase Price (the "Estimated Cash Portion") which shall be
equal to $14,000,000 adjusted by the Estimated Purchase Price Adjustment (as
defined below). The Seller shall deliver the calculation of the Estimated Cash
Portion to the Buyer not less than two (2) business days prior to the Closing
Date. The "Estimated Purchase Price Adjustment" shall mean the excess, if any,
of the Net Working Capital of Direct reflected on the Direct Balance Sheet over
the Net Working Capital of Direct as of the last day of the month for which the
most recent Direct Financials have been prepared (in which case the Estimated
Cash Portion would be decreased) or the excess, if any, of the Net Working
Capital of Direct as of the last day of the month for which the most recent
Direct Financials have been prepared, over the Net Working Capital reflected on
the Direct Balance Sheet (in which case the Estimated Cash Portion would be
increased), in either case as estimated by the President.
1.3 Closing Date.
The closing of the transactions contemplated by this Agreement (the "Closing")
shall take place at the offices of Xxxxxx & Dodge LLP in Boston at 10:00 a.m.
(local time) on such date as shall be mutually agreed by the parties hereto
after the date that is three business days after the date that all of the
approvals, consents and other conditions set forth in Sections 5.1(c) and 5.2(c)
of this Agreement have been obtained, waived or satisfied and prior to May 15,
1999, or at such other time, date or place as may be mutually agreed in writing
by Buyer and Seller (the "Closing Date").
1.4 Deposit.
Concurrently with the execution of this Agreement, the Buyer shall pay to Seller
the sum of $1,000,000 (the "Deposit") by wire transfer of immediately available
funds to an account designated by the Seller. In the event that the Closing
occurs, the Deposit shall be applied against the Cash Portion of the Purchase
Price. In the event that this Agreement is terminated (i) as a result of a
breach by the Seller of its obligations hereunder or a failure of any of the
conditions set forth in Section 5.1 to be fulfilled, the Seller shall return the
Deposit to the Buyer and (ii) for any other reason, the Seller shall retain the
Deposit.
1.5 Delivery and Payment.
At the Closing, (i) the Seller shall deliver to the Buyer (A) the Shares
together with stock powers duly executed in blank and (B) the minute books and
the corporate seal of Direct and (ii) Buyer shall pay the (A) Estimated Cash
Portion to the Seller by wire transfer of immediately available funds to an
account designated by the Seller prior to the Closing and (B) the shares
representing the Stock Portion of the Estimated Purchase Price evidenced by a
duly executed share certificate.
1.6 Settlement.
(a) For purposes of making a final calculation of the Purchase Price in
accordance with Section 1.2(a), the Seller shall deliver to the Buyer as soon as
reasonably practicable, and in any event not more than 30 days after the Closing
Date (i) a balance sheet of Direct, as of the most recent month end prior to the
Closing Date (the "Closing Balance Sheet"), prepared by the Seller with the
participation of the Buyer in accordance with GAAP and (ii) a computation of the
Purchase Price Adjustment.
(b) The Buyer hereby agrees to permit the Seller, its employees, agents and
representatives, such access to Direct's premises and books and records and to
render to the Seller all such reasonable assistance as the Seller all such
reasonable assistance as the Seller may deem necessary to prepare the Closing
Balance Sheet. The fees and expenses of preparing the Closing Balance Sheet and
calculating the Purchase Price Adjustment shall be paid by the Seller.
(c) On the fifth day (or the next succeeding business day if such day is not a
business day) following the delivery to the Buyer of the Closing Balance Sheet
and the computation of the Purchase Price Adjustment, the Seller shall pay to
the Buyer the amount, if any, by which the Estimated Cash Portion exceeds the
calculation of the Cash Portion (after making the adjustment set forth in
Section 1.2 (a)) or the Buyer shall pay to the Seller the amount, if any, by
which the calculation of the Cash Portion (after making the adjustment set forth
in Section 1.2(a)) exceeds the Estimated Cash Portion, unless the Buyer disputes
the Closing Balance Sheet or the Purchase Price Adjustment, in which case
payment shall be made only of the undisputed amount of the Purchase Price
Adjustment; payment with respect to the disputed amount of the Purchase Price
Adjustment shall be made upon the final determination of such dispute in
accordance with Section 1.6(d).
(d) In the event that the Buyer disputes the Closing Balance Sheet or the
Purchase Price Adjustment, the Buyer agrees to notify the Seller of such dispute
on or prior to the fifth day (or the next succeeding business day if such day is
not a business day) following the delivery to the Buyer of the Closing Balance
Sheet and the computation of the Purchase Price Adjustment. The parties agree to
attempt to resolve such dispute within a 30-day period following notice of such
dispute. If such dispute cannot be resolved within such period, then KPMG Peat
Marwick shall be retained to review the matter under dispute and to determine
the Purchase Price Adjustment. If KPMG Peat Marwick shall be unable or unwilling
to make such determination, and the parties hereto are unable to agree on
another nationally recognized accounting firm to make such determination, the
Seller and the Buyer shall each nominate a nationally recognized independent
accounting firm that does not regularly work for such party, and one of such two
nominated accounting firms shall be selected by a flip of a coin. The
determination by KPMG Peat Marwick or such other independent accounting firm
shall be final and binding on the parties hereto, and shall be based upon a
review of the Closing Balance Sheet (and any relevant books and records relating
to the Closing Balance Sheet or other documents or information relating to the
dispute which are requested by such independent accounting firm) in accordance
with GAAP. The Seller and the Buyer shall be afforded the opportunity to present
to KPMG Peat Marwick or such other independent accounting firm any material or
information relating to the matters in dispute. The Seller and the Buyer shall
each bear and pay one-half of the fees and disbursements of KPMG Peat Marwick or
such other independent accounting firm in connection with its analysis.
1.7 Treatment of Options.
Options to acquire shares of Direct Common Stock ("Direct Options") will be
terminated at the Closing. Vested Direct Options will become the right to
receive a cash payment equal to the product of (x) the number of shares for
which the option is exercisable immediately prior to Closing multiplied by (y)
the difference between (A) the Purchase Price divided by the total number of
shares outstanding of Direct as of the Closing giving effect to the exercise of
the vested Direct Options and (B) the exercise price per share. Unvested Direct
Options will not become entitled to any payment upon termination.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer, subject to the exceptions
set forth in the disclosure schedule supplied by the Seller to the Buyer (the
"Disclosure Schedule"), as follows:
2.1 Organization of Direct.
Direct and each of its Subsidiaries (as defined below) is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization, has the requisite
corporate or similar power to own, lease and operate its property and to carry
on its business as now being conducted, and is duly qualified to do business and
in good standing as a foreign corporation or other legal entity in each
jurisdiction in which the failure to be so qualified would reasonably be
expected to have a Direct Material Adverse Effect (as defined below). Included
in the Disclosure Schedule is a true and complete list of all of Direct's
Subsidiaries, together with the jurisdiction of incorporation or organization of
each such Subsidiary. The Seller has delivered or made available to the Buyer a
true and correct copy of the Certificate of Incorporation and Bylaws of Direct
and similar governing instruments of each of Direct's Subsidiaries, each as
amended to date. The minute books of Direct and its Subsidiaries made available
to the Buyer are the only minute books of Direct and its Subsidiaries, and the
minutes contain a reasonably accurate record of all actions taken in all
meetings of directors (or committees thereof) and stockholders or actions by
written consent. The term "Direct Material Adverse Effect" means, for purposes
of this Agreement, any change, event or effect that is materially adverse to the
business, assets, financial condition or results of operations of Direct and its
Subsidiaries taken as a whole; provided, however, that, for purposes of Section
5.1(a), the following shall not be deemed to constitute a Direct Material
Adverse Effect: (i) an adverse change in the business, financial condition or
results of operations of Direct following the date of this Agreement primarily
attributable to circumstances or events affecting the direct marketing or
internet industries generally or (ii) the loss of any officer or key employee of
Direct following the date of this Agreement. "Subsidiary" means, with respect to
any party, any corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary of such party is
a general partner (excluding partnerships, the general partnership interests of
which held by such party or any Subsidiary of such party do not have a majority
of the voting interest in such partnership) or (ii) at least 50% of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization are directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
2.2 The Capital Structure of Direct.
(a) The authorized capital stock of Direct consists of 15,000,000 shares of
common stock, par value $0.01 per share ("Direct Common Stock") and 5,000,000
shares of preferred stock, par value $0.01 per share ("Direct Preferred Stock").
As of the date of this Agreement, there are 9,000,000 shares of Direct Common
Stock issued and outstanding and no shares of Direct Preferred Stock issued and
outstanding. All outstanding shares of Direct Common Stock are duly authorized,
validly issued, fully paid and non-assessable and are not subject to preemptive
rights created by statute, Direct's Certificate of Incorporation or Direct's
Bylaws or any agreement or document to which Direct is a party or by which it is
bound.
(b) The Disclosure Schedule includes a true and complete list of all outstanding
rights, subscriptions, warrants, calls, preemptive rights, options or other
agreements of any kind to purchase or otherwise receive from Direct any shares
of the capital stock or any other security of Direct, and all outstanding
securities of any kind convertible into or exchangeable for such securities.
True and complete copies of all instruments (or forms of such instruments)
referred to in this Section 2.2(b) have been previously furnished to the Buyer.
There are no stockholder agreements, voting trusts, proxies or other agreements
or instruments with respect to the outstanding shares of capital stock of Direct
to which Direct is a party. As of the Closing Date, the Direct Options set forth
in the Disclosure Schedule, whether vested or unvested, shall be terminated and
the holders of vested Direct Options through the Closing Date shall be entitled
to the payments set forth in Section 1.7 hereof.
(c) Except for securities Direct owns directly or indirectly through one or more
Subsidiaries, there are no equity securities of any class of any Subsidiary of
Direct, or any security exchangeable or convertible into or exercisable for such
equity securities, issued, reserved for issuance or outstanding.
2.3 Authority.
(a) The Seller has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Seller. This Agreement has been duly
executed and delivered by the Seller. Assuming due authorization, execution and
delivery by the Buyer, this Agreement constitutes the valid and binding
obligation of the Seller, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general principles of equity. The execution and delivery of this
Agreement by the Seller does not, and the performance of this Agreement by the
Seller will not, (i) conflict with or violate the Certificate of Incorporation
or Bylaws of the Seller or the equivalent organizational documents of any of its
Subsidiaries, (ii) subject to compliance with the requirements set forth in
Section 2.3(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Seller or any of its Subsidiaries or by
which its or any of their respective properties is bound, or (iii) subject to
obtaining any third party consents referred to in the final sentence of this
Section 2.3(a), result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair the rights of the Seller or any of its Subsidiaries under, or give to
others any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a lien or encumbrance on any of the properties or
assets of the Seller or any of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license or other instrument or
obligation to which the Seller or any of its Subsidiaries is a party or by which
the Seller or any of its Subsidiaries or its or any of their respective
properties are bound, except, with respect to clauses (ii) and (iii), for any
such conflicts, violations, defaults or other occurrences that would not
reasonably be expected to have a Direct Material Adverse Effect. The Disclosure
Schedule lists all material consents, waivers and approvals under any of the
Seller's or any of its Subsidiaries' agreements, contracts, licenses or leases
required to be obtained in connection with the consummation of the transactions
contemplated hereby, except for those the absence of which would not reasonably
be expected to have a Direct Material Adverse Effect.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental or regulatory body or authority or instrumentality
("Governmental Entity") is required by or with respect to the Seller in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) the filing of Current
Reports on Form 8-K with the Securities and Exchange Commission (the "SEC"),
(ii) the filing with the Antitrust Division of the United States Department of
Justice (the "Antitrust Division") and the Federal Trade Commission (the "FTC")
of such forms as may be required by the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 0000 (xxx "XXX Xxx") and the termination or expiration of all applicable
waiting periods thereunder, (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and the laws of any foreign country
and (iv) such other consents, authorizations, filings, approvals and
registrations that, if not obtained or made, would not reasonably be expected to
have a Direct Material Adverse Effect or a material adverse effect on the
ability of the parties to consummate the transactions contemplated by this
Agreement.
2.4 Financial Statements of Direct.
(a) The Seller has previously delivered to the Buyer (i) the unaudited income
statement of Direct for the fiscal year ending July 31, 1998 (the "Annual Income
Statement"), (ii) the unaudited balance sheet of Direct as of September 30, 1998
(the "Direct Balance Sheet "), and the income statement for the fiscal quarter
ended October 31, 1998 (together with the Direct Balance Sheet, the "Interim
Financial Statements"). All of such financial statements referred to in this
section are collectively referred to herein as the "Direct Financial
Statements." The Direct Financial Statements have been prepared from, and are in
accordance with, the books and records of Direct and present fairly the
financial position and the results of operations as of the dates and for the
period indicated, in each case in accordance with generally accepted accounting
principles consistently applied throughout the periods involved, except as
otherwise indicated therein, and subject, in the case of the Interim Financial
Statements, to normal year-end audit adjustments, which are not, in the
aggregate, material, and the use of abbreviated notes.
(b) Except as disclosed in the Direct Financial Statements or the Disclosure
Schedule and except for obligations under this Agreement, neither Direct nor any
of its Subsidiaries has (i) any liabilities (absolute, accrued, contingent or
otherwise) of a nature required to be disclosed on a balance sheet prepared in
accordance with GAAP which are, individually or in the aggregate, material to
the business, results of operations or financial condition of Direct and its
Subsidiaries taken as a whole, except liabilities (x) incurred since the date of
the Direct Balance Sheet in the ordinary course of business consistent with past
practices or (y) incurred in connection with the transactions contemplated
hereby.
2.5 Absence of Certain Changes or Events.
Since the date of the Direct Balance Sheet, except as set forth in the
Disclosure Schedule, there has not occurred any Direct Material Adverse Effect
and there has not been, occurred or arisen any:
(a) amendment or change to the Certificate of Incorporation or Bylaws of
Direct;
(b) individual capital expenditure or commitment, or series of related capital
expenditures or commitments, by Direct or its Subsidiaries outside the ordinary
course of business exceeding $100,000;
(c) destruction of, damage to or loss of any assets material to the business of
Direct and its Subsidiaries taken as a whole (whether or not covered by
insurance);
(d) cancellation or termination by any customer of its relationship, or a
significant portion of its relationship, with Direct or any of its Subsidiaries
which would reasonably be expected to have a Direct Material Adverse Effect;
(e) labor trouble or claim of wrongful discharge (except for such claims not
reasonably expected to result in potential damages greater than $100,000) or
other unlawful labor practice or action that would reasonably be expected to
have a Direct Material Adverse Effect;
(f) material change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by Direct;
(g) declaration, setting aside or payment of a dividend or other distribution
with respect to the capital stock of Direct; or any direct or indirect
redemption, purchase or other acquisition by Direct of any of its capital stock;
(h) increase in the salary or other compensation payable or to become payable to
any of its (i) officers or directors or (ii) employees or advisors receiving,
after such increase, annualized compensation in excess of $150,000 per year, or
the declaration, payment or commitment or obligation of any kind for the payment
of a bonus or other additional salary or compensation to any such person except
as otherwise contemplated by this Agreement and except for increases, payments
or commitments in the ordinary course of business and consistent with past
practices;
(i) sale, lease, license or other disposition of any of material assets or
properties of Direct or its Subsidiaries outside of the ordinary course of
business; (j) amendment or termination of any material contract or agreement
identified in Section 2.15 of the Disclosure Schedule except for amendments in
the ordinary course of business or terminations pursuant to the terms of the
contract or agreement and not as a result of any breach;
(k) loan by Direct or any of its Subsidiaries to any person or entity,
incurrence by Direct or any of its Subsidiaries of any indebtedness for borrowed
money, guaranty made by Direct or any of its Subsidiaries of any indebtedness
for borrowed money, issuance or sale of any debt securities of Direct or any of
its Subsidiaries or guaranty made with respect to any debt securities of others,
except in the ordinary course of business and consistent with past practices; or
(l) commitment, understanding or agreement by Direct or any of its Subsidiaries
or any officer or employee thereof to do any of the things described in the
preceding clauses (a) through (k) (other than this Agreement).
2.6 Tax Matters.
(a) Direct and its Subsidiaries and any combined, consolidated, unitary, or
affiliated group of which both Direct and its Subsidiaries are or have been a
member prior to the Closing Date: (i) have paid all Taxes (as defined in Section
2.6(n)) required to be paid on or prior to the Closing Date (including, without
limitation, payments of estimated Taxes) for which both Direct and its
Subsidiaries could be held liable, except for Taxes which are being contested in
good faith and by appropriate proceedings as set forth in Schedule 2.6(a); and
(ii) have accurately and timely filed (or filed an extension for), all federal,
state, local and foreign Tax Returns (as defined in Section 2.6(n)), reports,
and forms with respect to the Taxes required to be filed by them on or before
the Closing Date;
(b) The amount set up as provisions for Taxes on September 30, 1998 is
sufficient in all material respects for all accrued and unpaid Taxes of Direct
and its Subsidiaries, whether or not due and payable and whether or not in
dispute, under applicable laws relating to Taxes as in effect on September 30,
1998 or now in effect, for the period ended on such date and for all periods
prior thereto;
(c) Except as set forth in Schedule 2.6(c), with respect to each taxable period
of Direct and its Subsidiaries, either such taxable period has been audited by
the Internal Revenue Service or other appropriate taxing authority or the time
for assessing or collecting Tax with respect to such taxable period has closed
and such taxable period is no longer subject to review;
(d) No deficiency or proposed adjustment which has not been settled or otherwise
resolved for any amount of Tax has been proposed, asserted or assessed by any
taxing authority against, or with respect to, the activities of Direct or its
Subsidiaries;
(e) Neither Direct nor any of its Subsidiaries has consented to extend the time
in which any Tax may be assessed or collected by a taxing authority;
(f) Neither Direct nor any of its Subsidiaries has requested or been granted an
extension of time for filing any Tax Return to a date later than the Closing
Date;
(g) There is no action, suit, taxing authority proceeding, or audit now in
progress, pending or threatened against or with respect to Direct or any of its
Subsidiaries with respect to any Tax assessment or deficiency;
(h) Neither Direct nor any of its Subsidiaries is or has been a member of an
affiliated group as defined in Section 1504 of the Internal Revenue Code of
1986, as amended (the "Code"), or filed or been included in a combined,
consolidated or unitary Tax Return except as set forth on Schedule 2.6(h);
(i) No claim has ever been made by a taxing authority in a jurisdiction where
Direct or any of its Subsidiaries does not pay Tax or file Tax Returns that any
of the companies may be subject to the Taxes assessed by such jurisdiction;
(j) Both Direct and its Subsidiaries have withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other party;
(k) Schedule 2.6(k) contains a list setting forth all the states, territories or
jurisdictions, if any, in which both Direct and its Subsidiaries is required to
file a Tax Return relating to their operations;
(l) The Seller has delivered to the Buyer complete and correct copies of all
federal, state, local and foreign income tax returns filed with respect to each
such company for taxable periods on or after August 1, 1996; and
(m) Neither Direct nor any of its Subsidiaries: (1) has made any payments, nor
are they obligated to make any payments, nor are they a party to any agreements
that under certain circumstances could obligate it to make any payment, that
will not be deductible under Section 280G of the Code; (2) will have liability
on or after the Closing Date pursuant to any tax sharing or tax allocation
agreement; (3) has any liability for the Taxes of any other person under
Treasury Regulation 1.1502-6 (or any similar provision of state, local or
foreign law), including as a transferee or successor, by contract, or otherwise;
(4) has agreed to, or is required to, make any adjustment under Section 481(a)
of the Code by reason of a change in accounting method or otherwise; or (5) has
filed a consent under Section 341(f) of the Code.
(n) For purposes of this Agreement, "Tax(es)" shall mean all federal, state,
local or foreign taxes, assessments or duties which are payable or remittable by
Direct or any of its Subsidiaries or levied upon any property of Direct or any
of its Subsidiaries, or levied with respect to either of their assets,
franchises, income, receipts, including, without limitation, import duties,
excise, franchise, gross receipts, utility, real property, capital, personal
property, withholding, FICA, unemployment compensation, sales or use tax,
governmental charges (whether or not requiring the filing of a return), and all
additions to tax, penalties and interest relating thereto. Tax Returns means any
return, declaration, report, claim for refund, information return, or other
statement relating to Taxes filed with or sent to any federal, state, local or
foreign governmental entity or subdivision.
2.7 Title to Properties; Absence of Liens and Encumbrances.
Direct and its Subsidiaries have good and valid title to, or have a valid and
enforceable right to use or a valid and enforceable leasehold interest in, all
real property (including all buildings, fixtures and other improvements thereto)
owned or leased by them and material to the conduct of their respective
businesses as such businesses are now being conducted. Neither Direct's nor any
of its Subsidiaries' ownership of or leasehold interest in any such property is
subject to any mortgage, pledge, lien, option, conditional sale agreement,
encumbrance, security interest, title exception or restriction or claim or
charge of any kind ("Encumbrances"), except for such Encumbrances as are set
forth in the Disclosure Schedule or the Direct Financial Statements or would not
in the aggregate reasonably be expected to have a Direct Material Adverse
Effect.
2.8 Intellectual Property.
Direct and its Subsidiaries own, or are licensed or otherwise possess legally
enforceable rights to use, all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, schematics, technology, know-how,
computer software programs or applications, and tangible or intangible
proprietary information or material that are required or reasonably necessary
for the conduct of business of Direct or its Subsidiaries as currently
conducted, the absence of which would reasonably be expected to have a Direct
Material Adverse Effect (the "Direct Intellectual Property Rights"). To the
knowledge of the Seller, the use of the Direct Intellectual Property Rights by
Direct and its Subsidiaries does not, in any material respect, conflict with,
infringe upon, violate or interfere with or constitute an appropriation of any
right, title, interest or goodwill (including, without limitation, any
intellectual property right, trademark, trade name, patent, service xxxx, brand
xxxx, brand name, computer program, database, industrial design, copyright or
any pending application therefor) of any other person, and neither Direct nor
any of its Subsidiaries has received notice of any claim or otherwise knows that
any of Direct Intellectual Property Rights conflicts with the asserted rights of
any other person, except for such conflicts, infringements, violations,
interferences, claims, invalidity, abandonments, cancellations or
unenforceability that would not, in the aggregate, reasonably be expected to
have a Direct Material Adverse Effect.
2.9 Compliance; Permits; Restrictions.
(a) Neither Direct nor any of its Subsidiaries is in conflict with, or in
default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to Direct or any of its Subsidiaries or by which its or any of
their respective properties is bound, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license or other instrument or obligation
to which Direct or any of its Subsidiaries is a party or by which Direct or any
of its Subsidiaries or its or any of their respective properties is bound,
except for any conflicts, defaults or violations that would not reasonably be
expected to have a Direct Material Adverse Effect.
(b) Direct and its Subsidiaries hold all consents, permits, licenses, variances,
exemptions, orders and approvals from governmental authorities that are material
to the operation of the business of Direct and its Subsidiaries taken as a whole
(collectively, the "Permits"). Direct and its Subsidiaries are in compliance
with the terms of the Permits, except where the failure to so comply would not
reasonably be expected to have a Direct Material Adverse Effect.
2.10 Litigation.
There is no action, suit or proceeding of any nature pending or to the Seller's
knowledge threatened against Direct or any of its Subsidiaries, or any of their
respective properties, officers or directors, in their respective capacities as
such (i) in which injunctive or other equitable relief or damages in excess of
$100,000 are or are reasonably likely to be sought against Direct or any of its
Subsidiaries or that otherwise are reasonably likely to result in a Direct
Material Adverse Effect or (ii) that in any manner challenges or seeks to
prevent, enjoin, alter or delay any of the transactions contemplated by this
Agreement. To the Seller's knowledge, there is no investigation pending or
threatened against Direct or any of its Subsidiaries, their respective
properties or any of their respective officers or directors by or before any
Governmental Entity that would reasonably be expected to have a Direct Material
Adverse Effect.
2.11 Brokers' and Finders' Fees.
Except for fees payable to ING Baring Xxxxxx Xxxx LLC and disclosed to the
Buyer, the Seller has not incurred, nor will it incur, directly or indirectly,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby. It is understood that such fees are paid by or on account
of Seller and not Direct.
2.12 Employee Benefit Plans.
The Disclosure Schedule sets forth a complete list of all pension, profit
sharing, retirement, deferred compensation, welfare, insurance, disability,
bonus, vacation pay, severance pay and similar plans, programs or arrangements,
including without limitation all employee benefit plans as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") covering current employees or former employees of Direct or its
Subsidiaries (the "Plans"). No Plan is a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, and neither Direct nor any or its Subsidiaries has
incurred any material liability under Sections 4062, 4063 or 4201 of ERISA. Each
Plan which is intended to be qualified under with Section 401(a) or 501(c)(9) of
the Code ("Qualified Plans") is so qualified. Each Plan has been administered in
all material respects in accordance with the terms of such Plan and the
provisions of any and all statutes, orders or governmental rules or regulations,
including without limitation ERISA and the Code, and to the knowledge of the
Seller nothing has been done or omitted to be done with respect to any Plan that
would result in any material liability on the part of Direct or its Subsidiaries
under Title I of ERISA or Section 4975 of the Code. All reports required to be
filed with respect to all Plans, including without limitation annual reports on
Form 5500, have been timely filed except where the failure to so file would not
reasonably be expected to have a Direct Material Adverse Effect. No "reportable
event" as defined in Section 4043 of ERISA, other than any such event for which
the thirty-day notice period has been waived, has occurred with respect to any
pension plan subject to Title IV of ERISA. With respect to all pension plans
subject to Title IV of ERISA, such plans have no "unfunded accrued liabilities"
as defined in Section 3(30) of ERISA, all contributions to such plans under the
minimum funding requirements of Section 412 of the Code have been made and all
premium payments to the Pension Benefit Guaranty Corporation with respect to
such plans have been made. All claims for welfare benefits, with the exception
of medical benefits, incurred by employees on or before the Closing are or will
be fully covered by third-party insurance policies or similar programs. Except
for continuation of health coverage to the extent required under Section 4980B
of the Code or as otherwise set forth in this Agreement, there are no
obligations under any welfare benefit plan providing benefits after termination
of employment.
2.13 Employment Matters.
(a) Direct and each of its Subsidiaries (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to employees; (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to employees; (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; and (iv) is not liable for any payment to any trust or other fund
or to any Governmental Entity, with respect to unemployment compensation
benefits, social security or other benefits or obligations for employees (other
than routine payments to be made in the normal course of business and consistent
with past practice), except in the case of (ii), (iii) or (iv) withholding or
liability that would not reasonably be expected to have a Material Adverse
Effect.
(b) No work stoppage or labor strike against Direct or any of its Subsidiaries
is pending or, to the best knowledge of the Seller, threatened. Neither Direct
nor any of its Subsidiaries is involved in or, to the knowledge of the Seller,
threatened with, any labor dispute, grievance, or litigation relating to labor,
safety or discrimination matters involving any employee, including without
limitation charges of unfair labor practices or discrimination complaints, that,
if adversely determined, would, in the aggregate, reasonably be expected to have
a Direct Material Adverse Effect. Neither Direct nor any of its Subsidiaries has
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act that would, individually or in the aggregate, reasonably be
expected to have a Direct Material Adverse Effect. Neither Direct nor any of its
Subsidiaries is presently, nor has it been in the past, a party to or bound by
any collective bargaining agreement or union contract with respect to employees
and no collective bargaining agreement is being negotiated by Direct or any of
its Subsidiaries.
2.14 Environmental Matters.
Except as would not reasonably be expected to have a Direct Material Adverse
Effect:
(a) no material amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, hazardous or otherwise to pose an unreasonable danger to human
health or the environment, including without limitation all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws, (a
"Hazardous Material"), but excluding office, maintenance, shipping and
janitorial supplies, are present as a result of the actions of Direct or any of
its Subsidiaries, or, to the knowledge of the Seller, as a result of any actions
of any third party or otherwise, in, on or under any property, including the
land and the improvements, ground water and surface water thereof, that Direct
or any of its Subsidiaries has at any time owned, operated, occupied or leased;
(b) neither Direct nor any of its Subsidiaries has transported, stored, used,
manufactured, disposed of, released or exposed its employees or others to
Hazardous Materials in violation of any law in effect prior to or as of the date
hereof, nor has Direct or any of its Subsidiaries disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity;
(c) Direct and its Subsidiaries currently hold all environmental approvals,
permits, licenses, clearances and consents ("Environmental Permits") necessary
for the conduct of Direct's and its Subsidiaries' Hazardous Material Activities
and other businesses of Direct and its Subsidiaries as such activities and
businesses are currently being conducted; and
(d) no action, proceeding, revocation proceeding, amendment procedure, writ,
injunction or claim is pending, or to Direct's knowledge, threatened concerning
any Environmental Permit, Hazardous Material in, on or under any property owned
or leased by Direct or any of its Subsidiaries or any Hazardous Materials
Activity of Direct or any of its Subsidiaries.
2.15 Agreements, Contracts and Commitments.
Except as identified in the Disclosure Schedule, neither Direct nor any of its
Subsidiaries is a party to or is bound by:
(a) any agreement, contract or commitment relating to capital expenditures and
involving future obligations in excess of $100,000 and not cancelable without
penalty;
(b) any agreement, contract or commitment currently in force relating to the
disposition or acquisition of assets not in the ordinary course of business or
any ownership interest in any corporation, partnership, joint venture or other
business enterprise (other than Direct's wholly-owned subsidiaries);
(c) any mortgages, indentures, loans or credit agreements, security agreements
relating to a material amount of assets or other agreements or instruments
relating to the borrowing of money or extension of credit; or
(d) any other agreement, contract or commitment (excluding real and personal
property leases) which requires annual payments by Direct or any of its
Subsidiaries under any such agreement, contract or commitment of $100,000 or
more in the aggregate and is not cancelable without penalty within thirty (30)
days.
Neither Direct nor any of its Subsidiaries, nor to the Seller's knowledge any
other party to a Direct Contract (as defined below), has breached, violated or
defaulted under, or received notice that it has breached violated or defaulted
under, any of the material terms or conditions of any of the agreements,
contracts or commitments to which Direct or any Subsidiary is a party or by
which it is bound of the type described in clauses (a) through (d) above (any
such agreement, contract or commitment, a "Direct Contract") in such a manner as
would permit any other party to cancel or terminate any such Direct Contract, or
would permit any other party to seek damages, in either case, which would
reasonably be expected to have a Direct Material Adverse Effect.
2.16 Insurance.
Direct and each of its Subsidiaries are, and have been continuously since
January 1, 1995, insured against such risks and losses as are customary in all
material respects for companies conducting the business as conducted by Direct
and its Subsidiaries during such time period. Neither Direct nor any of its
Subsidiaries has received any notice of cancellation or termination, except for
notice of Workers' Compensation non-renewal, with respect to any material
insurance policy of Direct or any of its Subsidiaries. On February 1, 1999 CMGI
received a notice of non-renewal for its Workers' Compensation policy, due to
poor loss experience. Direct's Workers' Compensation is covered by this policy.
The policy is an annual policy, which expires April 7, 1999. CMGI intends to
have a new, substitute policy for its Workers' Compensation. The new policy will
cover Direct until Closing. The insurance policies of Direct and each of its
Subsidiaries are, to Seller's knowledge, valid and enforceable policies in all
material respects.
2.17 The Business Conducted by Direct.
(a) Direct provides targeted databases and database services to direct marketers
in the traditional direct marketing and Internet marketing industries. Direct
provides targeted mailing lists, database management and processing, and list
brokerage and management services to over 7,500 clients in the consumer,
business-to-business, medical, high technology, and publishing industries.
Direct has developed two Internet technologies: (i) List.netTM, which allows
Direct to sell its lists on the Internet; and (ii) PermissionPlusTM ("PPLUS"), a
group of automated Internet marketing services delivered over the Internet, that
deploys several proprietary technology solutions to automate a process that
enables companies to conduct effective Internet marketing campaigns. PPlus
enables companies to: (i) develop profiles of their web site visitors and learn
their purchasing intentions; (ii) obtain permission to market to them via
e-mail; (iii) use profile data to automatically direct web site visitors to
relevant content; (iv) access and analyze profile data via online databases; (v)
use the online Campaign Management tool to execute targeted e-mail marketing
campaigns; and (vi) analyze the results of these campaigns in real time.
(b) Direct's database products include mailing lists representing over 26
million people including the largest list of direct mail consumer and
professional book buyers in the world. Direct offers the following proprietary
lists to its clients: (i) InfoBuyers List, consisting of over 20 million direct
mail purchasers of books, journals, magazines, videos, software, and other
information products, (ii) K-12 List, consisting of over 5 million teachers,
administrators and book buying families in the United States, (iii) College
List, consisting of over 800,000 professors and college administrators in the
United States, and (iv) ExpressList, consisting of over 400,000 opt-in e-mail
names.
(c) Direct offers value-added services in addition to its list sale business.
These services include database management, processing, list brokerage, and list
management services. Direct's database management and processing services
include the creation, maintenance and enhancement of clients' databases as well
as such value-added services as merge/purge, list processing and analytics.
Direct's list management service markets approximately 20 lists to list buyers.
These lists are owned by third party companies from the high technology, medical
and education industries.
2.18 Assets and Property Necessary to the Conduct of Business by Direct.
As of the Closing Date, Direct will either own, or will be in possession of
(whether through a lease agreement or some other contractual relationship), all
of the assets and property (whether tangible or intangible) necessary for the
conduct of its business as set forth in Section 2.18 hereof.
2.19 Year 2000.
The Disclosure Schedule summarizes the status of Direct with respect to
attempting to ensure that Direct's computer systems do not, or will not
following modification thereof, be deficient with respect to formatting for the
problem relating to computer programs and systems recognizing dates that use
two-digit year data rather than four-digit year data (the "Year 2000 Problem").
The Seller has made available to the Buyer copies of all correspondence between
Direct and its third-party service providers concerning Year 2000 Problem
compliance. Except as set forth in the Disclosure Schedule, the Seller has no
other contracts with, or commitments to, any third-party with respect to the
Year 2000 Problem. Direct has not been informed by any customer, insurance
company or service provider with which Direct or any of its Subsidiaries
transacts business of an inability to timely remedy their own deficiencies with
respect to the Year 2000 Problem, which deficiencies, individually or in the
aggregate, would have a Direct Material Adverse Effect.
2.20 Disclaimer.
The Seller shall not be deemed to have made to the Buyer any representation or
warranty other than as expressly made by the Seller in this Article 2. Without
limiting the generality of the foregoing, the Seller makes no representation or
warranty to the Buyer with respect to: (a) any projections, estimates or budgets
heretofore delivered to or made available to the Buyer of future revenues,
expenses or expenditures or future results of operations; or (b) any other
information or documents made available to the Buyer or its counsel, accountants
or advisors with respect to the assets, liabilities, business, operations or
prospects of Direct except as expressly covered a representation and warranty
contained in this Article 2 hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
3.1 Organization of the Buyer.
The Buyer and each of its Subsidiaries is a corporation or other legal entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, has the requisite corporate
or similar power to own, lease and operate its property and to carry on its
business as now being conducted, and is duly qualified to do business and in
good standing as a foreign corporation or other legal entity in each
jurisdiction in which the failure to be so qualified would reasonably be
expected to have a Buyer Material Adverse Effect (as defined below). Included in
the Disclosure Schedule is a true and complete list of all of Buyer's
Subsidiaries, together with the jurisdiction of incorporation or organization of
each such Subsidiary. The minutes books of the Buyer and its Subsidiaries made
available to the Seller are the only minute books of the Buyer and its
Subsidiaries, and the minutes contain a reasonably accurate record of all
actions taken in all meetings of directors (or committees thereof) and
stockholders or actions by written consent. The term "Buyer Material Adverse
Effect" means, for purposes of this Agreement, any change, event or effect that
is materially adverse to the business, assets, financial condition or results of
operations of the Buyer and its Subsidiaries taken as a whole; provided,
however, that, for purposes of Section 5.2(a), the following shall not be deemed
to constitute a Buyer Material Adverse Effect: an adverse change in the
business, financial condition or results of operations of the Buyer following
the date of this Agreement primarily attributable to circumstances or events
affecting the direct marketing or internet industries generally.
3.2 The Capital Structure of the Buyer.
(a) The authorized capital stock of the Buyer consists of 75,000,000 shares of
Buyer Common Stock and 150,000 shares of redeemable preferred stock, par value
$0.01 per share ("Buyer Preferred Stock"). As of March 4, 1999, there are
12,830,323 shares of Buyer Common Stock issued and outstanding and 50,000 shares
of Series D convertible preferred stock, the only series of Buyer Preferred
Stock issued and outstanding. All outstanding shares of Buyer Common Stock and
Buyer Preferred Stock are duly authorized, validly issued, fully paid and
non-assessable and are not subject to preemptive rights created by statute, the
Buyer's Certificate of Incorporation or the Buyer's Bylaws or any agreement or
document to which the Buyer is a party or by which it is bound.
(b) Schedule 3.2b includes a true and complete list of all outstanding rights,
subscriptions, warrants, calls, preemptive rights, options or other agreements
of any kind to purchase or otherwise receive from the Buyer any shares of the
capital stock or any other security of the Buyer, and all outstanding securities
of any kind convertible into or exchangeable for such securities. True and
complete copies of all instruments (or forms of such instruments) referred to in
this Section 3.2(b) have been previously furnished to the Seller. There are no
stockholder agreements, voting trusts, proxies or other agreements or
instruments with respect to the outstanding shares of capital stock of the Buyer
to which the Buyer is a party.
(c) Except for securities the Buyer owns directly or indirectly through one or
more Subsidiaries, there are no equity securities of any class of any Subsidiary
of the Buyer, or any security exchangeable or convertible into or exercisable
for such equity securities, issued, reserved for issuance or outstanding.
3.3 Authority.
(a) The Buyer has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Buyer. This Agreement has been duly executed and delivered by
the Buyer and, assuming due authorization, execution and delivery of this
Agreement by the Seller, this Agreement constitutes the valid and binding
obligation of the Buyer, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general principles of equity. The execution and delivery of this
Agreement by the Buyer do not, and the performance of this Agreement by the
Buyer will not, (i) conflict with or violate the charter or bylaws of the Buyer,
(ii) subject to compliance with the requirements set forth in Section 3.3(b)
below, conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Buyer or by which its properties is bound or affected,
or (iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair the
Buyer's rights under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Buyer pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license or other
instrument or obligation to which the Buyer is a party or by which the Buyer or
its properties are bound, except, with respect to clauses (ii) and (iii), for
any such conflicts, violations, defaults or other occurrences that would not
impair Buyer's ability to perform its obligations under this Agreement.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to the Buyer in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of Current Reports on Form 8-K with the SEC, (ii) the filing
with the Antitrust Division and the FTC of such forms as may be required by the
HSR Act and the expiration or termination of any applicable waiting periods
thereunder and (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state and federal securities laws.
3.4 SEC Documents, Financial Statements.
Since July 31, 1995, the Buyer has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the Securities
and Exchange Commission (the "SEC") pursuant to the reporting requirements of
Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")(all of the foregoing filed prior to the date hereof being hereinafter
referred to as the "Buyer SEC Documents"). The Buyer has delivered to the Seller
true and complete copies of the SEC Documents. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Documents, and none of the SEC Documents contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading. The
financial statements of the Buyer included in the SEC Documents (the "Buyer
Financial Statements") have been prepared from, and are in accordance with, the
books and records of the Buyer and present fairly the financial position and the
results of operations as of the dates and for the period indicated, in each case
in accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as otherwise indicated therein, and
subject, in the case of the interim financial statements, to normal year-end
audit adjustments, which are not, in the aggregate, material, and the use of
abbreviated notes. Except as disclosed in the Buyer Financial Statements and
except for obligations under this Agreement, neither the Buyer nor any of its
Subsidiaries has (i) any liabilities (absolute, accrued, contingent or
otherwise) of a nature required to be disclosed on a balance sheet prepared in
accordance with GAAP which are, individually or in the aggregate, material to
the business, results of operations or financial condition of the Buyer and its
Subsidiaries taken as a whole, except liabilities (x) incurred since December
31, 1998 in the ordinary course of business consistent with past practices or
(y) incurred in connection with the transactions contemplated hereby. Since
December 31, 1998, there has not occurred any Buyer Material Adverse Effect.
3.5 Financial Capability.
The Buyer will have at the Closing, sufficient immediately available funds to
purchase the Shares on the terms and conditions contained in this Agreement.
3.6 Acquisition of Shares; Ownership of Buyer.
The Shares are being acquired by the Buyer for its own account solely for the
purpose of investment without the view to, or for sale in connection with, any
distribution thereof in violation of federal, state or foreign securities laws
and with no present intention of distributing or reselling any part thereof.
Buyer will not distribute or resell any Shares in violation of any such law. The
Buyer understands that the Shares have not been and will not be registered under
the Securities Act of 1933, as amended (the "Securities Act"), or applicable
state securities laws. The Buyer understands that there is no public market for
the Shares and that there may never be a public market therefor, and that even
if such a market develops it may never be able to sell or dispose of the Shares
and may thus have to bear the risk of its investment therein for a substantial
period of time.
3.7 Examination and Agreement to Investigate
The Buyer acknowledges that it is solely responsible for having conducted its
due diligence investigation of Direct and its Subsidiaries. It acknowledges that
it or its representatives have had complete opportunity to ask such questions
and make such detailed inquires, and receive such information and material,
regarding the business, personnel, assets, condition, capital structure,
agreements and prospects of and applicable to Direct and the Shares as it has
deemed relevant to its determination of the value of the Shares. The Buyer has
such knowledge and experience in business matters as to be capable of evaluating
independently the merits and risks of purchasing the Shares and operating
Direct.
3.8 Litigation.
There is no action, suit, proceeding or investigation pending or, to the Buyer's
knowledge, threatened against the Buyer that in any manner challenges or seeks
to prevent, enjoin, alter or delay any of the transactions contemplated by this
Agreement.
ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Direct.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Closing, the Seller agrees
to cause Direct to carry on its business in the ordinary course, in
substantially the same manner as heretofore conducted and use its commercially
reasonable efforts consistent with past practices and policies to preserve
intact its present business organization, keep available the services of its
present officers and employees and preserve its relationships with customers,
suppliers, distributors, and others with which it has business dealings except
(i) as provided in the Disclosure Schedule (ii) as otherwise contemplated by
this Agreement, or (iii) to the extent that the Buyer shall otherwise consent in
writing, .
4.2 Certain Actions by Direct.
In addition, without the prior written consent of the Buyer, the Seller shall
cause Direct not to do any of the following:
(a) incur or commit to incur any indebtedness for borrowed money, or incur any
other indebtedness outside the ordinary course of business, other than loans or
advances from Seller which will be repaid or cancelled in full prior to Closing;
(b) assume, guarantee, endorse or otherwise become responsible for the
obligations of any other person, or make any loans or advances to any person,
except in the ordinary course of business;
(c) incur any obligations for capital expenditures or purchase or sell any
assets or properties otherwise than in the ordinary course of business, in
excess of $100,000;
(d) declare, set aside, make or pay any dividend or other distribution otherwise
than in cash, whether in property, securities or otherwise, with respect to the
capital stock of Direct or one of its Subsidiaries; or
(e) amend its certificate of incorporation, by-laws or any Direct Contract.
4.3 Transfer Taxes.
All excise, sales, use, transfer (including real property transfer or gains),
stamp, documentary, filing, recordation and other similar taxes together with
any interest , additions or penalties with respect thereto and any interest in
respect of such additions or penalties resulting directly from the sale and
transfer by the Seller to the Buyer of the Shares, shall be borne equally by the
Buyer and the Seller, and each shall be responsible equally for any liabilities
arising in connection therewith.
4.4 Access to Information; Confidentiality.
(a) Each Party will afford the other and its accountants, counsel and other
representatives reasonable access during normal business hours to the
properties, books, records and personnel of such party during the period prior
to the Closing to obtain all information concerning its business, including
properties, results of operations and personnel, as the other party may
reasonably request.
(b) The parties acknowledge that the Seller and the Buyer have previously
executed a Confidentiality Agreement dated December __, 1998 (the
"Confidentiality Agreement"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms, except as is necessary to
comply with the terms of this Agreement.
4.5 Public Disclosure.
The Buyer and the Seller will consult with each other before issuing any press
release or otherwise making any public statement with respect to this Agreement
and the transactions contemplated hereby and will not issue any such press
release or make any such public statement prior to such consultation and the
approval of the other party, which shall not be unreasonably withheld, except as
may be required by law or the rules of the Nasdaq.
4.6 Exclusivity.
Between the date of this Agreement and the Closing or earlier termination of
this Agreement pursuant to Article 6 hereof, neither the Seller nor any of its
directors, officers or employees will solicit any offer or proposal from, or
engage in any negotiations with, any third party relating to an acquisition of
the Shares or other equity investment in Direct, or the acquisition of a
substantial portion of Direct's assets or a merger with Direct.
4.7 Fees and Expenses.
Except as set forth in Section 4.3, all fees and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses; provided, however, that Buyer shall pay the
fees required to be paid to the Antirust Division and the FTC for the filing
required pursuant to the HSR Act.
4.8 Related Agreements.
The Buyer and the Seller agree, at Closing, (i) to enter into a Registration
Rights, Investment Representation and Lock-Up Agreement substantially in the
form as Exhibit A hereto, (ii) to negotiate in good faith a Transitional
Services Agreement reasonably acceptable to both parties for the Seller to
provide certain services to the Buyer at cost or at a reasonable estimate
thereof.
4.9 Intercompany Accounts.
Immediately prior to the Closing, (i) all intercompany accounts payable owing to
Direct or any of its subsidiaries by the Seller shall be forgiven, discharged,
or released by Direct and (ii) all intercompany accounts payable owing to the
Seller or any Subsidiary of the Seller by Direct or any of its Subsidiaries
shall be forgiven, discharged, or released by the Seller, in each case, as
determined by the Seller.
4.10 Agreements between Seller and Direct.
Prior to or at Closing, Seller and Direct agree to enter into (i) a mutually
agreeable sublease for the property at 000 Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxxxxxxx 00000 in substantially the form attached as Exhibit B; and (ii)
the License Agreement in substantially the form attached hereto as Exhibit C.
4.11 Consents of Direct Optionholders.
The Seller agrees to use reasonable efforts to obtain consents of the holders of
Direct Options to the treatment of the Direct Options set forth in Section 1.7
hereof.
4.12 Direct Employee Plans; Employment Matters.
For a period of one year after the Effective Time, and subject to applicable
law, the Buyer shall provide to the employees in the aggregate of the Buyer and
its Subsidiaries who were formerly employees of Direct and its Subsidiaries
employee benefits that are no less favorable in the aggregate than those
provided under the Plans (as defined in Section 2.12) disclosed in the
Disclosure Schedule as in effect on the Closing Date, provided that, from and
after the Effective Time, the employee benefits provided to the employees of the
Buyer and its Subsidiaries who were formerly employees of Direct and its
Subsidiaries shall be no less favorable than the employee benefits provided from
time to time by the Buyer or its Subsidiary for its similarly situated
employees. Such employee benefits shall be without limitation for preexisting
conditions other than any such condition or limitation (including without
limitation preexisting condition exclusions, waiting periods, actively-at-work
requirements and other similar exclusions and conditions) as to which the
relevant corresponding Plan of the Seller provided only a conditional waiver and
as to which the employee (or his or her spouse or dependents) had not, as of the
Closing Date, satisfied the relevant conditions for such waiver. From and after
the Effective Time, in the case of each employee benefit plan (a "Buyer Plan")
of the Buyer or its Subsidiaries which determines an individual's eligibility to
become a participant in the Buyer Plan (an "eligibility requirement") or the
extent of a participant's nonforfeitable right to benefits otherwise accrued
under the Buyer Plan (a "vesting requirement") by reference to service for the
Buyer and its Subsidiaries, the Buyer Plan's eligibility and vesting
requirements shall be applied to the extent permitted by law by taking into
account for each employee of the Buyer or its Subsidiaries who was an employee
of Direct or its Subsidiaries immediately prior to the Effective Time such
service of such employee for Direct or its Subsidiaries prior to the Effective
Time as would have been taken into account for purposes of the Buyer Plan's
eligibility and vesting requirements had such service been for the Buyer and its
Subsidiaries.
4.13 Best Efforts and Further Assurances.
Subject to the respective rights and obligations of the Buyer and the Seller
under this Agreement, each of the parties to this Agreement will use its best
efforts to effectuate the transactions contemplated hereby and to fulfill and
cause to be fulfilled the conditions to closing under this Agreement. Each party
hereto, at the reasonable request of another party hereto, will execute and
deliver such other instruments and do and perform such other acts and things as
may be necessary or desirable for effecting completely the consummation of the
transactions contemplated hereby.
ARTICLE 5
CONDITIONS TO THE PURCHASE AND SALE
5.1 Conditions to the Purchase and Sale Relating to the Buyer.
The obligations of the Buyer to consummate the transactions contemplated hereby
at the Closing shall be subject to the satisfaction of or waiver in writing by
the Buyer on or prior to the Closing of each of the following conditions:
(a) each of the representations and warranties of the Seller contained in this
Agreement shall be true in all material respects as of the Closing (except with
respect to representations and warranties made as of a specific time which shall
be true in all material respects as of such time and except for changes
expressly contemplated by this Agreement) with the same effect as though such
representations and warranties had been made on and as of the Closing, and each
of the covenants and agreements of the Seller to be performed on or prior to the
Closing Date shall have been performed in all material respects, and the Buyer
shall have received at the Closing a certificate from the Seller dated as of the
Closing Date and executed by an officer of the Seller certifying to the
fulfillment of the conditions set forth in this Section 5.1(a);
(b) no statute, rule or regulation or order, decree or judgment of or in any
court or tribunal of competent jurisdiction shall be in effect that prohibits
the Buyer from consummating the transactions contemplated hereby;
(c) all consents, approvals, orders or clearances of any governmental or
regulatory authority, the granting of which is required for the consummation of
the transactions contemplated hereby, shall have been obtained and all waiting
periods specified under applicable law, the expiration of which is necessary for
such consummation, shall have passed;
(d) the Seller shall have delivered to the Buyer the Shares together with duly
executed stock powers in blank.
(e) the Buyer shall have received a favorable written opinion of counsel to the
Seller in form reasonably satisfactory to the Buyer;
(f) the Buyer shall have received from each member of the boards of directors of
Direct and its Subsidiaries a written resignation of such member from the
relevant board, effective upon the Closing; and
(g) the Buyer shall have received from the Seller a "FIRPTA certificate," dated
the Closing Date, to the effect that the Seller is not a "foreign person" within
the meaning of the Code and applicable Treasury Regulations, in substantially
the form of Exhibit D.
5.2 Conditions to the Purchase and Sale Relating to the Seller.
The obligations of the Seller to consummate the transactions contemplated hereby
at the Closing shall be subject to the satisfaction of or waiver in writing by
the Seller on or prior to the Closing Date of each of the following conditions:
(a) each of the representations and warranties of the Buyer contained in this
Agreement shall be true in all material respects as of the Closing (except with
respect to representations and warranties made as of a specific time which shall
be true in all material respects as of such time and except for changes
expressly contemplated by this Agreement), with the same effect as though such
representations and warranties had been made on and as of the Closing, and each
of the covenants and agreements of the Buyer to be performed on or prior to the
Closing shall have been performed in all material respects, and the Seller shall
have received at the Closing a certificate from the Buyer dated as of the
Closing Date, executed on behalf of Buyer by an executive officer of Buyer,
certifying to the fulfillment of the conditions set forth in this Section
5.2(a);
(b) no statute, rule or regulation or order, decree or judgment of or in any
court or tribunal of competent jurisdiction shall be in effect that prohibits
the Seller from consummating the transactions contemplated hereby;
(c) all consents, approvals, orders or clearances of any governmental or
regulatory authority, the granting of which is required for the consummation of
the transactions contemplated hereby shall have been obtained and all waiting
periods specified under applicable law the expiration of which is necessary for
such consummation shall have passed;
(d) the Buyer shall have paid the Purchase Price to Seller in accordance with
the provisions of Section 1.2; and
(e) the Seller shall have received a favorable written opinion of counsel to the
Buyer in form reasonably satisfactory to the Seller.
ARTICLE 6
TERMINATION
6.1 Grounds for Termination.
This Agreement may be terminated at any time prior to the Closing:
(a) by written agreement of the parties hereto;
(b) by the Buyer or the Seller in writing without liability to the terminating
party on account of such termination (provided the terminating party is not
otherwise in material default or breach of this Agreement) if the Closing shall
not have occurred on or prior to May 15, 1999; or
(c) by the Buyer or the Seller if the other party has breached its obligations
under this Agreement and such breach prevents the Closing from occurring.
6.2 Effect of Termination.
Termination of this Agreement pursuant to this Article 6 shall terminate all
obligations of the parties hereto except for the obligations under Section
4.4(b); provided, however, that termination pursuant to Section 6.1(b) or (c)
shall not relieve the defaulting or breaching party hereunder from any liability
to the other party hereto resulting from the default or breach hereunder of such
defaulting or breaching party occurring prior to the date of termination;
provided, however, that, absent an intentional breach by the Buyer of its
obligations under this Agreement, if the Seller is entitled to retain the
Deposit under Section 1.4, the Deposit shall constitute the Seller's sole and
exclusive remedy against the Buyer for such termination. If this Agreement is
terminated pursuant to the provisions of this Article 6, the provisions set
forth in Sections 4.4(b), 6.2 and 7.2 shall survive any such termination.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by the Seller.
Subject to Sections 7.3, 7.4 and 9.1, the Seller shall indemnify and hold the
Buyer harmless from and against losses, costs and expenses, including reasonable
attorneys' fees ("Damages") based upon or resulting from any breach of a
representation, warrant or agreement made by the Seller in Sections 1.5 or 2.2.
7.2 Indemnification by the Buyer.
Subject to Sections 7.3, 7.4 and 9.1, the Buyer shall indemnify and hold the
Seller harmless from and against any and all Damages based upon or resulting
from any breach of a representation, warranty or agreement made by the Buyer in
Sections 1.5, 3.2 and 3.4.
7.3 Tax Matters
(a) Subject to Section 7.4, the Seller shall indemnify and hold the Buyer
harmless for (i) any Taxes and reasonable out-of-pocket attorneys' fees and
accountants' fees resulting from and against any breach of a representation,
warrant, agreement, or covenant made by Seller in Section 2.6 and Article 8,
(ii) any Taxes of Direct and its Subsidiaries with respect to any Tax year or
portion thereof ending on or before the Closing Date (except to the extent that
such Taxes are reflected as an accrual on the balance sheet of Direct and its
Subsidiaries as of the Closing Date), and (iii) any Taxes for which Seller is
responsible pursuant to Article 8 including, without limitation, Pre-Closing
Taxes as set forth in Section 8.1(a)(iii) and Taxes resulting from an election
pursuant to Section 338(h)(10) of the Code, and comparable provisions of state,
local, and foreign law (except to the extent that such Taxes are reflected as an
accrual on the balance sheet of Direct and its Subsidiaries as of the Closing
Date), including, in each case, any adjustment for such Taxes as a result of an
audit or administrative proceeding by any federal, state, or local Tax
authority.
(b) The Buyer shall be liable for and indemnify the Seller for all other Taxes
of Direct for any taxable period that are not specifically assumed by Seller
under Section 7.3.
(c) To the extent permitted by applicable law, all amounts paid by the Seller or
the Buyer under Section 7.3 shall be treated for all Tax purposes as adjustments
to the Purchase Price.
(d) The obligations of the parties set forth in this Section 7.3 shall survive
the Closing until the expiration of the applicable statute of limitations.
7.4 Claims.
Except as otherwise provided herein, when a party seeking indemnification under
Sections 7.1 or 7.2 (the "Indemnified Party") receives notice of any claim made
by a third party (a "Third Party Claim") which is to be the basis for a claim
for indemnification hereunder, the Indemnified Party shall give prompt written
notice thereof to the party from which indemnification is sought (the
"Indemnifying Party") reasonably indicating (to the extent known) the nature of
such claim and the basis thereof. Upon notice from the Indemnified Party, the
Indemnifying Party may, but shall not be required to, assume the defense of any
such Third Party Claim, including its compromise or settlement, and the
Indemnifying Party shall pay all reasonable costs and expenses thereof and shall
be fully responsible for the outcome thereof; provided, however, that in such
case, the Indemnifying Party shall have no obligation to pay any further costs
and expenses of legal counsel of the Indemnified Party in connection with such
defense. No compromise or settlement in respect of any Third Party Claim may be
effected by the Indemnifying Party without the Indemnified Party's prior written
consent (which consent which shall not be unreasonably withheld), unless the
sole relief is monetary damages that are paid in full by the Indemnifying Party.
The Indemnifying Party shall give notice to the Indemnified Party as to its
intention to assume the defense of any such Third Party Claim within thirty
business days after the date of receipt of the Indemnified Party's notice in
respect of such Third Party Claim. If an Indemnified Party does not, within
thirty business days after the Indemnified Party's notice is given, give notice
to the Indemnified Party of its assumption of the defense of the Third Party
Claim, the Indemnifying Party shall be deemed to have waived its rights to
control the defense thereof. If the Indemnified Party assumes the defense of any
Third Party Claim because of the failure of the Indemnifying Party to do so in
accordance with this Section 7.4, the Indemnifying Party shall pay all
reasonable costs and expenses of such defense. The Indemnifying Party shall have
no liability with respect to any compromise or settlement thereof effected
without its prior written consent (which consent shall not be unreasonably
withheld).
7.5 Limitations on Indemnification.
(a) Except as indicated in Section 7.3 or Section 7.3(c), no party shall be
obligated pursuant to this Section 7 or for any other reason or cause to
indemnify the other. The rights of the parties for indemnification relating to
this Agreement and the transactions contemplated hereby shall be strictly
limited to those contained in this Section 7, which are intended to be and shall
be the exclusive remedies of the parties hereto subsequent to the Closing.
(b) No indemnification shall be payable pursuant to this Section 7 unless the
amount of all claims for indemnification exceeds $100,000 in the aggregate.
Article 8
ADDITIONAL COVENANTS
8.1 Income and Franchise Taxes.
(a) Returns and Payments.
(i) The Seller shall include, or cause to be included, both Direct and its
Subsidiaries in the consolidated federal tax return and in any consolidated, and
(to the extent allowable by law) any combined or unitary, state, local, or
foreign Tax return to be filed by the Seller for all tax periods, or portions
thereof, ending on or before the Closing Date. Seller shall cause to be
prepared, consistent with past practice, and file, or cause to be filed, all
such consolidated and combined tax returns. The Buyer agrees to cooperate with
the Seller in preparation of all such Tax Returns and agrees to take no position
inconsistent with both Direct and its Subsidiaries' being a member of such
consolidated, combined, or unitary group. The Seller shall cause to be timely
paid all Taxes to which such Tax Returns relate for all periods covered by such
Tax Returns including as they relate to both Direct and its Subsidiaries.
(ii) Seller shall cause to be prepared, consistent with past practice, and shall
file or submit to the Buyer for filing, all required Tax Returns of both Direct
and its Subsidiaries (except to the extent described in Section 8(a)(i)) for any
period which ends on or before the Closing Date, for which Tax Returns are not
required to have been filed as of the Closing Date. The Seller shall pay or
shall pay to the Buyer and upon receipt the Buyer shall cause to be timely paid,
in each instance to the appropriate authorities, all Taxes to which such Tax
Returns relate for all periods covered by such Tax Returns.
(iii) The Buyer shall cause to be prepared, consistent with past practice and
timely filed all required Tax Returns for taxable periods beginning before and
ending after the Closing Date (the "Straddle Returns"). At least fifteen (15)
days prior to the filing of any Straddle Return required to be filed by the
Buyer pursuant to the preceding sentence, the Buyer shall submit copies of such
returns to the Seller for its approval, which shall not be unreasonably
withheld. The Buyer shall pay all Taxes reflected on the Straddle Returns. Such
taxes to the extent attributable to any period or portion of a period on or
before the Closing Date shall be referred to herein as "Pre-Closing Taxes".
Pre-Closing Taxes shall be calculated on the basis of the activities of both
Direct and its Subsidiaries as though the taxable period for the Company
terminated at the close of business on the Closing Date; provided, however, that
in the case of a Tax not based on income, Pre-Closing Taxes shall be equal to
the tax imposed with respect to the entire taxable period multiplied by a
fraction, the numerator of which is the number of days in the taxable period on
or preceding the Closing Date and the denominator of which is the number of days
in the taxable period. The Seller shall reimburse the Buyer for Pre-Closing
Taxes at such time as the Straddle Return is filed with the appropriate taxing
authority.
(b) Cooperation. After the Closing Date, the Buyer and the Seller shall make
available to the other, as reasonably requested, and to the appropriate tax
authorities, all information, records, and documents relating to the Tax
liabilities or potential Tax liabilities of both Direct and its Subsidiaries for
all periods on or prior to the Closing Date (including Pre-Closing Taxes
described in Section 8(a)(iii)) and shall preserve all such information,
records, and documents until the expiration of any applicable statue of
limitation or extension thereof.
(c) Tax Sharing Agreement. Any tax sharing or allocation agreement shall be
cancelled as of the date prior to the Closing Date. There will be no payment
covered by any tax sharing agreement after the Closing Date due to or from Buyer
and both Direct and its Subsidiaries on the one hand, and the Seller, on the
other hand, with respect to any tax year ending on or before the Closing Date.
(d) Election Pursuant to Section 338(h)(10) of the Code.
(i) The Seller agrees, if so directed by the Buyer, to join in making an
election pursuant to Section 338(h)(10) of the Code (and any corresponding
election under state, local, or foreign law) (the "Election") with respect to
the purchase of the stock of Direct and its Subsidiaries pursuant to this
Agreement. Seller will pay any Tax attributable to the Election (including any
corresponding election under state, local, or foreign law). The purchase price,
as determined in accordance with Treasury Regulations promulgated under Section
338(h)(10) of the Code, will be allocated to the assets of both Direct and its
Subsidiaries for all purposes as set forth in such section. As soon as
practicable, on or after the Closing Date, but in all cases on or before the due
date for such forms, the parties hereto will file such forms as are required to
effect the Election (including any comparable election under state, local, or
foreign law) with the appropriate taxing authority.
(e) Allocation of Purchase Price. No later than thirty (30) days after the
Closing Date, Buyer and Seller shall agree upon a schedule which shall set forth
the allocation of the purchase price among the assets of Direct and its
Subsidiaries. Such allocation shall be based on appraisals performed by the
Buyer's independent accountant.
ARTICLE 9
MISCELLANEOUS
9.1 Survival.
Except for the representations and warranties set forth in Sections 2.2, 3.2,
and 3.4, the representations and warranties contained in Article 2 and Article 3
herein shall not survive the Closing. The representations and warranties in
Sections 2.2 and 3.2 shall survive the Closing, but shall expire on the date six
years after the Closing Date, except with respect to and to the extent of any
claims of which written notice specifying, in reasonable detail, the nature and
amount of the claims, has been given by the Buyer to the Seller, or by the
Seller to the Buyer, as the case may be, prior to such expiration. The
representations and warranties in Section 3.4 shall survive the Closing but
shall expire on the date three years after the Closing Date, except with respect
to and to the extent of any claims of which written notice specifying the nature
and amount of the claims has been given by the Seller to the Buyer prior to such
expiration. This Section 9.1 shall not affect the provisions of Section 7.3.
9.2 Assignment.
This Agreement may not be assigned by any party hereto, and any such assignment
shall be void and of no force or effect. This Agreement shall be binding upon
and inure to the benefit of successors of the parties hereto.
9.3 Entire Agreement.
This Agreement (i) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (ii) is not intended to and shall not
be construed to confer upon any persons other than the parties hereto any rights
or remedies hereunder.
9.4 Amendment and Modification.
This Agreement and any of the terms contained herein may only be amended or
modified by the Seller and the Buyer in writing.
9.5 Waiver.
At any time prior to the Closing, either the Seller or the Buyer may (i) extend
the time for the performance of any of the obligations or other acts of the
other party hereto, (ii) waive any inaccuracies in the representations and
warranties of the other parties contained herein or in any document delivered
pursuant hereto, or (iii) waive compliance with any of the agreements or
conditions of the other party contained herein. Any agreement on the part of the
other party contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
by the party granting the extension or waiver. No waiver of any of the
provisions of this Agreement shall be deemed to or shall constitute a waiver of
any other provision hereof.
9.6 Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which shall be considered one and the
same instrument.
9.7 Reference.
The table of contents and the section and paragraph headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
9.8 Notices.
All notices hereunder shall be in writing and delivered personally or by telex,
telegram or facsimile transmission or by registered or certified mail (return
receipt requested) or by commercial overnight delivery service to the other
party at the following address for such party (or at such other address as shall
be specified by like notice):
If to the Buyer, to:
Marketing Services Group, Inc.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Camhy Xxxxxxxxx & Xxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Annex
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Seller, to:
CMGI, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx III
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
CMGI, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxxx II
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any notice given by mail or telegram or facsimile transmission shall be
effective when received.
9.9 Disclosure.
It is understood and agreed that the specification of any dollar amount in the
representations and warranties contained in this Agreement or the inclusion of
any specific item in the Schedules is not intended to imply that such amounts or
higher or lower amounts, or the items so included or other items, are or are not
material, and no party shall use the fact of the setting of such amounts or the
fact of the inclusion of any such item in the Schedules in any dispute or
controversy between the parties as to whether any obligation, item or matter not
describe herein or included in a Schedule is or is not material for purpose of
this Agreement.
9.10 Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of
the Commonwealth of Massachusetts.
9.11 Severability.
In the event that any provision of this Agreement or the application thereof,
becomes or is declared by a court of competent jurisdiction to be illegal, void
or enforceable, the remainder of this Agreement will continue in full force and
the application of such provision to the other persons or circumstances will be
interpreted so as reasonably to effect the intent of the parties hereto. The
parties further agree to replace such void or unenforceable provision of this
Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business and other purposes of such void or
unenforceable provision.
9.12 Consent to Jurisdiction.
(a) The parties hereto hereby irrevocably submit to the jurisdiction of the
courts of the Commonwealth of Massachusetts over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
and proceeding may be heard and determined in such court. The parties hereby
irrevocably waive, to the fullest extent permitted by law, any objection which
they may now or hereafter have to the laying of venue of any dispute arising out
of or relating to this Agreement or any of the transactions contemplated hereby
brought in such court or any defense of inconvenient forum for the maintenance
of such dispute. Each of the parties hereto agrees that a judgment in any such
dispute may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law. This consent to jurisdiction is being given solely
for purposes of this Agreement and is not intended to, and shall not, confer
consent to jurisdiction with respect to any other dispute in which a party to
this Agreement may become involved.
(b) Each of the parties hereto hereby consents to process being served by any
party to this Agreement in any suit, action or proceeding of the nature
specified in subsection (a) above by the mailing of a copy thereof in this
manner specified by the provisions of Section 7.8 of this Agreement.
9.13 Waiver of Jury Trial.
EACH OF THE BUYER AND THE SELLER HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF THE
BUYER OR THE SELLER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR
ENFORCEMENT HEREOF.
[Balance of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Buyer and the Seller have caused this Agreement to
be signed by themselves or their duly authorized respective officers, all as of
the date first written above.
MARKETING SERVICES GROUP, INC.
By: /s/ Xxxxxx Xxxxxxx
-------------------
Name: Xxxxxx Xxxxxxx
Title: Chairman, Chief Executive Officer
and President
CMGI, INC.
By: /s/ Xxxxxx X. Xxxxxxxx, III
--------------------------------
Name: Xxxxxx X. Xxxxxxxx, III
Title: Chief Financial Officer
TABLE OF CONTENTS
Page
Article 1 PURCHASE AND SALE OF SHARES ....................................1
1.1 Purchase and Sale of Shares ......................................1
1.2 Purchase Price ...................................................1
1.3 Closing Date .....................................................2
1.4 Deposit ..........................................................2
1.5 Delivery and Payment .............................................3
1.6 Settlement .......................................................3
1.7 Treatment of Options .............................................4
Article 2 REPRESENTATIONS AND WARRANTIES OF THE SELLER ...................4
2.1 Organization of Direct ...........................................4
2.2 The Capital Structure of Direct ..................................5
2.3 Authority ........................................................5
2.4 Financial Statements of Direct ...................................6
2.5 Absence of Certain Changes or Events .............................7
2.6 Tax Matters ......................................................8
2.7 Title to Properties; Absence of Liens and Encumbrances ..........10
2.8 Intellectual Property ...........................................10
2.9 Compliance; Permits; Restrictions ...............................10
2.10 Litigation ......................................................11
2.11 Brokers' and Finders' Fees ......................................11
2.12 Employee Benefit Plans ..........................................11
2.13 Employment Matters ..............................................12
2.14 Environmental Matters ...........................................12
2.15 Agreements, Contracts and Commitments ...........................13
2.16 Insurance .......................................................14
2.17 The Business Conducted by Direct ................................14
2.18 Assets and Property Necessary to the Conduct of Business by
Direct ..........................................................15
2.19 Year 2000 .......................................................15
2.20 Disclaimer ......................................................15
Article 3 REPRESENTATIONS AND WARRANTIES OF THE BUYER ...................15
3.1 Organization of the Buyer .......................................15
3.2 The Capital Structure of the Buyer ..............................16
3.3 Authority .......................................................16
3.4 SEC Documents, Financial Statements .............................17
3.5 Financial Capability ............................................18
3.6 Acquisition of Shares; Ownership of Buyer .......................18
3.7 Examination and Agreement to Investigate ........................18
3.8 Litigation ......................................................18
Article 4 CONDUCT PRIOR TO THE EFFECTIVE TIME ...........................18
4.1 Conduct of Business by Direct ...................................18
4.2 Certain Actions by Direct .......................................19
4.3 Transfer Taxes ..................................................19
4.4 Access to Information; Confidentiality ..........................19
4.5 Public Disclosure ...............................................19
4.6 Exclusivity .....................................................20
4.7 Fees and Expenses ...............................................20
4.8 Related Agreements ..............................................20
4.9 Intercompany Accounts ...........................................20
4.10 Agreements between Seller and Direct ............................20
4.11 Consents of Direct Optionholders ................................20
4.12 Direct Employee Plans; Employment Matters .......................20
4.13 Best Efforts and Further Assurances .............................21
Article 5 CONDITIONS TO THE PURCHASE AND SALE ...........................21
5.1 Conditions to the Purchase and Sale Relating to the Buyer .......21
5.2 Conditions to the Purchase and Sale Relating to the Seller ......22
Article 6 TERMINATION ...................................................23
6.1 Grounds for Termination .........................................23
6.2 Effect of Termination ...........................................23
Article 7 INDEMNIFICATION ...............................................23
7.1 Indemnification by the Seller ...................................23
7.2 Indemnification by the Buyer ....................................23
7.3 Tax Matters .....................................................23
7.4 Claims ..........................................................24
7.5 Limitations on Indemnification ..................................25
Article 8 ADDITIONAL COVENANTS ..........................................25
8.1 Income and Franchise Taxes ......................................25
Article 9 MISCELLANEOUS .................................................27
9.1 Survival ........................................................27
9.2 Assignment ......................................................27
9.3 Entire Agreement ................................................27
9.4 Amendment and Modification ......................................27
9.5 Waiver ..........................................................27
9.6 Counterparts ....................................................27
9.7 Reference .......................................................27
9.8 Notices .........................................................27
9.9 Disclosure ......................................................28
9.10 Governing Law ...................................................29
9.11 Severability ....................................................29
9.12 Consent to Jurisdiction .........................................29
9.13 Waiver of Jury Trial ............................................29
