Exhibit 2.1
Confidential
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ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ALLOY, INC.,
ALLOY ACQUISITION SUB, INC.,
AND
MARKETSOURCE CORPORATION
Dated as of November 26, 2001
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Confidential
TABLE OF CONTENTS
ARTICLE I PURCHASE AND SALE OF ASSETS; CLOSING........................................ 1
..
1.1 Purchase and Sale of Acquired Assets....................................... 1
1.2 Excluded Assets............................................................ 3
1.3 Shared Assets.............................................................. 4
1.4 Assumption of Liabilities.................................................. 4
1.5 Excluded Liabilities....................................................... 4
1.6 Continuing Liabilities..................................................... 6
1.7 Closing.................................................................... 6
1.8 Closing Deliveries......................................................... 7
1.9 Further Assurances......................................................... 7
ARTICLE II PURCHASE PRICE............................................................. 8
2.1 Purchase Price; Performance Stock Payment.................................. 8
(a) Purchase Price............................................................. 8
(b) Performance Stock Payment.................................................. 8
2.2 Escrow Deposit; Delviery of Purchase Price................................. 10
(a) Escrow Agreements.......................................................... 10
(b) Escrow Deposit............................................................. 11
(c) Delivery of Purchase Price................................................. 11
2.3 Working Capital Adjustment................................................. 11
2.4 Allocation of Purchase Price............................................... 12
ARTICLE III REPRESENTATIONS AND WARRANTIES............................................. 13
3.1 Representations and Warranties of MarketSource............................. 13
(a) Organization; Good Standing; Qualification and Power....................... 13
(b) Subsidiaries; Equity Investments........................................... 13
(c) Intentionally Omitted...................................................... 13
(d) Authority; No Consents..................................................... 13
(e) Financial Information...................................................... 14
(f) Absence of Undisclosed Liabilities......................................... 15
(g) Absence of Changes......................................................... 16
(h) Tax Matters................................................................ 17
(i) Title to Assets, Properties and Rights and Related Matters................. 18
(j) Real Property - Owned or Leased............................................ 18
(k) Intellectual Property...................................................... 19
(l) Software................................................................... 21
(m) Agreements, Etc............................................................ 21
(n) No Defaults................................................................ 23
(o) Litigation, Etc............................................................ 23
(p) Accounts and Notes Receivable.............................................. 24
(q) Accounts and Notes Payable................................................. 24
(r) Compliance; Governmental Authorizations and Consents....................... 24
(s) Environmental Matters...................................................... 25
(t) Labor Relations; Employees................................................. 26
(u) Employee Benefit Plans and Contracts....................................... 27
(v) Insurance.................................................................. 30
(w) [Intentionally Omitted].................................................... 30
(x) Brokers.................................................................... 30
(y) Related Transactions....................................................... 30
(z) Customers.................................................................. 31
(aa) Minute Books............................................................... 31
i
(bb) Business Generally......................................................... 31
(cc) Approval................................................................... 31
(dd) Investment Representations................................................. 31
(ff) Disclosure................................................................. 33
3.2 Intentionally Omitted...................................................... 33
3.3 Representations and Warranties of Alloy and Acquisition Sub................ 33
(a) Organization; Good Standing; Qualification and Power....................... 33
(b) Capital Stock.............................................................. 33
(c) Authority.................................................................. 33
(d) SEC Documents.............................................................. 34
(e) [Intentionally Omitted].................................................... 35
(f) Disclosure................................................................. 35
(g) Litigation................................................................. 35
ARTICLE IV RELATED AGREEMENTS......................................................... 35
4.1 Escrow Agreements.......................................................... 35
4.2 Lockup Agreement........................................................... 35
4.3 Registration Rights Agreements............................................. 36
4.4 Non-competition, Confidentiality and Assignment of Inventions Agreements... 36
4.5 Employment Offer Letters................................................... 36
4.6 Lease...................................................................... 36
4.7 License Agreement.......................................................... 36
4.8 Services Agreement......................................................... 36
4.9 Warrants................................................................... 36
ARTICLE V CONDITIONS PRECEDENT........................................................ 37
5.1 Conditions to Each Party's Obligations..................................... 37
(a) Approvals.................................................................. 37
(b) Legal Action............................................................... 37
(c) Legislation................................................................ 37
5.2 Conditions to Obligations of Alloy and Acquisition Sub..................... 37
(a) Representations and Warranties of MarketSource............................. 37
(b) Performance of Obligations of MarketSource................................. 37
(c) Authorization of Agreement................................................. 37
(d) Opinion of MarketSource's Counsel.......................................... 38
(e) Acceptance by Counsel to Alloy............................................. 38
(f) Consents and Approvals..................................................... 38
(g) Related Agreements......................................................... 38
(h) Default Under Agreements................................................... 38
(i) Approval by Board of Directors of Alloy and Acquistion Sub................. 38
(j) Evidence of Corporate Authority............................................ 38
(k) Change of Name............................................................. 38
5.3 Conditions to Obligations of MarketSource.................................. 39
(a) Representations and Warranties of Alloy and Acquisition Sub................ 39
(b) Performance of Obligations of Alloy and Acquisition Sub.................... 39
(c) Related Agreements......................................................... 39
(d) Opinion of Counsel for Alloy............................................... 39
(e) Stock Certificates......................................................... 39
(f) Closing Cash Payment....................................................... 39
(g) Evidence of Corporate Authority............................................ 39
ARTICLE VI ADDITIONAL AGREEMENTS...................................................... 40
6.1 Certain Information Required by the Code................................... 40
6.2 Restriction on Transfer.................................................... 40
6.3 [Intentionally Omitted].................................................... 42
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6.4 Litigation Cooperation..................................................... 42
6.5 Record Maintenance......................................................... 42
6.6 Preparation of Filings..................................................... 42
6.7 Efforts to Consummate...................................................... 43
6.8 Public Announcements....................................................... 43
6.9 Employment Matters......................................................... 43
6.10 Transfer Taxes............................................................. 45
6.11 Required Consents; Subsequent Events....................................... 46
ARTICLE VII INDEMNIFICATION........................................................... 46
7.1 Definitions................................................................ 46
(a) Affiliate.................................................................. 46
(b) Event of Indemnification................................................... 46
(c) Indemnified Persons........................................................ 47
(d) Indemnifying Persons....................................................... 47
(e) Losses..................................................................... 48
7.2 Indemnification Generally.................................................. 48
7.3 Assertion of Claims........................................................ 49
7.4 Notice and Defense of Third Party Claims................................... 49
7.5 Survival of Representations and Warranties................................. 51
ARTICLE VIII MISCELLANEOUS............................................................ 51
8.1 Expenses................................................................... 51
8.2 Entire Agreement........................................................... 51
8.3 Interpretation............................................................. 52
8.4 Knowledge Definition....................................................... 52
8.5 Notices.................................................................... 52
8.6 Counterparts............................................................... 53
8.7 Governing Law; Venue....................................................... 53
8.8 Benefits of Agreement...................................................... 53
8.9 Pronouns................................................................... 54
8.10 Amendment, Modification and Waiver......................................... 54
8.11 No Third Party Beneficiaries............................................... 54
8.12 Consents................................................................... 54
8.13 Interpretation............................................................. 54
8.14 No Joint Venture........................................................... 54
8.15 Specific Performance....................................................... 54
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EXHIBITS
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Exhibit A Form of Xxxx of Sale, Assignment and Assumption Agreement
Exhibit B [Intentionally Omitted]
Exhibit C Form of Trademark Assignment
Exhibit D-1 Form of Escrow Agreement
Exhibit D-2 Form of Supplemental Escrow Agreement
Exhibit E Form of Investment Representation and Lockup Agreement
Exhibit F Form of Registration Rights Agreement
Exhibit G Form of Non-Competition and Confidentiality Agreement
(MarketSource/Stockholders)
Exhibit H-1 Form of Non-Competition and Confidentiality Agreement
(Key Employees)
Exhibit H-2 Form of Non-Competition and Confidentiality Agreement (Xxxxxxx)
Exhibit I-1 Form of Sublease (10 Abeel Road)
Exhibit I-2 Form of Sublease (2 Commerce Way)
Exhibit J Form of License
Exhibit K Form of Services Agreement
Exhibit L-1 Form of Warrant (MarketSource)
Exhibit L-2 Form of Warrant (Xxxxxxx)
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INDEX TO DEFINED TERMS
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360 Youth Business............................................Preamble
360 Youth Business Employees....................................6.9(a)
360 Youth EBIT..................................................2.1(b)
360 Youth IP Rights.............................................3.1(k)
360 Youth Material Adverse Effect...............................3.1(a)
Actions.........................................................3.1(o)
Acquired Assets....................................................1.1
Acquisition Sub...............................................Preamble
Adjusted EBIT...................................................2.1(b)
Adjustment Notice...............................................2.3(a)
Affiliate.......................................................7.1(a)
Agreement.....................................................Preamble
Alloy.........................................................Preamble
Alloy Affiliate....................................................8.8
Alloy Common Stock..............................................2.1(a)
Alloy Event of Indemnification..................................7.1(b)
Alloy Indemnifying Persons......................................7.1(d)
Alloy SEC Documents.............................................3.3(d)
Alloy Shares....................................................2.1(a)
Arbitrator......................................................2.1(b)
Assumed Contracts...............................................1.1(a)
Assumed Liabilities................................................1.4
Audited Working Capital.........................................2.3(a)
Xxxx of Sale, Assignment and Assumption Agreement...............1.8(a)
Business Day.......................................................1.7
CERCLA..........................................................3.1(s)
Certificate of Incorporation....................................3.1(a)
Closing............................................................1.7
Closing Cash Payment............................................2.1(a)
Closing Date.......................................................1.7
Closing 360 Youth Balance Sheet..............................3.1(e)(i)
Code..........................................................Preamble
Copyrights......................................................3.1(k)
Damages.........................................................1.1(f)
Designated Persons..............................................3.1(o)
DGCL..........................................................Preamble
Disclosure Schedule................................................3.1
Dispute Notice..................................................2.3(a)
DOL.............................................................3.1(u)
EBIT Determination Date.........................................2.1(b)
EBIT Dispute Notice.............................................2.1(b)
Effective Time.....................................................1.7
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Employee........................................................3.1(u)
Employee Options................................................6.9(c)
Employee Plans..................................................3.1(u)
Encumbrances....................................................3.1(i)
Environmental Laws..............................................3.1(s)
ERISA ..........................................................3.1(u)
ERISA Affiliate.................................................3.1(u)
Escrow Agent....................................................2.2(a)
Escrow Agreement................................................2.2(a)
Escrow Cash.....................................................2.2(b)
Escrow Shares...................................................2.2(b)
Estimated Working Capital.......................................2.3(a)
Event of Indemnification........................................7.1(b)
Exchange Act....................................................3.4(c)
Excluded Assets....................................................1.2
Excluded Liabilities...............................................1.5
FAS No. 5.......................................................3.1(f)
Filings............................................................6.6
Final Working Capital...........................................2.3(a)
Form 10-Q.......................................................3.3(b)
Fraud Claims....................................................7.2(c)
GAAP............................................................2.1(b)
Generation Y Market...........................................Preamble
Governmental Authority..........................................3.1(o)
Indemnified Persons.............................................7.1(c)
Indemnifying Persons............................................7.1(d)
Independent Auditor.............................................2.3(a)
Intellectual Property Rights....................................3.1(k)
Interim 360 Youth Financial Statements.......................3.1(e)(i)
Interim MarketSource Financial Statements....................3.1(e)(i)
IRS.............................................................3.1(u)
Key Employees......................................................4.6
Leased Real Property............................................3.1(j)
Leases..........................................................3.1(j)
Liability.......................................................3.1(f)
License Agreements..............................................3.1(k)
Licensed Software...............................................3.1(l)
Lockup Agreement...................................................4.2
Losses..........................................................7.1(e)
MarketSource..................................................Preamble
MarketSource Event of Indemnification...........................7.1(b)
MarketSource Financial Statements...............................3.1(e)
MarketSource Indemnifying Persons...............................7.1(d)
MarketSource Indemnified Persons................................7.1(c)
Material........................................................3.1(m)
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Multiemployer Plan..............................................3.1(u)
Notice of Claim....................................................7.3
Ordinary Course of Business.....................................2.3(i)
Other Assignments...............................................1.8(d)
Outstanding Shares.................................................2.1
Patents.........................................................3.1(k)
Pension Plans...................................................3.1(u)
Performance Stock Payment.......................................2.1(b)
Performance Stock Shares.......................................3.1(dd)
Permitted Encumbrances..........................................2.3(i)
Proposed Settlement.............................................7.4(d)
Purchase Price..................................................2.1(a)
Registration Rights Agreement......................................4.3
Related Agreements...................................................4
Restricted Securities...........................................6.2(a)
Revised Working Capital.........................................2.3(a)
Services Agreement.................................................4.8
Shared Assets......................................................1.3
Stipulated Price................................................2.1(a)
Survival Date......................................................7.5
Tax.............................................................3.1(h)
Tax Returns.....................................................3.1(h)
Taxes...........................................................3.1(h)
Third Party Claim..................................................7.4
Trade Secrets...................................................3.1(k)
Trademark Assignment............................................1.8(c)
Trademarks......................................................3.1(k)
Transaction Costs..................................................8.1
Transfer........................................................6.2(a)
Transferred Employees...........................................6.9(a)
Warrant.........................................................2.1(a)
Warrant Shares.................................................3.1(dd)
Working Capital.................................................2.3(a)
Working Capital Statement.......................................2.3(a)
Working Capital Target..........................................2.3(a)
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Confidential
ASSET PURCHASE AGREEMENT (this "Agreement") dated as of November 26, 2001,
by and between ALLOY, INC., a Delaware corporation ("Alloy"), ALLOY ACQUISITION
SUB, INC., a Delaware corporation and wholly-owned indirect subsidiary of Alloy
("Acquisition Sub"), and MARKETSOURCE CORPORATION, a Delaware corporation
("MarketSource").
WHEREAS, MarketSource operates, among other businesses, its 360 Youth
business, which focuses on providing marketing and promotional services targeted
at teenagers and young adults including, without limitation, developing,
acquiring and placing advertising and other promotional materials as a sales
representative, agent or otherwise targeting the 10-24 year old demographic
market (the "Generation Y Market") in all forms of media and developing, staging
and promoting promotional events targeted at the Generation Y Market (the "360
Youth Business");
WHEREAS, subject to the terms and conditions set forth in this Agreement,
MarketSource wishes to sell to Acquisition Sub, and Acquisition Sub wishes to
purchase from MarketSource, substantially all of the assets that are used by
MarketSource to conduct the 360 Youth Business, all as identified or described
herein, and MarketSource wishes to transfer to Acquisition Sub, and Acquisition
Sub has agreed to assume, certain of MarketSource's obligations and liabilities
associated with the 360 Youth Business, and in connection therewith the parties
hereto wish to make certain agreements related to such purchase, sale,
assignment and assumption; and
WHEREAS, as a condition to the willingness of, and as an inducement to,
Alloy, Acquisition Sub and MarketSource to enter into this Agreement,
contemporaneously with the execution and delivery of this Agreement,
MarketSource, Alloy, Acquisition Sub and certain other parties are entering into
the Related Agreements (as defined below).
NOW, THEREFORE, in consideration of the mutual benefits to be derived from
this Agreement and the representations, warranties, covenants, agreements,
conditions and promises contained herein and therein, the parties hereby agree
as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS; CLOSING
1.1 Purchase and Sale of Acquired Assets. Upon the terms and subject to
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the conditions set forth in this Agreement, at the Closing, MarketSource shall
sell, transfer, assign and deliver to Acquisition Sub, and relinquish to
Acquisition Sub in perpetuity, free and clear of all Encumbrances, all right,
title and interest in and to all of the Acquired Assets. As used in this
Agreement, the term "Acquired Assets" means all of the assets, properties,
goodwill and rights of MarketSource of every kind and nature, real, personal or
mixed, tangible or intangible, owned, used or held for use by MarketSource,
relating in any manner to, or used in connection with the
operation of, the 360 Youth Business including, without limitation, the
following, but excluding, however, such assets, rights and properties that
constitute the Excluded Assets (as defined in Section 1.2):
(a) All right, title and interest of MarketSource in, to and under all
written or oral contracts, agreements, guaranties, understandings, deeds,
mortgages, indentures, leases, licenses, commitments, undertakings or other
documents or instruments relating in any manner to the 360 Youth Business,
including those listed in Section 1.1(a) of the Disclosure Schedule (the
"Assumed Contracts");
(b) All of the tangible personal property of MarketSource, wherever
located, relating in any manner to, or used in connection with the operation of,
the 360 Youth Business, including the tangible personal property listed in
Section 1.1(b) of the Disclosure Schedule;
(c) All accounts receivable of MarketSource, all other rights to receive
payment and all rights in respect of prepaid items however evidenced, whether by
notes, instruments, chattel paper or otherwise, relating in any manner to, or
arising out of the operation of, the 360 Youth Business, including those listed
in Section 1.1(c) of the Disclosure Schedule;
(d) All right, title and interest of MarketSource with respect to
leasehold interests and rights thereunder relating in any manner to the real and
personal property relating in any manner to, or used in connection with the
operation of, the 360 Youth Business, including the real and personal property
listed in Section 1.1(d) of the Disclosure Schedule;
(e) All rights of MarketSource, to the extent transferable, under all
Federal, state, local and foreign governmental licenses, consents, approvals,
authorizations, permits, orders decrees and other compliance agreements relating
in any manner to, or used in connection with the operation of, the 360 Youth
Business, including those listed in Section 1.1(e) of the Disclosure Schedule;
(f) All 360 Youth IP Rights and Licensed Software (as defined in Sections
3.1(k) and (l), respectively), and the goodwill associated therewith, licenses
and sublicenses granted in respect thereto and rights thereunder, together with
all claims against third parties for profits and all costs, losses, claims,
liabilities, fines, penalties, damages and expenses (including interest which
may be imposed in connection therewith), court costs, and reasonable fees and
disbursements of counsel, consultants and expert witnesses (collectively,
"Damages") incurred by reason of the past infringement, alleged infringement,
unauthorized use or disclosure or alleged unauthorized use or disclosure of any
360 Youth IP Rights, together with the right to xxx for, and collect the same,
or to xxx for injunctive relief, for Acquisition Sub's own use and benefit, and
for the use and benefit of its successors, assigns or other legal
representatives;
(g) All customer, supplier, advertiser and mailing lists of MarketSource,
including all copies thereof (in whatever media such copies may exists),
relating in any manner to, or used in connection with, the operation of the 360
Youth Business, and all rights in and to the information contained therein;
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(h) All claims, deposits, prepayments, prepaid expenses, refunds, causes
of action, choses in action, rights of recovery, rights of set off and rights of
recoupment relating in any manner to the 360 Youth Business, including those
listed in Section 1.1(h) of the Disclosure Schedule;
(i) All business and financial records, books, ledgers, files, plans,
documents, correspondence, lists, plats, architectural plans, drawings,
notebooks, specifications, creative materials, advertising and promotional
materials, marketing materials, studies, and reports relating in any manner to,
or used in connection with the operation of, the 360 Youth Business or to the
Acquired Assets, in whatever media they exist;
(j) All right, title and interest to and in respect of any telephone and
facsimile numbers, websites, e-mail addresses and Internet domain names used in
connection with the 360 Youth Business, including those listed in Section 1.1(j)
of the Disclosure Schedule;
(k) All right, title and interest in and to the Shared Assets listed in
Section 1.3(ii) of the Disclosure Schedule; and
(l) All goodwill of MarketSource relating to the 360 Youth Business.
1.2 Excluded Assets. In addition to those assets of MarketSource relating
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exclusively to any of MarketSource's businesses other than the 360 Youth
Business, the following assets and property (collectively, the "Excluded
Assets") are to be retained by MarketSource and shall not constitute Acquired
Assets:
(a) All insurance policies, contracts, coverages or bonds owned by
MarketSource, including entitlements to the return of premiums on cancellation
of policies, and all rights of MarketSource of every nature and description
under or arising out of such insurance policies;
(b) All cash, negotiable securities, certificates of deposit, bonds, bank
accounts, lock boxes, letters of credit and other cash equivalents, other than
any of the foregoing securing open customer orders which are included in the
Assumed Contracts;
(c) All real property owned or leased by MarketSource and all plants,
buildings and improvements thereon;
(d) All losses, loss carry-forwards and rights to receive refunds, credits
and loss carry-forwards with respect to any and all Taxes of MarketSource,
whether incurred or accrued prior to or after the Closing Date, including
without limitation interest payable with respect thereto; provided that
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MarketSource shall not have any rights with respect to any losses, loss carry-
forwards and rights to receive refunds, credits and loss carry-forwards with
respect to any and all Taxes of Alloy or Acquisition Sub for any period after
the Closing Date; and
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(e) All rights of MarketSource under this Agreement and the agreements and
instruments executed and delivered to MarketSource by Acquisition Sub pursuant
to this Agreement.
1.3 Shared Assets. For purposes hereof, the term "Shared Asset" means
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any asset which is used by MarketSource in the 360 Youth Business and in one or
more of its other businesses and which is identified as a "Shared Asset" in
Section 1.3(i) of the Disclosure Schedule. The licensing of Shared Assets that
constitute 360 Youth IP Rights or Licensed Software, and the licensing back to
MarketSource of certain rights in the 360 Youth IP Rights and the Licensed
Software, shall be governed by the provisions of the License described in
Section 4.7 and the Services Agreement. With respect to Shared Assets other
than 360 Youth IP Rights and Licensed Software, and notwithstanding anything
contained in Sections 1.1 or 1.2 to the contrary, Acquisition Sub shall acquire
only the Shared Assets which are listed in Section 1.3(ii) of the Disclosure
Schedule.
1.4 Assumption of Liabilities. Acquisition Sub shall not assume,
-------------------------
discharge or perform any of MarketSource's Liabilities other than the following
Liabilities of MarketSource (collectively, the "Assumed Liabilities"), all of
which Acquisition Sub will assume and pay, discharge or perform, as appropriate,
from and after the Effective Time in accordance with the provisions of this
Agreement and the Xxxx of Sale, Assignment and Assumption Agreement:
(a) Liabilities arising after the Closing Date under the Assumed
Contracts, except to the extent, in respect of each Assumed Contract, the
representations of MarketSource contained in Section 3.1(m) in respect of such
Assumed Contract are untrue in any material respect at the Closing; provided,
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that Acquisition Sub shall not assume, and does not hereby agree to pay,
discharge or perform, any Damages relating in any manner to or arising from any
breach or default of MarketSource or any of its Affiliates of any Assumed
Contract occurring on or prior to the Closing Date regardless of whether
MarketSource discloses such breach or default pursuant to this Agreement;
(b) Accounts payable of MarketSource relating to the 360 Youth Business
outstanding as of the Closing Date, but only to the extent set forth in Section
1.4(b) of the Disclosure Schedule; and
(c) Expenses incurred prior to the Closing Date in the Ordinary Course of
Business in connection with any work-in-process under any Assumed Contract, but
only to the extent such expenses relate to work-in-process that results in the
realization of revenue to Acquisition Sub following the Closing Date.
1.5 Excluded Liabilities. Alloy is not assuming any Liabilities of
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MarketSource or any of its Affiliates. Acquisition Sub shall have no liability
whatsoever for any Liabilities of MarketSource which are not specifically
assumed under Section 1.4, and, without limiting the generality of the
foregoing, Acquisition Sub shall not be deemed to assume, nor shall it assume
the following Liabilities (the "Excluded Liabilities"):
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(a) any and all Liabilities arising under or relating to any written or
oral contracts, agreements, guaranties, understandings, deeds, mortgages,
indentures, leases, licenses, commitments, undertakings or other documents or
instruments to which MarketSource or any Affiliate thereof is a party, other
than the Assumed Contracts to the extent specifically set forth in Section
1.4(a);
(b) any and all Liabilities of MarketSource or any of its Affiliates in
respect of any indebtedness for or guarantees of borrowed money;
(c) any and all Liabilities of MarketSource to any Affiliate or current or
former stockholder of MarketSource;
(d) any and all Liabilities of MarketSource or any of its Affiliates for
or in respect of Taxes including, without limitation, any Taxes resulting from
or relating to the consummation of the transaction contemplated hereby
(including any state Taxes that may become due as a result of any Bulk Sale or
similar statute that may be assessed against Acquisition Sub or Alloy following
the Closing);
(e) any and all Liabilities of MarketSource or any of its Affiliates
arising out of or relating, directly or indirectly, to any property of which
MarketSource or such Affiliate has disposed or proposed to dispose, including
any and all Liabilities to any other person or entity incurred in connection
with any sale or proposed sale of (i) all or any substantial part of
MarketSource or any Affiliate, or any other business combination or proposed
business combination, (ii) any real property of MarketSource or any Affiliate,
(iii) any other business or (iv) any securities of MarketSource, any Affiliate
or any other entity;
(f) any and all Liabilities arising out of or relating, directly or
indirectly, to any Employee Plan or the termination thereof including, without
limitation, MarketSource's Incentive Compensation Plan and MarketSource's
obligations to the 360 Youth Business Employees under such plan as set forth in
Section 6.9 of this Agreement;
(g) any and all Liabilities with respect to fees and expenses incurred by
MarketSource or any of its Affiliates in connection with the sale or proposed
sale or other disposition or proposed disposition of all or part of the assets
or capital stock of MarketSource or any Affiliate (including the Transaction
Expenses);
(h) any and all Liabilities of MarketSource or any of its Affiliates to
any present or former employee or independent contractor of MarketSource or any
Affiliate thereof;
(i) any and all Liabilities of MarketSource or any of its Affiliates for
any Actions against MarketSource or any Affiliate, including any Actions pending
or threatened against MarketSource as of the Closing Date;
5
(j) any and all Liabilities of MarketSource or any of its Affiliates for
damage or injury to person or property including, without limitation, those
resulting from or arising out of environmental claims;
(k) any and all Liabilities of MarketSource or any of its Affiliates
arising out of or resulting from non-compliance with any Federal, state, local
or foreign laws, ordinances, regulations or orders;
(l) any and all Liabilities of MarketSource or any of its Affiliates
arising out of, relating to or resulting from any obligation to indemnify any
person or entity (including officers and directors of MarketSource) (other than
as specifically set forth in any of the Assumed Contracts);
(m) any and all Liabilities of MarketSource or any of its Affiliates
arising under this Agreement or any of the Related Agreements;
(n) any and all other Liabilities attributable in any manner to the
Excluded Assets; and
(o) any and all other Liabilities of MarketSource or any of its Affiliates
that are not Assumed Liabilities.
1.6 Continuing Liabilities. Notwithstanding anything contained herein to
----------------------
the contrary, to the extent that any Assumed Liability assumed by Acquisition
Sub pursuant to Section 1.4, or any Damages imposed on Acquisition Sub by
operation of law or otherwise in connection with, or which otherwise arises out
of or in relation to, the transactions contemplated hereby (other than
Acquisition Sub's assumption of the Assumed Liabilities assumed by it pursuant
to Section 1.4), results from or arises out of an event or condition which is
continuing or continuous in nature, Acquisition Sub shall assume and discharge
only that portion of such Assumed Liability or Damage that results from or
arises out of that part of the event which occurs or condition which exists
after the Closing, without, however, releasing MarketSource from its obligation
to discharge that portion of such Assumed Liability or Damage that results from
that part of the event which occurs or condition which exists prior to the
Closing; provided, however, that MarketSource shall discharge all of such
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continuing or continuous Assumed Liabilities or Damages, including, without
limitation, those Assumed Liabilities assumed by Acquisition Sub pursuant to
Section 1.4 if and to the extent they result from a breach by MarketSource of
any of its representations, warranties or covenants hereunder.
1.7 Closing. The closing of the transactions contemplated by this
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Agreement (the "Closing") will take place at 10:00 a.m. (Eastern time) on
November 26, 2001 (the "Closing Date"), unless another date is agreed to in
writing by the parties. The Closing shall take place at the offices of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx, unless another time or place is agreed to in writing by the parties. As
used herein, the term "Business Day" shall mean any day other than a Saturday,
Sunday or day on which banks are permitted to close in the City and State of New
York. All transactions
6
contemplated to take place at the Closing shall be deemed to be effective as of
5:00 p.m. on the Closing Date (the "Effective Time") and events taking place,
and periods ending after the Effective Time shall be deemed to have taken place,
or ended, after the Closing.
1.8 Closing Deliveries. At the Closing, in addition to the agreements set
------------------
forth in Article IV, the parties shall execute and deliver the following
documents:
(a) MarketSource and Acquisition Sub shall execute and deliver the Xxxx of
Sale, Assignment and Assumption Agreement in the form of Exhibit A attached
---------
hereto (the "Xxxx of Sale, Assignment and Assumption Agreement") pursuant to
which MarketSource will transfer and assign to Acquisition Sub certain of the
Acquired Assets and Acquisition Sub will assume the Assumed Liabilities;
(b) [intentionally omitted];
(c) MarketSource will execute and deliver the Trademark Assignment in the
form of Exhibit C attached hereto (the "Trademark Assignment") pursuant to which
---------
MarketSource will transfer and assign to Acquisition Sub the Trademarks being
acquired by Acquisition Sub pursuant to this Agreement; and
(d) All such other bills of sale, assignment and assumption agreements,
endorsements, intellectual property right assignments, certificates of title,
consents and other good and sufficient instruments and documents of conveyance
and transfer, all dated the Closing Date and in a form reasonably satisfactory
to Alloy and Acquisition Sub, as Alloy and Acquisition Sub reasonably shall deem
necessary or appropriate to vest in or confirm to Acquisition Sub full and
complete right, title and interest in and to all of the Acquired Assets
(collectively, the "Other Assignments").
On the Closing Date, MarketSource shall transfer all of the Acquired
Assets, including the 360 Youth IP Rights, to such location or locations as
Acquisition Sub reasonably may request.
1.9 Further Assurances. At any time and from time to time after the
------------------
Closing, at the request of Alloy or Acquisition Sub and without further
consideration, MarketSource will execute and deliver such other instruments of
sale, transfer, conveyance, assignment and confirmation, and will take such
further action, as may be reasonably requested in order to more effectively
transfer, convey and assign to Acquisition Sub, and to confirm Acquisition Sub's
title to, the Acquired Assets, and each of the parties shall execute such other
documents and take such further action as may be reasonably required or
desirable to carry out the provisions of this Agreement and the transactions
contemplated hereby. Without limiting the generality of the foregoing,
MarketSource shall, from time to time and at no cost to Acquisition Sub,
cooperate with, and take all action reasonably requested by, Acquisition Sub to
effectively transition the Acquired Assets and the operation and ownership of
the 360 Youth Business, including, without limitation, all financial information
relating to the 360 Youth Business, all clients, suppliers and vendors of the
360 Youth Business and employees, independent contractors and agents of
7
MarketSource who perform services in connection with the operation of the 360
Youth Business (it being understood that MarketSource shall assist Acquisition
Sub in identifying such employees, independent contractors and agents) and all
technology (including software licenses), infrastructure and infrastructure-
related systems used in connection with the operation of the 360 Youth Business,
from MarketSource to Acquisition Sub, and shall make its officers, employees and
agents available to, and direct such officers, employees and agents to cooperate
with, Acquisition Sub for such purposes. Further, promptly following the
Closing, MarketSource shall cause its accountants, BDO Xxxxxxx, LLP, to prepare
audited financial statements in accordance with Regulation S-X promulgated under
the Securities Act which might be required in connection with any filings
required of Alloy with respect to the transactions contemplated hereby pursuant
to the Securities Act or the Exchange Act.
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price; Performance Stock Payment.
-----------------------------------------
(a) Purchase Price. The entire consideration (the "Purchase Price")
--------------
payable by Alloy and Acquisition Sub for the Acquired Assets shall, subject to
adjustment pursuant to Section 2.3, be an aggregate of (i) $13,375,000 in cash
(the "Closing Cash Payment"); (ii) the number of shares (the "Alloy Shares") of
common stock, $0.01 par value per share, of Alloy ("Alloy Common Stock") as is
obtained by dividing (A) $25,000,000 by (B) $13.5905 (the "Stipulated Price");
(iii) a warrant to purchase up to 100,000 shares of Alloy Common Stock, which
warrant shall be in the form of Exhibit L-1 attached hereto (the "Warrant"); and
-----------
(iv) if earned, the Performance Stock Payment.
(b) Performance Stock Payment. As soon as practical after December 1, 2002
-------------------------
(the "EBIT Determination Date"), Alloy will determine the amount of Adjusted
EBIT (as hereinafter defined) of Acquisition Sub generated during the period
from the Closing Date to the EBIT Determination Date (the "360 Youth EBIT") in
accordance with U.S. generally accepted accounting principles ("GAAP") as in
effect on the Closing Date and shall deliver a written notice to MarketSource
setting forth the Adjusted EBIT and the calculation thereof, together with
copies of such financial statements relied upon by Alloy in preparing such
calculation and such other documents as MarketSource may reasonably request that
Alloy reasonably determines would support its calculation of the 360 Youth EBIT;
provided, however, that Alloy shall have no obligation to deliver to
-------- -------
MarketSource any work papers or other confidential information pertinent to such
calculation. For purposes hereof, "Adjusted EBIT" shall mean Acquisition Sub's
earnings before interest, taxes and depreciation and amortization of not more
than $350,000. In determining the Adjusted EBIT in all cases, including, without
limitation, the determination in accordance with the dispute resolution
procedures set forth in this Section 2.1(b), the following principles shall
apply:
(i) The Adjusted EBIT shall include an allocation of overhead
charges for the
8
360 Youth EBIT calculation period in the amount of $350,000 for
Administrative Services (as such term is defined in the
Services Agreement) to be provided to Acquisition Sub by
MarketSource or by any other party, including Alloy and, with
respect to legal services, outside counsel (but only to the
extent that such outside counsel provides legal services of a
nature that were typically performed by MarketSource's in-house
counsel prior to the Closing Date), regardless of Acquisition
Sub's actual cost of such services, it being understood that
such allocation does not include audit fees, outside legal fees
(other than outside legal fees for legal services that are of a
nature that were typically performed by MarketSource's in-house
counsel prior to the Closing Date, it being understood that
legal services relating to litigation matters shall not
constitute services typically performed by MarketSource's
in-house counsel) and other professional service fees, charges
under maintenance or service agreements (other than the
Services Agreement), insurance expenses, depreciation, rent,
utilities or any other overhead costs necessary to operate the
360 Youth Business in a commercially reasonable manner.
(ii) The Adjusted EBIT shall not include any extraordinary (as the
term "extraordinary" is defined under GAAP) items of income,
gain or loss that may be realized;
(iii) If either Alloy, Acquisition Sub or any Affiliate thereof
effects an acquisition whereby any such acquired business or
assets are assumed by or merged into Acquisition Sub, Alloy and
MarketSource shall negotiate in good faith, on a case by case
basis, any applicable adjustments to the 360 Youth EBIT
calculation; and
(iv) Alloy and Acquisition Sub each shall earn a 20% commission on
sales of products and services of the other and their
respective subsidiaries during the 360 Youth EBIT calculation
period. For sales of products and services of any unrelated
third party for which Alloy or Acquisition Sub or their
respective subsidiaries act as a sales representative during
the 360 Youth EBIT calculation period, Alloy and Acquisition
Sub each shall earn a commission on sales of such products and
services equal to 20% of the commission that the such unrelated
third party pays for the transaction in question. Consequently,
in determining the 360 Youth EBIT, (a) the revenues of
Acquisition Sub shall not include the gross amount of sales of
products and services of Alloy and its subsidiaries other than
Acquisition Sub and its subsidiaries, if any, but rather shall
only include the amount of the commission so earned whether or
not such commissions shall have been paid during the EBIT
calculation period, and (b) the expenses of Acquisition Sub
shall include any such commissions earned by Alloy or any of
its subsidiaries (other than Acquisition Sub and its
subsidiaries) whether or not such commissions shall have been
paid during the EBIT calculation period.
9
If MarketSource objects to Alloy's written determination of the 360 Youth
EBIT, it shall deliver to Alloy written notice of such objection within sixty
(60) calendar days after its receipt thereof (an "EBIT Dispute Notice") setting
forth, in reasonable specificity, the nature of its dispute and, if feasible,
its alternative calculation of the 360 Youth EBIT. If MarketSource does not
timely deliver to Alloy an EBIT Dispute Notice, it shall be deemed to have
agreed to Alloy's determination of the 360 Youth EBIT. If MarketSource does
timely deliver to Alloy an EBIT Dispute Notice, representatives of Alloy and
MarketSource shall meet within fifteen (15) calendar days after Alloy's receipt
of the EBIT Dispute Notice to attempt to resolve any dispute referenced therein.
Any dispute not able to be resolved within such 15 calendar day period shall be
submitted to an independent accounting firm reasonably acceptable to Alloy and
MarketSource within twenty (20) days following the expiration of such 15-day
period to arbitrate the dispute (the "Arbitrator"). If Alloy and MarketSource
are unable to agree on the Arbitrator within such 20-day period, either may
request that the American Arbitration Association appoint an independent
accounting firm to act as Arbitrator hereunder, and any firm appointed after
such request shall be the Arbitrator hereunder absent mutual agreement of Alloy
and MarketSource on a replacement Arbitrator. Alloy and MarketSource shall,
within the next twenty (20) calendar days after the selection or appointment, as
applicable, of the Arbitrator, present their positions with respect to the
disputed item(s) to the Arbitrator together with such other materials as the
Arbitrator deems appropriate. The Arbitrator shall, after the submission of all
evidentiary materials, be required to submit its written decision on each
disputed item to Alloy and MarketSource within thirty (30) days thereafter. Any
determination by the Arbitrator with respect to any disputed item shall be
final, binding and conclusive on each party to this Agreement absent manifest
error. The costs of the Arbitrator shall be borne by the party whose
determination of the 360 Youth EBIT was farthest from the determination of the
360 Youth EBIT by the Arbitrator, or equally by Alloy and MarketSource, if the
determination by the Arbitrator is equidistant between the determinations of the
parties.
If, upon final determination of the 360 Youth EBIT (whether upon agreement
of the parties or by the Arbitrator), the 360 Youth EBIT is greater than
$5,000,000, Alloy shall, within fifteen (15) days of such final determination,
instruct its transfer agent to issue and deliver to MarketSource an aggregate
number of additional shares of Alloy Common Stock which could be purchased at
the Stipulated Price per share for an amount equal to seven (7) times the amount
of the 360 Youth EBIT in excess of $5,000,000 (the "Performance Stock Payment").
Notwithstanding the foregoing, the number of shares issuable in connection with
the Performance Stock Payment shall be capped at 1,545,197 shares (as such
number may be adjusted for any stock dividend, stock split, combination or
similar recapitalization occurring from and after the date of this Agreement)
regardless of the actual amount of the 360 Youth EBIT.
2.2 Escrow Deposit; Delivery of Purchase Price.
------------------------------------------
(a) Escrow Agreements. Reference is made to (i) the escrow agreement dated
-----------------
as of the Closing Date between MarketSource, Alloy, Acquisition Sub and State
Street Bank and Trust Company (the "Escrow Agent") in the form of Exhibit D-1
-----------
attached hereto (the "Escrow Agreement"), for the purpose of, among other
things, securing the indemnification obligations of
10
the MarketSource Indemnifying Parties pursuant to Article VII hereof and (ii)
the escrow agreement dated as of the Closing Date between MarketSource, Alloy,
Acquisition Sub and Xxxxx, Xxxxxxxxx & Xxxxxxxxx, as escrow agent, in the form
of Exhibit D-2 attached hereto (the "Supplement Escrow Agreement").
-----------
(b) Escrow Deposit. At the Closing, Alloy (i) shall cause to be deposited
--------------
with the Escrow Agent, and MarketSource, by its execution and delivery of this
Agreement, hereby authorizes and directs Alloy to make such deposit on its
behalf a certificate representing 283,286 Alloy Shares (the "Escrow Shares"), to
be held by the Escrow Agent in accordance with the provisions of the Escrow
Agreement and (ii) shall cause to be deposited with Xxxxx, Xxxxxxxxx &
Xxxxxxxxx, and MarketSource, by its execution and delivery of this Agreement,
hereby authorizes and directs Alloy to make such deposit on its behalf, the sum
of $300,000 (the "Escrow Cash") to be held in accordance with the provisions of
the Supplemental Escrow Agreement.
(c) Delivery of Purchase Price. At the Closing, Alloy shall deliver to
--------------------------
MarketSource: (i) the Closing Cash Payment (net of the Escrow Cash); (ii) a
certificate representing the Alloy Shares (net of the Escrow Shares) and (iii)
the Warrant. No fractional shares of Alloy Common Stock shall be issued in
connection with the Purchase Price Payment, but in lieu thereof, MarketSource
will receive from Alloy, an amount of cash (without interest), rounded up to the
nearest cent, equal to (i) the Stipulated Price multiplied by (ii) the fraction
of a share of Alloy Common Stock otherwise issuable to MarketSource.
2.3 Working Capital Adjustment.
--------------------------
(a) For purposes hereof, the term "Working Capital" shall mean the current
assets of MarketSource that constitute Acquired Assets less the current
liabilities of MarketSource that constitute Assumed Liabilities, and the term
"Working Capital Target" shall mean $-450,000. On the Closing Date,
MarketSource shall calculate the Working Capital as of the Closing Date (the
"Estimated Working Capital") and shall deliver to Alloy a certificate setting
forth such calculation in reasonable detail (the "Working Capital Statement").
If the Working Capital Target exceeds the Estimated Working Capital, the Closing
Cash Payment shall be reduced by an amount equal to the amount by which the
Working Capital Target exceeds the Estimated Working Capital. As promptly as
reasonably practicable after the Closing, Alloy shall cause an independent
accounting firm of its selection to review the Working Capital Statement to
verify the accuracy of the determination of the Estimated Working Capital as set
forth therein. If such firm determines that the Working Capital as of the
Closing Date was greater or less than the Estimated Working Capital (the
"Revised Working Capital"), Alloy shall deliver to MarketSource a notice (the
"Adjustment Notice") setting forth the Revised Working Capital and the
calculation thereof in reasonable detail. MarketSource shall have ten (10) days
from its receipt of the Adjustment Notice to provide written notice that it
disputes the Adjustment Notice, which notice shall provide a detailed
description of such dispute (a "Dispute Notice"). If MarketSource does not
timely deliver a Dispute Notice to Alloy, the determination of the Revised
Working Capital shall be final and binding on all parties and the Purchase Price
shall be adjusted in accordance with the provisions of Section 2.3(b). If
MarketSource timely delivers a Dispute Notice to Alloy, Alloy and MarketSource
shall mutually agree on an independent public
11
accounting firm (the "Independent Auditor") within twenty (20) days of the
delivery of the Dispute Notice to review the Working Capital Statement and the
Adjustment Notice (and all related information). If Alloy and MarketSource are
unable to agree on the Independent Auditor within such 20-day period, either may
request that the American Arbitration Association appoint an independent
accounting firm to act as Independent Auditor hereunder, and any firm appointed
after such request shall be the Independent Auditor hereunder absent mutual
agreement of Alloy and MarketSource on a replacement Independent Auditor. The
Independent Auditor shall determine the Working Capital as of the Closing Date
(the "Audited Working Capital") and the Purchase Price shall be adjusted in
accordance with the provisions of Section 2.3(b). The Independent Auditor's
determination of the Audited Working Capital shall be final and binding on all
parties absent manifest error. The costs of the Independent Auditor shall be
borne by the party whose determination of the Working Capital as of the Closing
Date was farthest from the determination of the Final Working Capital, or
equally by Alloy and MarketSource if the determination by the Independent
Auditor is equidistant between the determinations of the parties. For purposes
hereof, "Final Working Capital" shall mean either (i) the Revised Working
Capital or (ii) the Audited Working Capital, as the case may be.
(b) The Purchase Price shall be adjusted as follows:
(i) If the Working Capital Target exceeded the Estimated Working
Capital as of the Closing Date, then (A) if the Final Working Capital
exceeds the Estimated Working Capital, Alloy shall pay to MarketSource in
cash an amount equal to the amount by which the Final Working Capital
exceeds the Estimated Working Capital, or (B) if the Estimated Working
Capital exceeds the Final Working Capital, MarketSource shall pay to Alloy
in cash an amount equal to the amount by which the Estimated Working
Capital exceeds the Final Working Capital; and
(ii) If the Estimated Working Capital was equal to or exceeded the
Working Capital Target as of the Closing Date, then (A) if the Final
Working Capital exceeds the Working Capital Target, Alloy shall pay to
MarketSource in cash an amount equal to the amount by which the Final
Working Capital exceeds the Working Capital Target, or (B) if the Working
Capital Target exceeds the Final Working Capital, MarketSource shall pay to
Alloy in cash an amount equal the amount by the Working Capital Target
exceeds the Final Working Capital.
2.4 Allocation of Purchase Price. The Purchase Price shall be allocated
----------------------------
among the Acquired Assets and the covenant not to compete to be entered into by
MarketSource in connection with this Agreement and shall be consistent with the
requirements of Section 1060 of the Code, and the regulations thereunder. Alloy
and MarketSource agree that such allocation shall be fair and equitable. Alloy
and MarketSource agree to report this transaction for Tax purposes, including
the filing of Internal Revenue Service Form 8594 (Asset Acquisition Statement),
in accordance with such allocation and to defend such allocation before, and not
take any positions that are inconsistent with such allocation before, any
Governmental Authority charged with the collection of Taxes, or in any judicial
proceeding.
12
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of MarketSource. MarketSource hereby
----------------------------------------------
represents and warrants to Alloy and Acquisition Sub that, except as disclosed
in the disclosure schedule dated the date hereof, certified by MarketSource and
delivered to Alloy and Acquisition Sub simultaneously herewith (which disclosure
schedule shall contain specific references to the representations and warranties
to which the disclosures contained therein relate and an item on such disclosure
schedule shall be deemed to qualify only the particular subsection or
subsections specified for such item) (the "Disclosure Schedule"):
(a) Organization; Good Standing; Qualification and Power. MarketSource
----------------------------------------------------
(i) is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, (ii) has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted, and as proposed to be conducted, to enter
into this Agreement and the Related Agreements to which MarketSource is a party,
to perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby and (iii) except as set forth in
Section 3.1(a) of the Disclosure Schedule, is duly qualified and in good
standing to do business in those jurisdictions listed in Section 3.1(a) of
Disclosure Schedule and in all other jurisdictions where the failure to be so
qualified and in good standing would have a material adverse effect on
MarketSource, the 360 Youth Business or the business, properties, condition
(financial or otherwise), assets, liabilities, operations, results of
operations, prospects or affairs of MarketSource or of the 360 Youth Business (a
"360 Youth Material Adverse Effect"). MarketSource has delivered to Alloy true
and complete copies of the Certificate of Incorporation and by-laws of
MarketSource, in each case as amended to the date hereof. As used herein,
"Certificate of Incorporation" shall mean the certificate of incorporation, and
all amendments thereto, of the named corporation, as the same may have been
restated, and all amendments thereto (including any articles or certificates of
merger or consolidation, certificate of correction or certificates of
designation or similar instruments which effect any such amendment) which became
effective after the most recent such restatement.
(b) Subsidiaries; Equity Investments. MarketSource does not currently
--------------------------------
have, or, except as set forth in Section 3.1(b) of the Disclosure Schedule, has
it ever had, any subsidiaries, nor does it currently own, or, except as set
forth in Section 3.1(b) of the Disclosure Schedule, has it ever owned, any
capital stock or other proprietary interest, directly or indirectly, in any
corporation, limited liability company, association, trust, partnership, joint
venture or other entity.
(c) [Intentionally Omitted].
-----------------------
(d) Authority; No Consents. The execution, delivery and performance by
----------------------
MarketSource of this Agreement and the Related Agreements to which it is a party
and the
13
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of
MarketSource; and this Agreement has been, and the Related Agreements to which
it is a party when executed and delivered by MarketSource will be, duly and
validly executed and delivered and the valid and binding obligations of
MarketSource, enforceable against it in accordance with their respective terms.
Except as set forth in Section 3.1(d) of the Disclosure Schedule, the execution,
delivery and performance of this Agreement or the Related Agreements to which it
is a party, the consummation by MarketSource of the transactions contemplated
hereby or thereby, nor compliance by MarketSource with any provision hereof or
thereof will (A) conflict with, (B) result in any material violation of, (C)
cause a material default under (with or without due notice, lapse of time or
both), (D) give rise to any right of termination, amendment, cancellation or
acceleration of any obligation contained in or the loss of any material benefit
under or (E) result in the creation of any Encumbrance on or against any assets,
rights or property of MarketSource under any term, condition or provision of (x)
any instrument or agreement to which MarketSource is a party, or by which
MarketSource or any of its properties, assets or rights may be bound or (y) any
law, statute, rule, regulation, order, writ, injunction, decree, permit,
concession, license or franchise of any Governmental Authority applicable to
MarketSource or any of its properties, assets or rights or conflict with or
result in any violation of MarketSource's Certificate of Incorporation or by-
laws. No permit, authorization, consent or approval of or by, or any
notification of or filing with, any Governmental Authority or other person or
entity is required in connection with the execution, delivery and performance by
MarketSource of this Agreement or the Related Agreements or the consummation by
MarketSource of the transactions contemplated hereby or thereby, except for (i)
the consents listed in Section 3.1(d) of the Disclosure Schedule and (ii) such
other consents, waivers, authorizations, filings, approvals and registrations
which if not obtained or made would not have a 360 Youth Material Adverse Effect
or impair in any material respect the ability of MarketSource to consummate the
transactions contemplated by this Agreement.
(e) Financial Information.
---------------------
(i) MarketSource has previously delivered to Alloy the following
financial statements (collectively, the "MarketSource Financial
Statements"):
(1) the unaudited balance sheet of MarketSource as of October 31,
2001 and the related statements of income, cash flow and shareholders'
equity for the ten-month period then ended, prepared by MarketSource
in the ordinary course of business (the "Interim MarketSource
Financial Statements"), and the unaudited consolidating balance sheet
of MarketSource relating solely to the operations of the 360 Youth
Business as of October 31, 2001 and the related statements of income,
cash flow and shareholders' equity for the ten-month period then
ended, prepared by MarketSource (the "Interim 360 Youth Financial
Statements");
(2) the audited balance sheets of MarketSource as of December 31,
1999 and December 31, 2000, and the related audited statements of
income, cash
14
flow and shareholders' equity for the periods then ended (including
complete footnotes thereto), certified by MarketSource's independent
public accountants, and accompanied by a copy of such auditor's
report, and the unaudited consolidating balance sheets of MarketSource
relating solely to the operations of the 360 Youth Business as of
December 31, 1999 and December 31, 2000, and the related statements of
income, cash flow and shareholders' equity for the periods then ended
(included complete footnotes thereto), prepared by MarketSource; and
(3) the unaudited consolidating balance sheet of MarketSource
relating solely to the operations of the 360 Youth Business as of the
Closing Date prepared by MarketSource after giving effect to the
transactions contemplated by this Agreement (the "Closing 360 Youth
Balance Sheet").
(ii) The MarketSource Financial Statements are in accordance with the
books and records of MarketSource, fairly present the financial condition
of MarketSource or the 360 Youth Business, as the case may be, as of the
dates indicated and the results of operations of MarketSource, or the 360
Youth Business, as the case may be, for the respective periods indicated,
and have been prepared in accordance with GAAP, except, in the case of the
Interim MarketSource Financial Statements, the Interim 360 Youth Financial
Statements and the Closing 360 Youth Balance Sheet, for the absence of
complete footnote disclosure as required by GAAP and subject to changes
resulting from normal year-end audit adjustments, which adjustments shall
not in any event result in a material adverse change to any item of
MarketSource's or the 360 Youth Business's, as the case may be, assets,
liabilities, revenue or expense. The Interim 360 Youth Financial
Statements and the Closing 360 Youth Balance Sheet have been prepared by
MarketSource for its use in the Ordinary Course of Business.
(f) Absence of Undisclosed Liabilities. At October 31, 2001, with respect
----------------------------------
to the balance sheet set forth in the Interim 360 Youth Financial Statements,
and at the Closing Date, with respect to the Closing 360 Youth Balance Sheet,
respectively, to the knowledge of MarketSource, MarketSource had no liability or
obligation of any nature, whether matured or unmatured, fixed or contingent,
secured or unsecured, accrued, absolute or otherwise (a "Liability") relating in
any manner to, or arising from the operation of, the 360 Youth Business, either
individually or in the aggregate in excess of $20,000, required to be set forth
therein in order for such balance sheets to accurately present the financial
condition of the 360 Youth Business at the respective dates thereof which was
not provided for or disclosed thereon, other than those Liabilities arising in
the Ordinary Course of Business as a result of the accounting practices used by
MarketSource in a consistent manner in the Ordinary Course of Business, and all
liability reserves established by MarketSource and set forth thereon were
adequate for all such Liabilities at the respective dates thereof. There were
no material loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board in
March, 1975 ("FAS No. 5")) which were not adequately provided for on such
balance sheets, respectively, as required by FAS No. 5.
15
(g) Absence of Changes. Since January 1, 2001 or such other date as is
------------------
specifically provided below, except as set forth in Section 3.1(g) of the
Disclosure Schedule, the 360 Youth Business has been operated in the Ordinary
Course of Business, and there has not been:
(i) any event or other action (or inaction) that has occurred that
could have a 360 Youth Material Adverse Effect;
(ii) any damage, destruction or loss to any of the Acquired Assets,
whether or not covered by insurance, having or which could have a 360 Youth
Material Adverse Effect;
(iii) any Liability relating in any manner to, or arising from the
operation of, the 360 Youth Business created, assumed, guaranteed or
incurred, or any material transaction, contract or commitment relating in
any manner to the 360 Youth Business entered into by MarketSource other
than in the Ordinary Course of Business;
(iv) any payment, discharge or satisfaction of any material
Encumbrance on any of the Acquired Assets or Liability relating in any
manner to, or arising from the operation of, the 360 Youth Business by
MarketSource or any cancellation by MarketSource of any material debts or
claims relating in any manner to, or arising from the operation of, the 360
Youth Business or any amendment, termination or waiver of any rights of
material value to MarketSource relating in any manner to, or arising from
the operation of, the 360 Youth Business;
(v) [intentionally omitted];
(vi) any license, sale, transfer, pledge, mortgage or other
disposition of any material tangible or intangible asset (including any
Intellectual Property Rights of MarketSource) relating in any manner to, or
used in the operation of, the 360 Youth Business other than in the Ordinary
Course of Business;
(vii) any termination of, or written indication of an intention to
terminate or not renew, any material contract, license, commitment or other
agreement relating in any manner to the 360 Youth Business between
MarketSource and any other person;
(viii) any material write-down or write-up of the value of any asset
of MarketSource relating in any manner to, or used in the operation of, the
360 Youth Business, or any write-off of any accounts receivable or notes
receivable of MarketSource or any portion thereof relating in any manner
to, or arising from the operation, of the 360 Youth Business, in any event
in excess of $20,000 in the aggregate;
(ix) any increase in or modification of compensation payable or to
become payable to any Transferred Employee other than in the Ordinary
Course of Business and consistent with past practice, or the entering into
of any employment contract with any officer or Transferred Employee;
16
(x) any increase in or modification or acceleration of any benefits
payable or to become payable under any bonus, pension, severance, insurance
or other benefit plan, payment or arrangement (including, but not limited
to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any Transferred Employee;
(xi) any material change in the manner in which MarketSource extends
discounts or credit to customers or otherwise deals with customers of the
000 Xxxxx Xxxxxxxx;
(xii) any termination of any Transferred Employee or any expression
of intention by any Transferred Employee to resign from employment with
MarketSource (except as contemplated by Section 6.9);
(xiii) [intentionally omitted];
(xiv) any labor dispute or any union organizing campaign;
(xv) the commencement of any litigation or other action by or
against MarketSource relating in any manner to the 000 Xxxxx Xxxxxxxx;
(xvi) since October 1, 2001, any entry by MarketSource into any
agreement, understanding, commitment or transaction involving any expense
or capital expenditure by MarketSource relating in any manner to the 360
Youth Business in excess of $50,000 individually or any series of related
agreements, understandings, commitments or transactions involving expenses
or capital expenditures of MarketSource in excess of $50,000 in the
aggregate; or
(xvii) any agreement, understanding, authorization or proposal,
whether in writing or otherwise, for MarketSource to take any of the
actions specified in items (i) through (xvi) above.
(h) Tax Matters. MarketSource and each other corporation or entity (if
-----------
any) included in any consolidated or combined tax return in which MarketSource
has been included have filed and will file, in a timely and proper manner,
consistent with applicable laws, all Federal, state and local Tax returns and
Tax reports required to be filed by them as they relate to the 360 Youth
Business (the "Tax Returns") with the appropriate governmental agencies in all
jurisdictions in which Tax Returns are required to be filed and have timely paid
or will timely pay all amounts shown thereon to be due. All such Tax Returns
will be correct and complete in all material respects at the time of filing.
MarketSource has not agreed to, nor is it required to, make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise. As used in this Agreement, "Tax" means any of the Taxes and "Taxes"
means, with respect to any entity, (A) all income taxes (including any tax on or
based upon net
17
income, gross income, income as specially defined, earnings, profits or selected
items of income, earnings or profits) and all gross receipts, sales, use, ad
valorem, transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties and other taxes, fees,
assessments or charges of any kind whatsoever, together with all interest and
penalties, additions to tax and other additional amounts imposed by any taxing
authority (domestic or foreign) on such entity and (B) any liability for the
payment of any amount of the type described in the immediately preceding clause
(A) as a result of being a "transferee" (within the meaning of Section 6901 of
the Code or any other applicable law) of another entity or a member of an
affiliated or combined group.
(i) Title to Assets, Properties and Rights and Related Matters.
----------------------------------------------------------
MarketSource has good and valid title to all of the Acquired Assets free and
clear of all Encumbrances of any kind or character other than Permitted
Encumbrances. The Acquired Assets are in good operating condition and repair in
all material respects (ordinary wear and tear excepted). The Acquired Assets
include all assets, properties and interests in properties (real, personal and
mixed, tangible and intangible) and all rights, leases, licenses and other
agreements necessary or desirable to enable Acquisition Sub to carry on the 360
Youth Business in the manner as presently conducted by MarketSource and as
proposed to be conducted. Except for the Shared Assets being retained by
MarketSource, none of the assets, properties or rights being retained by
MarketSource are used in, or necessary or desirable for, the operation of the
360 Youth Business as currently conducted or as proposed to be conducted. As
used herein, (A) the term "Encumbrances" means and includes security interests,
mortgages, liens, pledges, guarantees, charges, easements, reservations,
restrictions, clouds, equities, rights of way, options, rights of first refusal
and all other encumbrances, whether or not relating to the extension of credit
or the borrowing of money, (B) "Permitted Encumbrances" means (i) liens for
taxes, assessments and other governmental charges or levies not due and payable,
or which currently are being contested in good faith by appropriate proceedings
and which are specifically listed on the appropriate section of the Disclosure
Schedule, (ii) mechanics', workmen's, repairmen's, materialmen's,
warehousemen's, vendors' and carriers' liens, and other similar liens arising in
the Ordinary Course of Business for charges which are not delinquent, or which
currently are being contested in good faith by appropriate proceedings and have
not proceeded to judgment and which specifically are listed on the appropriate
section of the Disclosure Schedule, and (iii) liens in respect of judgments or
awards which specifically are listed on the appropriate section of the
Disclosure Schedule and with respect to which there shall be a good faith
current prosecution of an appeal or proceedings for review which is secured by
an appropriate bond or a stay of execution pending such appeal or proceedings
for review, and (C) "Ordinary Course of Business" means the operation of the 360
Youth Business in the ordinary course of business consistent with MarketSource's
usual and customary practices in managing and operating the 360 Youth Business
as they existed on September 30, 2001 without regard to the transactions
contemplated hereby.
(j) Real Property - Owned or Leased. Section 3.1(j) of the Disclosure
-------------------------------
Schedule contains a list and brief description of (i) all real property leased
by MarketSource together with all buildings and other structures and material
improvements located on such real property used
18
in any way in connection with the operation of the 360 Youth Business (the
"Leased Real Property") and (ii) with respect to each lease covering the Leased
Real Property (collectively, the "Leases"), (A) the name of the lessor, (B) any
requirement of consent of the lessor to assignment (including assignment by way
of merger or change of control) (C) the termination date of the Lease, (D)
notice requirements with respect to termination, (E) the annual rental payment
thereunder, and (F) any renewal or purchase terms thereof. MarketSource is the
owner and holder of all the leasehold estates purported to be granted by each
Lease, and all Leases are in full force and effect and constitute valid and
binding obligations of MarketSource. MarketSource has made available to Alloy
true and complete copies of all Leases. Except as set forth in Section 3.1(j) of
the Disclosure Schedule, all improvements included in the Leased Real Property
are in good operating condition and repair in all material respects (ordinary
wear and tear excepted) and there does not exist any condition which interferes
with the economic value or use of such property and improvements.
(k) Intellectual Property.
---------------------
(i) Except as set forth in Section 3.1(k)(i)(1) of the Disclosure
Schedule, MarketSource has good and valid title to, and owns free and clear
of all Encumbrances, has the exclusive right to use, sell, transfer,
license (or sublicense), transmit, broadcast, deliver (electronically or
otherwise) and dispose of, and has the right to bring actions for the
infringement of, all Intellectual Property Rights used in connection with
or necessary for the conduct of the 360 Youth Business in the Ordinary
Course of Business and as proposed to be conducted after the Closing Date,
including all Intellectual Property Rights set forth in Section
3.1(k)(i)(2) of the Disclosure Schedule (collectively, the "360 Youth IP
Rights");
(ii) The execution, delivery and performance of this Agreement and
the Related Agreements and the consummation of the other transactions
contemplated hereby or thereby, will not breach, violate or conflict with
any instrument or agreement governing any 360 Youth IP Rights in any
material respect, will not cause the forfeiture or termination or give rise
to a right of forfeiture or termination of any 360 Youth IP Right or
materially impair the right of MarketSource or Acquisition Sub to use,
sell, license (or sublicense), transmit, broadcast, deliver (electronically
or otherwise) or dispose of, or to bring any action for the infringement
of, any 360 Youth IP Right or portion thereof;
(iii) To the knowledge of MarketSource, there are no royalties,
honoraria, fees or other payments payable by MarketSource to any person by
reason of the ownership, use, license (or sublicense), transmission,
broadcast, delivery (electronically or otherwise), sale, or disposition of
any 360 Youth IP Rights;
(iv) Except as set forth in Section 3.1(k)(iv) of the Disclosure
Schedule, neither the manufacture, marketing, license (or sublicense),
sale, transmission, delivery (electronically or otherwise), or use of any
product or service currently or proposed to be licensed, sold, marketed,
transmitted, broadcast, delivered (electronically or otherwise) or
19
used by MarketSource or currently under development by MarketSource
violates any license (or sublicense) or agreement of MarketSource with any
third party or infringes any common law or statutory rights of any other
party, including, without limitation, rights relating to defamation,
contractual rights, Intellectual Property Rights and rights of privacy or
publicity; nor, to the knowledge of MarketSource, is any third party
infringing upon, or violating any license (or sublicense), transmission,
broadcast, delivery, (electronically or otherwise) or agreement with
MarketSource relating to, any 360 Youth IP Right; and there is no pending
or threatened claim or litigation contesting the validity, ownership or
right to use, manufacture, sell, license (or sublicense), transmit,
broadcast, deliver (electronically or otherwise) or dispose of any 360
Youth IP Right, nor is there any basis for any such claim. MarketSource has
not received any notice asserting that any 360 Youth IP Right or the
proposed use, manufacture, sale, license (or sublicense), transmission,
broadcast, delivery (electronically or otherwise) or disposition thereof
conflicts or will conflict with the rights of any other party, nor is there
any basis for any such assertion;
(v) All works that were created, prepared or delivered by
consultants, independent contractors or other third parties for or on
behalf of MarketSource (including any materials and elements created,
prepared or delivered by such parties in connection therewith) (A) are and
shall constitute "works made for hire" specially ordered or commissioned by
MarketSource within the meaning of United States' copyright law or (B) have
been duly assigned to MarketSource in writing, except to the extent that
any failure to constitute a "works made for hire" or to assign any such
work would not, either individually or in the aggregate, have a 360 Youth
Material Adverse Effect;
(vi) Section 3.1(k)(vi) of the Disclosure Schedule sets forth, for
all 360 Youth IP Rights, a complete and accurate list of all United States
and foreign (a) Patents; (b) Trademarks (including Internet domain
registrations and unregistered Trademarks); and (c) Copyrights (including
unregistered copyrights) indicating for each, the applicable jurisdiction,
registration number (or application number), and date issued (or date
filed);
(vii) To the knowledge of MarketSource, Section 3.1(k)(vii) of the
Disclosure Schedule sets forth a complete and accurate list of all license
agreements granting any right to use or practice any rights under any 360
Youth IP Rights, whether MarketSource is the licensee or licensor
thereunder (except for shrink-wrap licenses for off-the-shelf software used
by MarketSource and other licensees identified in Section 3.1(l) of the
Disclosure Schedule) and any assignments, consents, term, forbearances to
xxx, judgments, orders, settlements or similar obligations relating to any
360 Youth IP Rights to which MarketSource is a party or otherwise bound
(collectively, the "License Agreements"), indicating for each the title,
the parties, date executed, whether or not it is exclusive and the
Intellectual Property Rights covered thereby. The License Agreements are
valid and binding obligations of MarketSource, enforceable in accordance
with their terms, and there exists no event or condition which will result
in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default by MarketSource under any such License
Agreement;
20
(viii) All Trademarks of MarketSource that constitute 360 Youth IP
Rights have been in continuous use by MarketSource. To the knowledge of
MarketSource, except as set forth in Section 3.1(k)(viii) of the Disclosure
Schedule, there has been no prior use of such Trademarks by any third party
which would confer upon said third party superior rights in such
Trademarks; and
(ix) As used herein, the term "Intellectual Property Rights" shall
mean all intellectual property rights worldwide, including, without
limitation, trademarks, service marks, trade names, service names, URLs and
Internet domain names and applications therefor (and all interest therein),
designs, slogans and general intangibles of like nature, together with all
goodwill related to the foregoing (including any registrations and
applications for any of the foregoing) (collectively, "Trademarks");
patents (including any registrations, continuations, continuations in part,
renewals and applications for any of the foregoing) (collectively,
"Patents"); copyrights (including any registrations, applications and
renewals for any of the foregoing (collectively, "Copyrights"); computer
programs and other computer software (including, but not limited to the
software); databases; technology, trade secrets and other confidential
information, know-how, proprietary technology, processes, formulae,
algorithms, models, user interfaces, customer lists, inventions, source
codes and object codes and methodologies, architecture, structure, display
screens, layouts, development tools, instructions, templates, marketing
materials, inventions, trade dress, logos and designs and all documentation
and media constituting, describing or relating to the foregoing
(collectively, "Trade Secrets").
(l) Software.
--------
(i) Section 3.1(l) of the Disclosure Schedule sets forth a true
and complete list of all material software programs and applications
licensed by MarketSource from any third party and used by MarketSource in
the operation of the 360 Youth Business (the "Licensed Software").
(ii) The Licensed Software is validly held and used by
MarketSource, as applicable, and may be used by MarketSource pursuant to
the applicable license agreement with respect thereto without the consent
of or notice to any third party. Each of the license agreements relating to
the Licensed Software are valid and binding obligations, enforceable in
accordance with their terms, and there exists no event or condition which
will result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default by MarketSource or the licensor
under any such license agreement.
(m) Agreements, Etc. Section 3.1(m) of the Disclosure Schedule sets forth
---------------
a true and complete list of all written or oral contracts, agreements and
instruments (and, with respect to any oral contract, agreement or instrument,
provides a description of the terms of such contract, agreement or instrument
agreements and other instruments) to which MarketSource is a party or
21
by which it or its properties are bound relating in any manner to the 360 Youth
Business, the Acquired Assets or the Assumed Liabilities, including, without
limitation, the following:
(i) agreements for the development, modification or enhancement
of computer software or multimedia products;
(ii) distributorship, dealer, sales, advertising, agency,
manufacturer's representative, franchise or similar agreements or other
agreements relating to the payment of a commission or other fee calculated
as or by reference to a percentage of the profits or revenues of
MarketSource or of any business segment of MarketSource;
(iii) joint venture, partnership or other agreements for the
sharing of profits;
(iv) collective bargaining agreements or other agreements with or
commitment to any labor union;
(v) agreements relating to the future purchase, sale or license
of products, material, supplies, equipment or services requiring payments
to or from MarketSource, or pursuant to which MarketSource has granted or
received manufacturing rights, most favored nations pricing provisions or
exclusive marketing or other rights relating to any product, group of
products, services, technology, assets or territory;
(vi) license (whether as licensor or licensee), sublicense,
royalty, permit, or franchise agreements, including, without limitation,
agreements pursuant to which MarketSource licenses any 360 Youth IP Rights
to any third party (other than ordinary course licenses to end-users);
(vii) agreements relating to the content or delivery of its
computer software or multimedia products and services (including the
transmission or other performance (electronically or otherwise));
(viii) employment agreements with any 360 Youth Business Employee or
any other type of agreement, commitment or understanding with any 360 Youth
Business Employee related to continued employement;
(ix) profit-sharing, bonus, stock option, stock appreciation
right, pension, retirement, disability, stock purchase, hospitalization,
insurance or similar plans or agreements, formal or informal, providing
benefits to any 360 Youth Business Employee;
(x) indentures, mortgages, promissory notes, loan agreements,
guarantees or other agreements or commitments for the borrowing of money,
for a line of credit or for a leasing transaction of a type required to be
capitalized in accordance with Statement of Financial Accounting Standards
No. 13 of the Financial Accounting Standards Board;
22
(xi) agreements, instruments or other arrangements granting or
permitting any Encumbrance on any of the properties, assets or rights of
MarketSource;
(xii) leases for real property (whether as lessor or lessee) or any
other lease or agreement under which MarketSource is lessee of or holds or
operates any items of tangible personal property owned by any third party;
(xiii) agreements or commitments for charitable contributions;
(xiv) agreements or commitments for capital expenditures;
(xv) agreements or arrangement for the sale of any assets,
properties or rights;
(xvi) agreements which restricts MarketSource from engaging in any
aspect of its business or competing in any line of business in any
geographic area;
(xvii) confidentiality, non-competition, non-solicitation or
assignment of inventions agreements with any 360 Youth Business Employee;
or
(xviii) other agreements or commitments which are material to
MarketSource and the conduct of its business in the ordinary course.
MarketSource has furnished to Alloy true and complete copies of all such
agreements listed in Section 3.1(m) of Disclosure Schedule and (x) each such
agreement (A) is the legal, valid and binding obligation of MarketSource, and,
to the knowledge of MarketSource, the legal, valid and binding obligation of
each other party thereto, in each case enforceable in accordance with its terms,
(B) is in full force and effect and (y) except as set forth in Section 3.1(m) of
Disclosure Schedule, neither MarketSource nor, to the knowledge of MarketSource,
any other party or parties thereto, is or are in material default thereunder.
(n) No Defaults. Except as set forth in Section 3.1(n) of the Disclosure
-----------
Schedule, MarketSource has in all material respects performed all of the
obligations required to be performed by it to date and is not in default or
alleged to be in default under (i) its Certificate of Incorporation or by-laws,
(ii) the Assumed Contracts or (iii) any other material agreement, lease,
license, contract, commitment, instrument or obligation relating to the 360
Youth Business to which it is a party or by which any of the Acquired Assets are
or may be bound or affected, and there exists no event, condition or occurrence
which, with or without due notice or lapse of time, or both, would constitute
such a default or alleged default by it of any of the foregoing.
(o) Litigation, Etc. Except as set forth in Section 3.1(o) of the
----------------
Disclosure Schedule, there are no (i) actions, suits, claims, investigations or
legal or administrative or arbitration proceedings (collectively, "Actions")
pending or threatened against MarketSource relating in any manner to, or arising
out of the operation of, the 360 Youth Business, nor is there any basis
therefor, whether at law or in equity, or before or by any Federal, state,
municipal, foreign or other governmental court, department, commission, board,
bureau, agency or instrumentality
23
("Governmental Authority"), (ii) judgments, decrees, injunctions or orders of
any Governmental Authority or arbitrator against MarketSource relating in any
manner to, or arising out of the operation of, the 360 Youth Business, or (iii)
disputes with customers or vendors of the 360 Youth Business. Except as set
forth in Section 3.1(o) of the Disclosure Schedule, there are no Actions pending
or threatened, nor is there any basis therefor, with respect to (A) any of the
Acquired Assets or Assumed Liabilities, (B) the employment by, or association
with, Acquisition Sub, of any of the present officers or employees of or
consultants to MarketSource (collectively, the "Designated Persons"), or (C) the
use, in connection with the 360 Youth Business, of any information, techniques
or processes presently utilized or proposed to be utilized by MarketSource or
any of the Designated Persons, that Acquisition Sub or any of the Designated
Persons are or would be prohibited from using as the result of a violation or
breach of, or conflict with any agreements or arrangements between any
Designated Person and any other person, or any legal considerations applicable
to unfair competition, trade secrets or confidential or proprietary information.
MarketSource has delivered to Alloy all material documents and correspondence
relating to such matters referred to in Section 3.1(o) of Disclosure Schedule
(including, in the case of clause (iii) of the first sentence of this Section
3.1(o), any correspondence evidencing material customer dissatisfaction with
MarketSource or its products or services).
(p) Accounts and Notes Receivable. All of the accounts receivable and
-----------------------------
notes receivable owing to MarketSource being transferred and assigned to
Acquisition Sub pursuant to this Agreement constitute valid and enforceable
claims arising from bona fide transactions in the Ordinary Course of Business,
and there are no known or asserted claims, refusals to pay or other rights of
set-off against any thereof. Except as set forth in Section 3.1(p) of the
Disclosure Schedule, there is (i) no account debtor or note debtor that has
refused (or, to the knowledge of MarketSource, threatened to refuse) to pay any
obligation to MarketSource arising from or related in any way to the 360 Youth
Business for any reason, (ii) to the knowledge of MarketSource, no account
debtor or note debtor owing an obligation to MarketSource arising from or
related in any way to the 360 Youth Business that is insolvent or bankrupt and
(iii) no account receivable or note receivable being transferred and assigned to
Acquisition Sub which is pledged to any third party by MarketSource.
(q) Accounts and Notes Payable. Except as set forth in Section 3.1(q) of
--------------------------
the Disclosure Schedule, all accounts payable and notes payable by MarketSource
relating in any way to, or arising from the operation of, the 360 Youth
Business, to third parties as of the date hereof arose in the Ordinary Course of
Business, are listed in Section 1.4(b) of the Disclosure Schedule and, except as
set forth in Section 3.1(q) of the Disclosure Schedule, there is no such account
payable or note payable delinquent in its payment, except those contested in
good faith which are disclosed in Section 3.1(q) of Disclosure Schedule.
(r) Compliance; Governmental Authorizations and Consents.
----------------------------------------------------
(i) Except as set forth in Section 3.1(r) of the Disclosure
Schedule, MarketSource has complied and is presently in compliance in all
material respects with all Federal, state, local or foreign laws,
ordinances, regulations and orders applicable to
24
the operation of the 360 Youth Business (including, without limitation,
laws, ordinances, regulations and orders applicable to labor, employment
and employment practices, terms and conditions of employment and wages and
hours);
(ii) MarketSource has all Federal, state, local and foreign
governmental licenses, consents, approvals, authorizations, permits,
orders, decrees and other compliance agreements necessary in the conduct of
the 360 Youth Business as presently conducted or as proposed to be
conducted, such licenses, consents, approvals, authorizations, permits,
orders, decrees and other compliance agreements are in full force and
effect, no violations are or have been recorded in respect of any thereof
and no proceeding is pending or, to the knowledge of MarketSource,
threatened to revoke or limit any thereof, except to the extent that the
failure to have any such license, consent, approval, authorization, permit,
order, decree or other compliance agreement, to maintain the same in full
force and effect or to be in compliance therewith would not, either
individually or in the aggregate, have a 360 Youth Material Adverse Effect;
and
(iii) Section 3.1(r) of the Disclosure Schedule contains a true and
complete list of all such governmental licenses, consents, approvals,
authorizations, permits, orders, decrees and other compliance agreements
relating in any manner to, or used in the operation of, the 360 Youth
Business under which MarketSource is operating or bound, MarketSource is
not in default or alleged to be in default under any thereof and
MarketSource has furnished to Alloy true and complete copies thereof. None
of such licenses, consents, approvals, authorizations, permits, orders,
decrees and other compliance agreements shall be affected in any material
respect by the transactions contemplated hereby or by any of the Related
Agreements.
(s) Environmental Matters.
---------------------
(i) To the knowledge of MarketSource, MarketSource has complied
with and is in compliance with all Federal, state, local and foreign laws,
statutes (civil and criminal), common laws, ordinances, codes, regulations,
rules, notices, permits, judgments, requirements, standards, guidelines,
judicial and administrative orders and decrees applicable to it and its
properties, assets, operations and businesses relating to pollution, worker
and public health and safety, and/or environmental protection (collectively
"Environmental Laws"), including without limitation Environmental Laws
relating to air, water, land and the generation, release, storage, use,
handling, transportation, treatment, discharge, disposal or other handling
of Wastes, Hazardous Wastes and Hazardous Substances (as such terms are
currently defined in any applicable Environmental Law);
(ii) To the knowledge of MarketSource, MarketSource has obtained
and adhered to all necessary material permits and other approvals necessary
to treat, transport, store, dispose of and otherwise handle Wastes,
Hazardous Wastes and Hazardous Substances and has reported, to the extent
required by all Environmental Laws, all past
25
and present sites owned and operated by MarketSource where Hazardous Wastes
or Hazardous Substances have been treated, stored, disposed of or otherwise
handled;
(iii) To the knowledge of MarketSource, there have been no
emissions, spills, discharges, releases or threats of releases (as defined
in Environmental Laws) at, from, in or on any property owned, leased or
operated by MarketSource except as permitted by Environmental Laws;
(iv) To the knowledge of MarketSource, MarketSource has not
transported or disposed of Wastes, Hazardous Wastes and/or Hazardous
Substances or arranged for the transportation of Hazardous Wastes and
Hazardous Substances to any on-site or off-site location, which site is the
subject of any Federal, state, local or foreign enforcement action or any
other investigation which could lead to any claim against MarketSource,
Alloy or Newco for any clean-up cost, remedial work, damage to natural
resources or personal injury, including without limitation any claim under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"); and
(v) To the knowledge of MarketSource, MarketSource does not or
will not have any liability in connection with any release of any Hazardous
Waste or Hazardous Substance into the environment,.
For purposes hereof, the term Environmental Laws includes, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. (S) 9601 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. (S) 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. (S) 1251 et seq., the Clean Air Act, 42 U.S.C.
(S)1857 et seq., the Occupational Safety and Health Act of 1970, 29 U.S.C.
(S) 651 et seq., and the Toxic Substances Control Act, 15 U.S.C. (S) 2601
et seq.
(t) Labor Relations; Employees.
--------------------------
(i) Section 3.1(t) of the Disclosure Schedule identifies all
employees and consultants employed or engaged by MarketSource that perform
services on behalf of or related to the 360 Youth Business and sets forth
each such individual, such individual's (i) rate of pay or annual
compensation, (ii) job title, (iii) date of hire, (iv) annual vacation and
sick time and (v) accrued vacation and sick days as of the Closing Date.
Except as set forth on Section 3.1(t)(i) of the Disclosure Schedule, there
are no employment, consulting, severance pay, continuation pay, termination
or indemnification agreements or other similar agreements of any nature
(whether in writing or not) between MarketSource and any current or former
stockholder, officer, director, employee, or any consultant that will
constitute an Acquired Asset or an Assumed Liability. No such employment
agreement disclosed on Section 3.1(t)(i) of the Disclosure Schedule will,
as a direct or indirect result of the transactions contemplated hereby,
require any payment by MarketSource or Acquisition Sub or any consent or
waiver from any stockholder, officer, director, employee or consultant; or
result in any change in the nature of any rights or any
26
stockholder, officer, director, employee or consultant, including, but not
limited to, any accelerated payments, deemed satisfaction of goals or
conditions, new or increased benefits or additional or accelerated vesting.
No individual will as a direct or indirect result of the transactions
contemplated hereby, accrue or receive additional benefits, service or
accelerated rights to payments under any Employee Plan (as defined in
Section 3.1(u)) included as part of the Acquired Assets and Assumed
Liabilities, if any, including the right to receive any parachute payment,
as defined in Section 280G of the Code, or become entitled to severance,
termination allowance or similar payments that could result in the payment
of any such benefits or payments.
(ii) Except as set forth in Section 3.1(t)(ii) of the Disclosure
Schedule, (A) MarketSource is not delinquent in payments to any of the 360
Youth Business Employees for any wages, salaries, commissions, bonuses or
other direct compensation for any services performed by them to date or
amounts required to be reimbursed to such employees, (B) upon termination
of the employment of any such employees, neither Alloy nor Acquisition Sub
will by reason of anything done prior to the Closing be liable to any of
such employees for so-called "severance pay" or any other payments, (C)
there is no unfair labor practice complaint against MarketSource pending
before the National Labor Relations Board or any comparable Governmental
Authority, and none of MarketSource's policies or practices is currently
being audited or, to the knowledge of MarketSource, investigated by any
Federal, state or local government agency, in either case, relating in any
manner to, or arising from the operation of, the 360 Youth Business or
involving any 360 Youth Business Employee, (D) there is no labor strike,
dispute, claim, charge, lawsuit, proceeding, labor slowdown or stoppage
pending or, to the knowledge of MarketSource, threatened against or
involving MarketSource which relates in any manner to, or arises from the
operation of, the 360 Youth Business or involves any 360 Youth Business
Employee, (E) to the knowledge of MarketSource, no labor union has taken
any action with respect to organizing the employees of MarketSource, (F)
neither any grievance nor any arbitration proceeding arising out of or
under collective bargaining agreements covering any 360 Youth Business
Employee is pending and no claim therefor has been asserted against
MarketSource, and (G) no 360 Youth Business Employee has informed any
officer of MarketSource that such employee will terminate his or her
employment or engagement with MarketSource or Acquisition Sub and
MarketSource has no reason to believe that the 360 Youth Business Employees
that accept employment with Acquisition Sub will not remain employees of
Acquisition Sub for at least 180 days after the Closing. Neither
MarketSource nor, to the knowledge of MarketSource, any employee or
independent contractor of MarketSource that provides any services to
MarketSource related in any manner to the 360 Youth Business, is in
violation of any term of any employment contract, patent disclosure
agreement or any other contract or agreement relating to the relationship
of such employee or independent contractor with MarketSource or any other
party because of the nature of the business conducted or proposed to be
conducted by MarketSource or the execution and delivery of any
confidentiality agreement or similar agreement by such employee.
(u) Employee Benefit Plans and Contracts.
------------------------------------
27
(i) Section 3.1(u) of the Disclosure Schedule identifies all
"employee benefit plans" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and all
bonus, phantom stock, stock appreciation rights, incentive, deferred
compensation, retirement or supplemental retirement, severance, golden
parachute, vacation, cafeteria, dependent care, medical care, employee
assistance program, education or tuition assistance programs, insurance and
other similar compensation, fringe or employee benefit plans, programs or
arrangements, and any current or former employment or executive
compensation or severance agreements, written or otherwise, for the benefit
of, or relating to, any present or former Employee of MarketSource or any
trade or business (whether or not incorporated) which is a member of a
controlled group or which is under common control with MarketSource within
the meaning of Section 414 of the Code and the regulations promulgated
thereunder (an "ERISA Affiliate") and all other written or formal plans or
agreements involving direct or indirect compensation (including any
employment agreements entered into between MarketSource and any Employee,
but excluding workers' compensation, unemployment compensation, other
government-mandated programs and MarketSource's salary and wage
arrangements) currently or previously maintained, contributed to or entered
into by MarketSource, or any ERISA Affiliate for the benefit of any
Employee or former Employee under which MarketSource or any ERISA Affiliate
thereof has any present or future obligation or liability (the "Employee
Plans"), whether or not such plan or arrangement has been terminated.
MarketSource has provided to Alloy true and complete copies of all Employee
Plans (and, if applicable, related trust agreements) and all amendments
thereto and written interpretations thereof, and (where applicable) (A) all
summary plan descriptions, summaries of material modifications, and
corporate resolutions related to such plans (B) the three most recent
determination letters received from the IRS, (C) the three most recent Form
5500 Annual Reports, with all attachments, (D) the most recent audited
financial statement and actuarial valuation, and (E) all related
agreements, insurance contracts and other agreements which implement each
such Employee Plan. Any Employee Plan that individually or collectively
would constitute an "employee pension benefit plan", as defined in Section
3(2) of ERISA, but which are not Multiemployer Plans (collectively, the
"Pension Plans"), are identified as such in Disclosure Schedule. For
purposes of Section 3.1(u), "Employee" means any common law employee,
consultant or director of MarketSource who provides or has provided any
services to MarketSource related in any manner to the 360 Youth Business.
(ii) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during
the period from its adoption to the date hereof, and each trust forming a
part thereof is exempt from tax pursuant to Section 501(a) of the Code, and
nothing has occurred which may be expected to cause the loss of such
qualification or exemption. There has been no "prohibited transaction," as
such term is defined in Section 406 of ERISA and Section 4975 of the Code,
with respect to any Employee Plan; there are no claims pending (other than
routine claims for benefits) or, to the knowledge of MarketSource,
threatened against any Employee Plan or against the assets of any Employee
Plan, nor are there any current or threatened liens on the
28
assets of such plans; all Employee Plans conform to, and in their operation
and administration are in all respects in compliance with the requirements
prescribed by any and all statutes (including ERISA and the Code), orders,
or governmental rules and regulations currently in effect with respect
thereto (including all applicable requirements for notification, reporting
and disclosure to participants of the Department of Labor ("DOL"), Internal
Revenue Service ("IRS") or Secretary of the Treasury), and MarketSource and
each of its ERISA Affiliates have performed all obligations required to be
performed by them under, are not in default under or violation of, and have
no knowledge of any default or violation by any other party to, any of the
Employee Plans; all contributions required to be made to any Employee Plan
pursuant to Section 412 of the Code, the terms of the Employee Plan or any
collective bargaining agreement, have been made on or before their due
dates and a reasonable amount has been accrued for contributions to each
Employee Plan for the current plan years; the transaction contemplated
herein will not directly or indirectly result in an increase of benefits,
acceleration of vesting or acceleration of timing for payment of any
benefit to any participant or beneficiary; and MarketSource has reviewed
the fees assessed by all third parties for services provided in relation to
any aspect of the operation of each Employee Plan which includes a cash or
deferred arrangement under Code section 401(k) and has determined that such
fees are reasonable and has fully disclosed the nature and amount of such
fees to each participant and beneficiary of such Employee Plan.
(iii) No Employee Plan constitutes or since the enactment of ERISA
has constituted (A) a "multiemployer plan", as defined in Section 3(37) of
ERISA (a "Multiemployer Plan") (B) a plan covered under Title IV of ERISA,
or (C) a "multiple employer plan," as defined in Section 413(c) of the
Code. MarketSource has never incurred any material liability under Title IV
of ERISA arising in connection with the termination of any Pension Plan or
the complete or partial withdrawal from any Multiemployer Plan.
(iv) Each Employee Plan which is a "group health plan" (as defined
in Section 5000 of the Code) has been maintained in compliance with Section
4980B of the Code and Title I, Subtitle B, Part 6 of ERISA ("COBRA
Coverage"), and no tax payable on account of Section 4980B of the Code has
been or is expected to be incurred with respect to any current or former
Employees of MarketSource. Each Employee Plan which is a group health plan
has been maintained in compliance with Section 4980D of the Code and
Sections 701 through 707 of ERISA, Title XXII of the Public Health Service
Act and the provisions of the Social Security Act, to the extent such
requirements are applicable. Each Employee Plan that is subject to Section
1862(b) (1) of the Social Security Act has been operated in compliance with
the secondary payor requirements of Section 1862(b)(1) of such Act.
(v) All contributions due and payable on or before the Closing
Date in respect of any Employee Plan have been made in full and proper
form, or adequate accruals in accordance with generally accepted accounting
principles have been provided for in the
29
MarketSource Financial Statements for all other contributions or amounts in
respect of the Employee Plans for periods ending on the Closing Date.
(vi) Except as set forth on Schedule 3.1(u)(vi) of the Disclosure
Schedule no Employee Plan currently or previously maintained by
MarketSource or any of its ERISA Affiliates provides any post-termination
health care or life insurance benefits, and neither MarketSource nor its
ERISA Affiliates has any obligations (whether written or real) to provide
any post-termination benefits in the future (except for COBRA Coverage).
(vii) The consummation of the transactions contemplated by this
Agreement will not, except as set forth in Section 3.1(u)(vii) of the
Disclosure Schedule, (A) entitle any individual to severance or separation
pay, or (B) except as set forth in the relevant Employee Plans, accelerate
the time of payment or vesting, or increase the amount, of compensation due
to any individual. No payment made or contemplated under any Employee Plan
or Benefit Arrangement constitutes an "excess parachute payment" within the
meaning of Section 280G of the Code.
(v) Insurance. Section 3.1(v) of the Disclosure Schedule contains a list
---------
of all policies of liability, theft, fidelity, fire, product liability, errors
and omissions, workmen's compensation, indemnification of directors and officers
and other similar forms of insurance held by MarketSource in connection with, or
that relate in any manner to, the operation of the 360 Youth Business
(specifying the insurer, the amount of coverage, the type of insurance, the
policy number and any pending claims thereunder) and a history of all claims
made by MarketSource thereunder in connection with the 360 Youth Business during
the three-year period immediately preceding the date of this Agreement, and the
status thereof. Except as set forth in Section 3.1(v) of the Disclosure
Schedule, MarketSource has not, since its inception, been denied or had revoked
or rescinded any policy of insurance.
(w) [Intentionally Omitted].
-----------------------
(x) Brokers. MarketSource has not, nor have any of its officers,
-------
directors, securityholders or employees, employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
(y) Related Transactions. Except as set forth in Section 3.1(y) of the
--------------------
Disclosure Schedule, no current or former director, officer or securityholder of
MarketSource that is an Affiliate of MarketSource or any associate (as defined
in the rules promulgated under the Exchange Act) thereof, is now, or has been
since the inception of MarketSource, a party to any transaction with
MarketSource (including, but not limited to, any contract, agreement or other
arrangement providing for the furnishing of services by, or rental of real or
personal property from, or borrowing money from, or otherwise requiring payments
to, any such director, officer or affiliated stockholders of MarketSource or
associate thereof) relating to, or involving in any manner, the 360 Youth
Business, or the direct or indirect owner of an interest in any corporation,
firm, association or business organization which is a competitor, supplier or
customer of the 360
30
Youth Business (other than non-affiliated holdings in publicly-held companies),
nor does any such person receive income from any source other than MarketSource
which relates to the business of, or should properly accrue to, MarketSource.
(z) Customers. Section 3.1(z) of the Disclosure Schedule sets forth a true
---------
and complete list of the twenty (20) largest revenue producing customers of
MarketSource (taking into account only the revenues from the 360 Youth Business)
during the period from January 1, 2001 to the date hereof.
(aa) Minute Books. The minute books of MarketSource provided to Alloy for
------------
review contain a complete summary of all meetings of and actions by their
respective directors and stockholders from the time of its incorporation to the
date of such review and reflect all actions referred to in such minutes
accurately in all material respects.
(bb) Business Generally. To the knowledge of MarketSource, there have been
------------------
no events or transactions, or information which has come to the attention of any
officer, director or Key Employee of MarketSource that could reasonably be
expected to have a 360 Youth Material Adverse Effect, and MarketSource is not
obligated under any contract or agreement or subject to any Certificate of
Incorporation or other corporate restriction which could have a 360 Youth
Material Adverse Effect.
(cc) Approval. The Board of Directors of MarketSource has unanimously
--------
approved this Agreement and each of the Related Agreements to which MarketSource
is a party and the transactions contemplated hereby and thereby. Approval by the
stockholders of MarketSource of this Agreement, the Related Agreements to which
MarketSource is a party or the consummation of the transactions contemplated
hereby or thereby is not required by the DGCL.
(dd) Investment Representations. MarketSource:
--------------------------
(A) is acquiring the Alloy Shares, the Warrant, any shares of
Alloy Common Stock that may be issued upon exercise of the Warrant (the
"Warrant Shares") and the shares which may be delivered in satisfaction of
the Performance Stock Payment, if any, (the "Performance Stock Shares") for
investment and for MarketSource's own account and not as a nominee or agent
for any other person and with no present intention of distributing or
reselling such securities or any part thereof in any transactions that
would be in violation of the Securities Act or any state securities or
"blue-sky" laws;
(B) understand (1) that the Alloy Shares, the Warrant, the
Warrant Shares and the Performance Stock Shares that may be issued have not
been registered for sale under the Securities Act or any state securities
or "blue-sky" laws in reliance upon exemptions therefrom, which exemptions
depend upon, among other things, the bona fide nature of the investment
intent of MarketSource as expressed herein, (2) that the Alloy Shares, the
Warrant, the Warrant Shares and the Performance Stock Shares must be held
indefinitely and not sold until such shares are registered under the
Securities Act and any applicable state securities or "blue-sky" laws,
unless an exemption from such registration
31
is available, (3) that, except as provided in the Registration Rights
Agreement, Alloy is under no obligation to so register the Alloy Shares,
the Warrant, the Warrant Shares or Performance Stock Shares and (4) that
the certificates evidencing such Alloy Shares, the Warrant, the Warrant
Shares and the Performance Stock Shares will be imprinted with a legend in
the form set forth in Section 6.2(b) that prohibits the transfer of such
securities, except as provided in Section 6.2;
(C) has been furnished with, and has read and reviewed, the Alloy
SEC Documents;
(D) has had an opportunity to ask questions of and have received
satisfactory answers from the officers of Alloy or persons acting on
Alloy's behalf concerning Alloy and the terms and conditions of an
investment in Alloy Common Stock;
(E) is aware of Alloy's business affairs and financial condition
and has acquired sufficient information about Alloy to reach an informed
and knowledgeable decision to acquire the Alloy Shares, the Warrant, the
Warrant Shares and the Performance Stock Shares;
(F) is familiar with the provisions of Rule 144 promulgated under
the Securities Act which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof, in a non-public offering subject to the satisfaction of certain
circumstances which require among other things: (1) the availability of
certain public information about the issuer, (2) the resale occurring not
less than one year after the party has purchased, and made full payment
for, within the meaning of Rule 144, the securities to be sold; and, in the
case of an affiliate, or of a non-affiliate who has held the securities
less than two years, the amount of securities being sold during any three
month period not exceeding the specified limitations stated therein, if
applicable and (3) the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as
said term is defined under the Exchange Act);
(G) understands that if all of the applicable requirements of
Rule 144 are not satisfied, registration under the Securities Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not
exclusive, the staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from registration is
available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own
risk;
(H) has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of acquiring
and holding the Alloy Shares and the Performance Stock Shares; and
32
(I) is an "accredited investor" as such term is defined in Rule
501 under the Securities Act.
(ff) Disclosure. To the knowledge of MarketSource, neither Section 3.1 of
----------
this Agreement (including the Disclosure Schedule) nor any document, written
information, statement, financial statement, certificate or exhibit furnished or
to be furnished to Alloy or Acquisition Sub by or on behalf of MarketSource or
any securityholder of MarketSource, pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements or facts contained herein and therein not
misleading in light of the circumstances under which they were made.
3.2 Intentionally Omitted.
---------------------
3.3 Representations and Warranties of Alloy and Acquisition Sub. Alloy and
-----------------------------------------------------------
Acquisition Sub represent and warrant to MarketSource as follows:
(a) Organization; Good Standing; Qualification and Power. Each of Alloy
----------------------------------------------------
and Acquisition Sub (i) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and (ii) has all
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as now being conducted, to enter into
this Agreement and each of the Related Agreements to which it is a party, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Alloy has delivered to
MarketSource true and complete copies of the Certificate of Incorporation and
by-laws of each of Alloy and Acquisition Sub.
(b) Capital Stock. Alloy's Quarterly Report on Form 10-Q filed with the
-------------
SEC on September 14, 2001, as amended, with respect to the fiscal quarter ended
July 31, 2001 (the "Form 10-Q"), sets forth a true and complete description of
the authorized and outstanding shares of capital stock of Alloy as of September
5, 2001. Alloy has duly authorized and reserved for issuance the Alloy Shares,
and, when issued in accordance with the terms of Article II, the Alloy Shares
and the Performance Stock Shares (if any) will be validly issued, fully paid and
nonassessable and free of preemptive rights.
(c) Authority. The execution, delivery and performance by Alloy and
---------
Acquisition Sub of this Agreement and each of the Related Agreements to which
Alloy or Acquisition Sub is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Alloy and Acquisition Sub. This Agreement and
each of the Related Agreements to which Alloy or Acquisition Sub is a party are
valid and binding obligations of Alloy or Acquisition Sub, enforceable against
Alloy or Acquisition Sub, as the case may be, in accordance with their
respective terms. Neither the execution, delivery and performance by Alloy or
Acquisition Sub of this Agreement and the Related Agreements to which Alloy or
Acquisition Sub is a party, nor the consummation of the transactions
contemplated hereby or thereby, will in any material respect (A) conflict with,
(B)
33
result in any violation of, (C) cause a default under (with or without due
notice, lapse of time or both), (D) give rise to any right of termination,
amendment, cancellation or acceleration of any obligation contained in or the
loss of any benefit under, (E) result in the creation of any Encumbrance on or
against any assets, rights or property of Alloy or Acquisition Sub under any
term, condition or provision of (x) any instrument or agreement to which Alloy
or Acquisition Sub is a party, or by which Alloy or Acquisition Sub or any of
their properties, assets or rights may be bound, (y) any law, statute, rule,
regulation, order, writ, injunction, decree, permit, concession, license or
franchise of any Governmental Authority applicable to Alloy or Acquisition Sub
or any of their properties, assets or rights or (z) Alloy's or Acquisition Sub's
Certificate of Incorporation or by-laws, as amended through the date hereof, in
each case, which conflict, breach, default or violation or other event would
prevent the consummation of the transactions contemplated by this Agreement or
any other Related Agreement. Except as contemplated by this Agreement, no
permit, authorization, consent or approval of or by, or any notification of or
filing with, any Governmental Authority or other person is required in
connection with the execution, delivery and performance by Alloy or Acquisition
Sub of this Agreement or the Related Agreements to which it is a party or the
consummation of the transactions contemplated hereby or thereby, other than (i)
the filing with the SEC of such reports and information under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated by the SEC thereunder, as may be required in connection
with this Agreement and the transactions contemplated hereby, (ii) the filing of
such documents with, and the obtaining of such orders from, various state
securities and blue-sky authorities as are required in connection with the
transactions contemplated hereby, and (iii) such other consents, waivers,
authorizations, filings, approvals and registrations which if not obtained or
made would materially impair the ability of Alloy or Acquisition Sub to
consummate the transactions contemplated by this Agreement.
(d) SEC Documents.
-------------
(i) Alloy has furnished or made available to MarketSource a correct
and complete copy of Alloy's Annual Report on Form 10-K filed with the SEC
with respect to the fiscal year ended January 31, 2001, as amended, and the
Form 10-Q and each report, schedule, registration statement and definitive
proxy statement filed by Alloy with the SEC on or after the date of filing
of the Form 10-Q which are all of the documents (other than preliminary
material) that Alloy was required to file (or otherwise did file) with the
SEC in accordance with Sections 13, 14 and 15(d) of the Exchange Act on or
after the date of filing with the SEC of the Form 10-K (collectively, the
"Alloy SEC Documents"). As of their respective filing dates, or in the case
of registration statements, their respective effective times, none of the
Alloy SEC Documents (including all exhibits and schedules thereto and
documents incorporated by reference therein) 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 under which they were made, not misleading, and
the Alloy SEC Documents complied when filed, or in the case of registration
statements, as of their respective effective times, in all material
respects with the then applicable requirements of the Securities Act or the
34
Exchange Act, as the case may be, and the rules and regulations promulgated
by the SEC thereunder.
(ii) The financial statements (including the notes thereto) of Alloy
included in the Form 10-Q for the fiscal quarter then ended, complied as to
form in all material respects with the then applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP during the periods
involved (except as may have been indicated in the notes thereto) and
fairly present the financial position of Alloy as at the dates thereof and
the results of their operations, shareholders' equity and cash flows for
the period then ended.
(e) [Intentionally Omitted].
---------------------
(f) Disclosure. To the knowledge of Alloy and Acquisition Sub, neither
----------
Section 3.3 of this Agreement nor any of the SEC Documents, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements or facts contained
herein and therein not misleading in light of the circumstances under which they
were made.
(g) Litigation. There are no Actions pending or, to the knowledge of Alloy
----------
or Acquisition Sub, threatened against Alloy or Acquisition Sub, whether at law
or in equity, or before or by and Governmental Authority, challenging or seeking
to prevent the transactions contemplated by this Agreement.
ARTICLE IV
RELATED AGREEMENTS
On or prior to the Closing Date, the following agreements (such agreements,
together with the Xxxx of Sale, Assignment and Assumption Agreement, Trademark
Assignment and Other Assignments being herein collectively referred to as the
"Related Agreements") are being executed and delivered by the respective parties
thereto:
4.1 Escrow Agreements. Each of Alloy, Acquisition Sub, MarketSource and
-----------------
the Escrow Agent are entering into the Escrow Agreement, in the form of
Exhibit D attached hereto, and each of Alloy, Acquisition Sub, MarketSource and
---------
Xxxxx, Xxxxxxxxx & Xxxxxxxxx are entering into the Supplemental Escrow
Agreement, in the form of Exhibit D-2 attached hereto.
-----------
4.2 Lockup Agreement. MarketSource is entering into an Investment
----------------
Representation and Lockup Agreement with Alloy, effective as of the Closing Date
(the "Lockup Agreement"), in substantially the form of Exhibit E attached
---------
hereto, providing, among other things, that MarketSource shall not transfer its
shares of Alloy Common Stock following the Closing Date except as provided
therein and including a representation as to MarketSource's intentions with
respect thereto. Alloy shall be entitled to place legends on the certificates
evidencing any Alloy
35
Common Stock to be received by MarketSource pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for Alloy Common Stock, consistent with the terms of the Lockup Agreement,
whether or not the Lockup Agreement is actually delivered to Alloy.
4.3 Registration Rights Agreement. MarketSource, Alloy and Xxxxx
-----------------------------
Xxxxxxx are entering into a Registration Rights Agreement, effective as of the
Closing Date, in the form of Exhibit F attached hereto (the "Registration Rights
---------
Agreement"), providing for registration rights with respect to the Alloy Shares,
the Performance Stock Shares, the Warrant Shares and certain other shares of
Alloy Common Stock.
4.4 Non-competition and Confidentiality Agreements. MarketSource and
----------------------------------------------
each stockholder and former stockholder of MarketSource is entering into a Non-
competition and Confidentiality Agreement with Alloy and Acquisition Sub,
effective as of the Closing Date, in the form of Exhibit G attached hereto. Each
---------
Key Employee is entering into a Non-competition and Confidentiality Agreement,
effective as of the Closing Date, in the form of Exhibit H-1 attached hereto,
-----------
and Xxxxx Xxxxxxx is entering into a Non-competition and Confidentiality
Agreement, effective as of the Closing Date, in the form of Exhibit H-2 attached
hereto.
4.5 Employment Offer Letters. Each existing key employee of
------------------------
MarketSource identified in Section 4.5 of the Disclosure Schedule hereto (the
"Key Employees"), is entering into an employment offer letter with Acquisition
Sub.
4.6 Subleases. Acquisition Sub, MarketSource and Xxxxxx X. Xxxxxx are
---------
entering into a Sublease in the form of Exhibit I-2 attached hereto pursuant to
-----------
which Acquisition Sub is leasing certain real property located at 00 Xxxxx Xxxx,
Xxxxxxxx, Xxx Xxxxxx, and Acquisition Sub and MarketSource are entering into a
Sublease in the form of Exhibit I-2 attached hereto pursuant to which
-----------
Acquisition Sub is leasing certain real property located at 0 Xxxxxxxx Xxx,
Xxxxxxxx, Xxx Xxxxxx.
4.7 License. Acquisition Sub and MarketSource are entering into a
-------
License in the form of Exhibit J attached hereto pursuant to which, among other
---------
things, MarketSource is licensing the use of its name and service xxxx to
Acquisition Sub.
4.8 Services Agreement. Acquisition Sub, Alloy and MarketSource are
------------------
entering into a Services Agreement in the form of Exhibit K attached hereto
---------
pursuant to which, among other things, MarketSource is agreeing to provide
certain services to Acquisition Sub relating to the transition and operation of
the 360 Youth Business (the "Services Agreement").
4.9 Warrants. Alloy is issuing to MarketSource the Warrant in the
--------
form of Exhibit L-1 attached hereto and is issuing to Xxxxx Xxxxxxx a warrant in
-----------
the form of Exhibit L-2 attached hereto.
-----------
36
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligations. The obligations of each
--------------------------------------
party to perform this Agreement and to consummate the transactions contemplated
hereby are subject to the satisfaction of the following conditions unless waived
(to the extent such conditions can be waived) by all parties hereto:
(a) Approvals. All authorizations, consents, orders or approvals of,
---------
or declarations or filings with or expiration of waiting periods imposed by any
Governmental Authority necessary for the consummation of the transactions
contemplated hereby shall have been obtained or made or shall have occurred.
(b) Legal Action. No temporary restraining order, preliminary
------------
injunction or permanent injunction or other order preventing the consummation of
the transactions contemplated hereby shall have been issued by any Federal or
state court or other Governmental Authority and remain in effect.
(c) Legislation. No Federal, state, local or foreign statute, rule or
-----------
regulation shall have been enacted which prohibits, restricts or delays the
consummation of the transactions contemplated by this Agreement or any of the
conditions to the consummation of such transactions.
5.2 Conditions to Obligations of Alloy and Acquisition Sub. The
------------------------------------------------------
obligations of Alloy and Acquisition Sub to perform this Agreement and to
consummate the transactions contemplated hereby are subject to the satisfaction
of the following conditions unless waived (to the extent such conditions can be
waived) by Alloy and Acquisition Sub:
(a) Representations and Warranties of MarketSource. Alloy and
----------------------------------------------
Acquisition Sub shall have received a certificate signed by the President or
Chief Executive Officer of MarketSource to the effect that the representations
and warranties of MarketSource set forth in Sections 3.1 hereof are true and
correct in all material respects (except for any representation or warranty that
by its terms is qualified by materiality, in which case it shall be true and
correct in all respects).
(b) Performance of Obligations of MarketSource. Alloy and Acquisition
------------------------------------------
Sub shall have received a certificate signed by the President or Chief Executive
Officer of MarketSource to the effect that MarketSource has performed in all
material respects the obligations required to be performed by it under this
Agreement prior to or as of the Closing Date.
(c) Authorization of Agreement. All actions necessary to authorize
--------------------------
the execution, delivery and performance of this Agreement and the Related
Agreements by MarketSource and the consummation of the transactions contemplated
hereby and thereby shall have been duly and validly taken by the Board of
Directors and, if necessary, the stockholders of MarketSource, and
37
MarketSource shall have full power and right to effect the transactions
contemplated hereby and thereby on the terms provided herein and therein.
(d) Opinion of MarketSource's Counsel. Alloy and Acquisition Sub
---------------------------------
shall have received an opinion, dated the Closing Date, of Xxxxx, Xxxxxxxxx &
Xxxxxxxxx, counsel to MarketSource, in form and substance reasonably
satisfactory to Alloy and Acquisition Sub.
(e) Acceptance by Counsel to Alloy. The form and substance of all
------------------------------
legal matters contemplated hereby and of all documents or instruments delivered
hereunder shall be reasonably acceptable to Alloy's General Counsel.
(f) Consents and Approvals. Alloy and Acquisition Sub shall have
----------------------
received duly executed copies of all consents and approvals contemplated by this
Agreement or the Disclosure Schedule, in form and substance satisfactory to
Alloy and Acquisition Sub.
(g) Related Agreements. Each of the Related Agreements shall be in
------------------
full force and effect as of the Closing Date and become effective in accordance
with the respective terms thereof and the actions required to be taken
thereunder by the parties thereto immediately prior to the Closing Date shall
have been taken, and each person or entity who or which is required or
contemplated by the parties hereto to be a party to any Related Agreement who or
which did not theretofore enter into such Related Agreement shall execute and
deliver such Related Agreement.
(h) Default Under Agreements. The consummation of the transactions
------------------------
contemplated hereby shall not cause MarketSource to be in default under any
Assumed Contract.
(i) Approval by Board of Directors of Alloy and Acquisition Sub. This
-----------------------------------------------------------
Agreement and the Related Agreements and the transaction contemplated hereby and
thereby shall have been approved by the Board of Directors of Alloy and
Acquisition Sub.
(j) Evidence of Corporate Authority. MarketSource shall have
-------------------------------
delivered (A) a certificate of the Secretary or an Assistant Secretary of
MarketSource, dated as of the Closing Date, certifying as to (i) the attached
true and correct copies of the Certificate of Incorporation and by-laws of
MarketSource, (ii) the incumbency of the officers executing this Agreement and
the Related Agreements on behalf of MarketSource and (iii) the attached true and
correct copies of resolutions of the board of directors and, if necessary,
stockholders of MarketSource authorizing and approving the execution, delivery
and performance of this Agreement and the Related Agreements and the
transactions contemplated hereby and thereby, and the acts of the officers of
MarketSource in carrying out the terms and provisions hereof; and (B)
certificates of good standing from the Secretary of State of Delaware and of
each jurisdiction in which it is qualified to do business as identified on
Section 3.1(a) to the Disclosure Schedule dated within five (5) days of the
Closing Date.
(k) Change of Name. MarketSource shall have caused its wholly-owned
--------------
subsidiary, 360 Youth, Inc., a New Jersey corporation, to change its name so
that the words "360 Youth" no longer appear in its name.
38
5.3 Conditions to Obligations of MarketSource. The obligations of
-----------------------------------------
MarketSource to perform this Agreement and to consummate the transactions
contemplated hereby are subject to the satisfaction of the following conditions
unless waived (to the extent such conditions can be waived) by MarketSource:
(a) Representations and Warranties of Alloy and Acquisition Sub.
-----------------------------------------------------------
MarketSource shall have received a certificate signed by an officer of Alloy and
Acquisition Sub to the effect that the representations and warranties of Alloy
and Acquisition Sub set forth in Section 3.3 hereof are true and correct in all
material respects (except for any representation or warranty that by its terms
is qualified by materiality, in which case it shall be true and correct in all
respects).
(b) Performance of Obligations of Alloy and Acquisition Sub.
-------------------------------------------------------
MarketSource shall have received a certificate signed by an officer of Alloy and
Acquisition Sub to the effect that Alloy and Acquisition Sub have performed in
all material respects their respective obligations required to be performed by
them under this Agreement prior to or as of the Closing Date.
(c) Related Agreements. Each of Alloy and Acquisition Sub shall have
------------------
executed and delivered the Related Agreements to which it is a party.
(d) Opinion of Counsel for Alloy. MarketSource shall have received an
----------------------------
opinion of counsel, dated the Closing Date, of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., counsel to Alloy and Acquisition Sub, in form and
substance reasonably satisfactory to MarketSource.
(e) Stock Certificates. Alloy shall have delivered an irrevocable
------------------
letter to its transfer agent directing the transfer agent to deliver the Alloy
Shares in accordance with the terms of this Agreement.
(f) Closing Cash Payment. Alloy shall have delivered the Closing Cash
--------------------
Payment (net of the Escrow Cash) to MarketSource by means of a wire transfer to
an account designated in writing by MarketSource at least three (3) Business
Days prior to Closing.
(g) Evidence of Corporate Authority. Each of Alloy and Acquisition
-------------------------------
Sub shall have delivered (A) a certificate of the Secretary or an Assistant
Secretary of Alloy or Acquisition Sub, as applicable, dated as of the Closing
Date, certifying as to (i) the attached true and correct copies of the
Certificates of Incorporation and by-laws of Alloy or Acquisition Sub, (ii) the
incumbency of the officers executing this Agreement and the Related Agreements
on behalf of Alloy or Acquisition Sub and (iii) the attached true and correct
copies of resolutions of the board of directors of Alloy or Acquisition Sub
authorizing and approving the execution, delivery and performance of this
Agreement and the Related Agreements and the transactions contemplated hereby
and thereby, and the acts of the officers of Alloy or Acquisition Sub in
carrying out the terms and provisions hereof; and (B) a certificate of good
standing from the Secretary of State of Delaware dated within five (5) days of
the Closing Date.
39
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Certain Information Required by the Code. MarketSource shall
----------------------------------------
furnish Alloy with any information required pursuant to Section 1060(e) of the
Code at such time and in such manner as Alloy may request in order to comply
with Section 1060(e) and any regulations promulgated thereunder.
6.2 Restriction on Transfer.
-----------------------
(a) The shares of Alloy Common Stock to be issued to MarketSource
pursuant to this Agreement, the Warrant, the Warrant Shares, and any shares of
capital stock or other securities received with respect thereto (collectively,
the "Restricted Securities") shall not be sold, transferred, assigned, pledged,
encumbered or otherwise disposed of (each, a "Transfer") except upon the
conditions specified in this Section 6.2, which conditions are intended to
insure compliance with the provisions of the Securities Act. MarketSource shall
observe and comply with the Securities Act and the rules and regulations
promulgated by the SEC thereunder as now in effect or hereafter enacted or
promulgated, and as from time to time amended, in connection with any Transfer
of Restricted Securities beneficially owned by MarketSource.
(b) Each certificate representing Restricted Securities issued to
MarketSource and each certificate for such securities issued to subsequent
transferees of any such certificate shall (unless otherwise permitted by the
provisions of Sections 6.2(c) and 6.2(d) hereof) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES OR "BLUE-SKY" LAWS. THESE SECURITIES MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN SECTION 6.2 OF THE ASSET PURCHASE
AGREEMENT DATED AS OF NOVEMBER 26, 2001 BETWEEN ALLOY, INC.,
ALLOY ACQUISITION SUB, INC. AND MARKETSOURCE CORPORATION AND NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL
SUCH CONDITIONS HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF
CERTAIN OF SUCH CONDITIONS, ALLOY, INC. HAS AGREED TO DELIVER TO
THE HOLDER HEREOF A CERTIFICATE,
40
NOT BEARING THIS LEGEND, FOR THE SECURITIES REPRESENTED HEREBY
REGISTERED IN THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF
ALLOY, INC.
THESE SECURITIES ARE ALSO SUBJECT TO AN INVESTMENT REPRESENTATION
AND LOCKUP AGREEMENT, DATED AS OF NOVEMBER 26, 2001 WITH ALLOY,
INC. WHICH RESTRICTS THE TRANSFER THEREOF, A COPY OF WHICH CAN BE
OBTAINED FROM ALLOY, INC. AT ITS EXECUTIVE OFFICES."
(c) Prior to any Transfer of Restricted Securities, MarketSource
shall give written notice to Alloy of MarketSource's intention to effect such
Transfer and to comply in all other respects with the provisions of this Section
6.2. Each such notice shall describe the manner and circumstances of the
proposed Transfer and, if requested by Alloy, shall be accompanied by the
written opinion, addressed to Alloy, of counsel for the holder of such
Restricted Securities, stating that in the opinion of such counsel (which
opinion and counsel shall be reasonably satisfactory to Alloy) such proposed
transfer does not involve a transaction requiring registration or qualification
of such Restricted Securities under the Securities Act or the securities or
"blue-sky" laws of any relevant state of the United States. The holder thereof
shall thereupon be entitled to Transfer such Restricted Securities in accordance
with the terms of the notice delivered by it to Alloy. Each certificate or other
instrument evidencing the securities issued upon the Transfer of any such
Restricted Securities (and each certificate or other instrument evidencing any
untransferred balance of such Restricted Securities) shall bear the legend set
forth in Section 6.2(b) unless (x) in such opinion of counsel of Alloy
registration of any future Transfer is not required by the applicable provisions
of the Securities Act or (y) Alloy shall have waived the requirement of such
legends. MarketSource shall not Transfer any Restricted Securities until such
opinion of counsel has been given (unless waived by Alloy or unless such opinion
is not required in accordance with the provisions of this Section 6.2(c)).
(d) Notwithstanding the foregoing provisions of this Section 6.2, the
restrictions imposed by this Section 6.2 upon the transferability of Restricted
Securities shall cease and terminate when (i) any such shares are sold or
otherwise disposed of pursuant to an effective registration statement under the
Securities Act or as otherwise contemplated by Section 6.2(c) and, pursuant to
Section 6.2(c), the securities so transferred are not required to bear the
legend set forth in Section 6.2(b) or (ii) the holder of such Restricted
Securities has met the requirements for Transfer of such Restricted Securities
pursuant to subparagraph (k) of Rule 144. Whenever the restrictions imposed by
this Section 6.2 shall terminate, as herein provided, the holder of Restricted
Securities as to which such restrictions have terminated shall be entitled to
receive from Alloy, without expense, a new certificate not bearing the
restrictive legend set forth in Section 6.2(b) and not containing any other
reference to the restrictions imposed by this Section 6.2.
41
(e) MarketSource understands and agrees that Alloy, at its
discretion, may cause stop transfer orders to be placed with its transfer agent
with respect to certificates for Restricted Securities owned by MarketSource but
not as to certificates for such shares of Alloy Common Stock as to which the
legend set forth in paragraph (b) of this Section 6.2 is no longer required
because one or more of the conditions set forth in Section 6.2(d) shall have
been satisfied, in the event of a proposed transfer in violation or breach of
this Section 6.2 or that is or may otherwise be unlawful.
(f) MarketSource shall not, and shall cause its Affiliates to not,
Transfer, or enter into any agreement, arrangement or understanding to Transfer,
any shares of Alloy Common Stock or cash received in connection with the
transactions contemplated by this Agreement to any Transferred Employees or to
members of any of their immediate families if such Transfer, or entering into
such agreement, arrangement or understanding to Transfer, would result in any
reduction of Alloy's earnings as determined in accordance with GAAP.
6.3 [Intentionally Omitted].
---------------------
6.4 Litigation Cooperation. If a party hereto shall become engaged
----------------------
in or participate in any investigation, claim, litigation, arbitration,
mediation, or other proceeding with any third party relating in any way to the
Acquired Assets, the Assumed Liabilities or the Excluded Liabilities, the other
parties shall cooperate in all reasonable respects with such party in connection
therewith, including, without limitation, making available to such parties,
without cost, all relevant records and using its best efforts to make available
to the other the then employees of the parties or their Affiliates who may be
helpful with respect to such claim or litigation.
6.5 Record Maintenance. Each party shall, in connection with the
------------------
preparation by the others of tax and financial reporting matters and other bona
fide business purposes, for a period of five (5) years from the Closing Date
afford to the other parties and their representatives the opportunity, upon
reasonable advance notice, to examine and make copies of the books and records
of the other, or portions thereof, which relate to MarketSource for any period
prior to the Closing, except to the extent that such access is precluded
pursuant to the provisions of a confidentiality agreement between such party and
another person that is not an Affiliate of such party or is otherwise precluded
by law, and shall maintain such records for a period of five (5) years from the
date hereof; provided, that any party may destroy any record which was first
offered to the other parties and not claimed or picked up by one or more of the
other parties within thirty (30) days, and shall not destroy any record without
first providing the other parties at least thirty (30) days' prior written
notice of its intent to destroy such record.
6.6 Preparation of Filings. As promptly as practicable after the date
----------------------
of this Agreement, Alloy and MarketSource shall properly prepare and file any
filings required to be made by them under the Exchange Act, the Securities Act
or any other Federal or state laws, and Alloy shall properly prepare and file
any filings required under state securities or "blue sky" laws, in each case
relating to the transactions contemplated by this Agreement (collectively, the
42
"Filings"). MarketSource shall promptly furnish Alloy with all information
concerning MarketSource as may be reasonably requested by Alloy in connection
with any action contemplated by this Section 6.6. Alloy and MarketSource will
notify the other promptly of the receipt of any comments from any government
officials for amendments or supplements to or any Filing or for additional
information and will supply the other with copies of all correspondence between
such party or any of its representatives, on the one hand, and any government
officials, on the other hand, with respect to any Filing. Alloy and MarketSource
shall promptly provide the other (or its counsel) with copies of all filings
made by such party with any Governmental Authority in connection with this
Agreement and the transactions contemplated hereby. The Filings shall comply in
all material respects with all applicable requirements of law. Whenever any
event occurs which should be set forth in an amendment or supplement to any
Filing, Alloy and/or MarketSource, as the case may be, shall promptly inform the
other party of such occurrence and cooperate in filing with any government
officials, and/or mailing to MarketSource, such amendment or supplement.
6.7 Efforts to Consummate. The parties hereto shall use all
---------------------
commercially reasonable efforts to do or cause to be done all such acts and
things as may be necessary, proper or advisable, consistent with all applicable
laws and regulations, to consummate and make effective the transactions
contemplated hereby. In particular, each party hereto shall use all commercially
reasonable efforts to cause all of its managers, officers and directors to
support the transactions contemplated hereby and to take all actions and execute
all documents reasonably requested by the other parties hereto to carry out the
intent of the parties with respect to the transactions contemplated hereby.
6.8 Public Announcements. The parties hereto agree that, to the
--------------------
maximum extent feasible, but subject to the public disclosure and other legal
obligations of Alloy and regulatory obligations to which each may be subject,
they shall advise and confer prior to the issuance (and provide copies to the
other party prior to issuance) of any public announcement or reports or
statements with respect to the transactions contemplated hereby; provided,
--------
however, that Alloy will provide MarketSource the opportunity to review, comment
-------
on and approve (such approval not to be unreasonably withheld) any press release
announcing the transactions contemplated hereby to be issued by Alloy prior to
issuing such press release; provided, further, however, that none of
-------- ------- ------
MarketSource or any of its Affiliates or their representatives will issue any
report, statement or release pertaining to this Agreement or any transaction
contemplated hereby, without the prior written consent of Alloy.
6.9 Employment Matters.
------------------
(a) Immediately prior to the Closing, MarketSource shall terminate
the employment or engagement of the employees and consultants of MarketSource
listed on Section 6.9 of the Disclosure Schedule (the "360 Youth Business
Employees"). MarketSource shall terminate any and all existing employment,
consulting, independent contractor, confidentiality, non-disclosure, assignment
of inventions or other intellectual property, non-competition, non-solicitation
or similar agreements between MarketSource and any 360 Youth Business Employee
effective as of the Closing Date. MarketSource shall also, in accordance with
all applicable law, pay to each
43
360 Youth Business Employee all wages, salaries and commissions earned through
the Closing Date, reimburse each 360 Youth Business Employee for all
reimbursable expenses incurred by him or her through the Closing Date and make
such other payments as may be required by applicable law to the 360 Youth
Business Employees as of such date. MarketSource shall also pay to the 360 Youth
Business Employees all bonus payments due to such employees under the
MarketSource Corporation Incentive Compensation Plan (or any other similar plan)
as soon as reasonably practicable following its calculation of such bonus
payments. On the Closing Date, Acquisition Sub shall offer to each of the 360
Youth Business Employees employment or engagement on terms acceptable to
Acquisition Sub. Any such 360 Youth Business Employee accepting a position with
Acquisition Sub is referred to herein as a "Transferred Employee" and,
notwithstanding anything in this Agreement to the contrary, shall be employees
or independent contractors of Acquisition Sub, as determined by Acquisition Sub,
following the Closing Date. Acquisition Sub shall credit each Transferred
Employee for all accrued and unpaid vacation and sick days as set forth in
Section 3.1(t)(i) of the Disclosure Schedule. MarketSource shall accept sole and
exclusive responsibility for the disposition of any 360 Youth Business Employee
who does not accept employment with Acquisition Sub including, without
limitation, any obligation to offer and provide COBRA continuation coverage for
health insurance to such individual and his or her spouse and dependents, if
any.
(b) During the period commencing on the Closing Date and ending on
the last day of the pay period including December 31, 2001, MarketSource shall
continue to provide to all Transferred Employees, coverage under MarketSource's
health, dental, life and disability insurance plans to the same extent that such
Transferred Employees participated in any such plan immediately prior to the
Closing Date, and MarketSource shall pay all wages to Transferred Employees as
approved by Acquisition Sub, and shall withhold appropriate taxes and other
withholdings with respect to such wages and issue all information statements to
all such employees (including W-2 statements) and taxing authorities and pay all
federal and state taxes with respect to such Transferred Employees; provided,
--------
that, Acquisition Sub shall reimburse MarketSource for its direct costs incurred
----
for such premiums, wages and taxes after MarketSoruce has provided Acquisition
Sub evidence of such payments as Acquisition Sub may reasonably require.
(c) Promptly following the Closing Date, Alloy shall grant to certain
of the Transferred Employees options to purchase up to an aggregate of 600,000
shares of Alloy Common Stock (the "Employee Options") at an exercise price per
share equal to the greater of (i) the closing price of a share of Alloy Common
Stock on the NASDAQ for the trading day immediately preceding the date of grant
and (ii) $12.47. The Employee Options (i) shall be issued to such Transferred
Employees and in such individual amounts as is determined by Alloy after
consultation with MarketSource, (ii) shall be incentive stock options, within
the meaning of Section 422 of the Code, to the extent possible, and (iii) shall
become exercisable as to 25% of the underlying shares on each anniversary of the
grant date for a period of four (4) consecutive years. All such options shall be
granted in accordance with and subject to the terms of the Alloy, Inc. Restated
1997 Employee, Director and Consultant Stock Option Plan.
44
6.10 Transfer Taxes. MarketSource shall pay all Taxes, if any,
---------------
incurred as a result of the transfer of the Acquired Assets hereunder.
6.11 Required Consents; Subsequent Events.
------------------------------------
(a) Notwithstanding anything in this Agreement or in the Xxxx of Sale,
Assignment and Assumption Agreement to the contrary notwithstanding, neither
this Agreement nor the Xxxx of Sale, Assignment and Assumption Agreement shall
constitute an agreement to assign or otherwise transfer any of the Assumed
Contracts, or any rights thereunder, if an attempted assignment or transfer
thereof would constitute a breach thereof or would be ineffective, in either
case without the consent of a third party to such assignment or transfer, or
would violate any applicable law; provided, however, that this provision shall
-------- -------
not be deemed to modify in any respect any of MarketSource's representations or
warranties set forth herein or the conditions to Alloy's or Acquisition Sub's
obligations contained in Article V hereof.
(b) If any such consent has not been obtained as of the Closing Date
and Alloy and Acquisition Sub nevertheless determine to proceed with the
Closing, MarketSource shall continue to use its commercially reasonable efforts
to obtain such consent after the Closing. In such circumstances, until such
consent has been obtained, Acquisition Sub shall use all commercially reasonable
efforts to perform in MarketSource's name and, in respect of the incremental
costs incurred by Acquisition Sub in performing in MarketSource's name, at
MarketSource's expense, all of MarketSource's obligations with respect to each
Assumed Contract for which any such consent has not been obtained; provided,
--------
however, that Acquisition Sub shall not be required to take any action in
-------
performing such obligations which, in Acquisition Sub's reasonable judgment,
would subject Acquisition Sub to any Liability or an unreasonable risk of
incurring any Liability.
(c) If any Assumed Contracts are not transferred to
Acquisition Sub at the Closing pursuant to this Section 6.11, MarketSource shall
cooperate with Acquisition Sub in any reasonable arrangement designed to provide
for Acquisition Sub all of the benefits of, and to have Acquisition Sub assume
the burdens, liabilities, obligations and expenses expressly assumed by
Acquisition Sub hereunder with respect to, all such Assumed Contracts. At
Acquisition Sub's request, MarketSource shall take all reasonable actions
requested by Acquisition Sub to enforce for the benefit of Acquisition Sub any
and all rights of MarketSource with respect to any such Assumed Contract that is
not otherwise transferred pursuant to the provisions of this Agreement.
MarketSource hereby authorizes Acquisition Sub to perform all of MarketSource's
obligations after the Closing with respect to all such Assumed Contracts and
hereby grants to Acquisition Sub a power of attorney to act in the name of
MarketSource with respect thereto. Such power of attorney shall be coupled with
an interest and shall be irrevocable. MarketSource agrees to remit promptly to
Acquisition Sub all collections or payments received by MarketSource in respect
of all such Assumed Contracts, and shall hold all such collections or payments
in trust for the benefit of, and promptly pay the same over to, Acquisition Sub;
provided, however, that nothing herein shall create or provide any rights
-------- -------
or benefits in or to third parties.
45
(d) If, subsequent to the Closing, a claim brought by any party
challenging any of the transactions contemplated hereby results in any ruling or
order which has the result of frustrating in a material way the transfer of any
of the Acquired Assets hereunder to Acquisition Sub or Acquisition Sub's use
thereof pursuant to the applicable transfer and licensing provisions contained
herein, MarketSource shall cooperate with Acquisition Sub in any reasonable
arrangement designed to give Acquisition Sub, as nearly as possible, the same
economic benefits, and to have Acquisition Sub assume the same burdens,
liabilities, obligations and expenses, as if such transfer or license had been
consummated in accordance with the provisions hereof.
ARTICLE VII
INDEMNIFICATION
7.1 Definitions. As used in this Agreement, the following terms
-----------
shall have the following meanings:
(a) "Affiliate" as to any person means any entity, directly or
indirectly, through one or more intermediaries, controlling, controlled by or
under common control with such person.
(b) "Event of Indemnification" means the following:
(i) with respect to the Alloy Indemnified Persons (an "Alloy
Event of Indemnification"),
(A) the breach of any representation or warranty contained
in Section 3.1 of this Agreement, any Related Agreement or any
document delivered in connection herewith or therewith;
(B) the breach of any agreement or covenant of MarketSource
contained in this Agreement, any Related Agreement or any
document delivered in connection herewith or therewith;
(C) any claim, demand, Liability or obligation of any
nature whatsoever based upon, arising out of or related to the
Excluded Liabilities;
(D) any claim, demand, Liability or obligation of any
nature whatsoever based upon, arising out of or related to any
non-competition or similar agreement to which MarketSource or any
stockholder of MarketSource or any of its Affiliates is a party
or is otherwise bound; and
(E) any Liability or obligation of any nature whatsoever
resulting from or in connection with any claim or demand by any
360 Youth Business Employees based upon any act or omission
occurring prior to the Closing Date, or any claim,
46
demand, Liability or obligation of any nature whatsoever related to or
resulting from the termination by MarketSource of the 360 Youth
Business Employees, or
(ii) with respect to the MarketSource Indemnified Persons (a
"MarketSource Event of Indemnification"),
(A) the breach by Alloy or Acquisition Sub of any
representation or warranty contained in Section 3.3 of this Agreement,
any Related Agreement or any document delivered in connection herewith
or therewith;
(B) the breach of any agreement or covenant of Alloy or
Acquisition Sub contained in this Agreement, any Related Agreement or
any document delivered in connection herewith or therewith;
(C) any claim, demand, Liability or obligation of any nature
whatsoever based upon, arising out of or related to the Assumed
Liabilities; and
(D) any Liability or obligation of any nature whatsoever
resulting from or in connection with any claim or demand by any
Transferred Employee relating to the services to be provided by
MarketSource pursuant to Section 6.9(b), other than any Liability or
obligation resulting from or relating to any breach by MarketSource of
any provision of Section 6.9(b) or to any negligent act or omission by
MarketSource in performing the services to be provided pursuant to
Section 6.9(b).
(c) "Indemnified Persons" means and includes:
(i) with respect to an Alloy Event of Indemnification, Alloy,
Acquisition Sub and their respective Affiliates, successors and assigns,
and the respective officers and directors of each of the foregoing (the
"Alloy Indemnified Persons"); or
(ii) with respect to a MarketSource Event of Indemnification,
MarketSource, its Affiliates, successors and permitted assigns, and the
respective officers and directors of each of the foregoing (the
"MarketSource Indemnified Persons").
(d) "Indemnifying Persons" means and includes:
(i) with respect to an Alloy Event of Indemnification,
MarketSource, its Affiliates and their respective successors and permitted
assigns (the "MarketSource Indemnifying Persons"); or
(ii) with respect to a MarketSource Event of Indemnification,
Alloy, Acquisition Sub and their respective successors and assigns (the
"Alloy Indemnifying Persons").
47
(e) "Losses" means any and all losses, demands, actions or causes of
action, suits, proceedings, investigations, arbitrations, claims, shortages,
damages, liabilities (contingent or otherwise), payments, obligations, expenses
(including reasonable attorneys', accountants', consultants' and expert
witnesses' fees), assessments or Taxes (including interest or penalties thereon)
sustained, suffered or incurred by any Indemnified Person arising from or in
connection with any such matter that is the subject of indemnification under
Section 7.2 hereof.
7.2 Indemnification Generally.
------------------------
(a) The Indemnifying Persons shall indemnify the Indemnified Persons from
and against any and all Losses arising from or in connection with any Event of
Indemnification. All Losses with respect to any Alloy Event of Indemnification
shall be asserted against and satisfied first from the Escrow Fund (as defined
in the Escrow Agreement). To the extent that Losses with respect to any Alloy
Event of Indemnification in amounts in excess of the Escrow Fund have been
asserted or satisfied from the Escrow Fund, all such Losses shall be paid by the
MarketSource Indemnifying Persons, provided that, subject to the provisions of
Section 7.2(c), the maximum aggregate liability of the MarketSource Indemnifying
Persons hereunder (in excess of the Escrow Fund) shall be $5,000,000.
(b) Subject to the provisions of Section 7.2(c), no indemnification shall
be payable to an Alloy Indemnified Person until the aggregate amount of Losses
incurred by all Alloy Indemnified Persons as a result of an Alloy Event of
Indemnification described in Section 8.1(b)(i)(A) exceeds $250,000, whereupon
the Alloy Indemnified Persons shall be entitled to receive the full amount of
all Losses (including the first $250,000 of such Losses).
(c) Notwithstanding any of the foregoing, nothing contained in this
Section 7.2 shall in any way limit, impair, modify or otherwise affect the
rights of the Indemnified Persons (including rights available under the
Securities Act or the Exchange Act) nor shall there be any limitation of
liability of Indemnifying Persons, nor shall the provisions of Section 7.2(b)
apply, in connection with any of such rights of the Indemnified Persons (1) to
bring any claim, demand, suit or cause of action otherwise available to the
Indemnified Persons based upon (i) an allegation or allegations that
MarketSource had an intent to defraud or made a willful or intentional
misrepresentation or willful omission of a material fact in connection with this
Agreement or any Related Agreement and the transactions contemplated hereby or
thereby ("Fraud Claims"), (ii) any or alleged breach of any of the
representations or warranties contained in Sections 3.1(h), 3.1(k), 3.1(l),
3.1(s), 3.1(u), 3.1(x) or the first sentence of Section 3.1(i), (iii) any
adjustment to the Purchase Price pursuant to Section 2.3, or (iv) any Alloy
Event of Indemnification described in Section 7.1(b)(i)(B), (C), (D) or (E), (2)
to enforce any judgment of a court of competent jurisdiction in connection with
any claim, demand, suit or cause of action described in clause (A) of this
Section 7.2(c) or (3) arising out of the breach of any of the covenants or
agreements contained in any of the Related Agreements.
(d) The parties agree that the amount of any indemnification payment
otherwise required to be made by any Indemnifying Person hereunder shall be
determined net of insurance proceeds and on an "after tax" basis. In particular,
the amount of an indemnification payment
48
shall be (i) the amount of the Loss (determined without regard to insurance
proceeds or tax adjustments), (ii) minus any insurance payments received by the
Indemnified Person attributable to the Loss, (iii) minus the present value of
any tax benefits to the Indemnified Person attributable to deducting the amount
of the Loss, and (iv) plus the present value of any tax detriment to the
Indemnified Person attributable to including in taxable income receipt or
accrual of the insurance proceeds in accordance with the last sentence of this
Section 7.2(d) and indemnification payment. Notwithstanding the foregoing, if
the present value of a tax benefit or detriment cannot be realized (for example,
the Indemnified Person is in a net loss position so that marginal income or
deduction does not currently affect tax liability), the indemnification payment
shall be made assuming the tax benefit or detriment is zero, and appropriate
adjustment shall be made among the parties in the future at such time as the tax
benefit or detriment is realized. In any case, no Alloy Indemnified Person shall
be obligated to seek any payment pursuant to the terms of any insurance policy
in respect of any Loss except to the extent such Loss is covered by an insurance
policy of MarketSource assigned to Acquisition Sub pursuant to the terms of this
Agreement.
(e) The parties agree that payment pursuant to an indemnification
obligation under this Article VII shall be treated for federal income tax
purposes as an adjustment to the Purchase Price.
7.3 Assertion of Claims. To bring a claim for indemnification under this
-------------------
Article VII, the Indemnified Person shall give the appropriate Indemnifying
Person(s) (a) written notice of the existence of any such claim, specifying the
nature and basis of such claim and the amount thereof, to the extent known, or
(b) written notice pursuant to Section 7.4 of any Third Party Claim, the
existence of which might give rise to such a claim (each, a "Notice of Claim")
as promptly as practicable after becoming aware of such claim, but the failure
so to provide such Notice of Claim will not relieve the Indemnifying Person(s)
from any liability which they may have to the Indemnified Persons under this
Agreement or otherwise (unless and only to the extent that such failure results
in the loss or compromise in any material respect of any material rights or
defenses of the Indemnifying Persons and the Indemnifying Persons were not
otherwise aware of such action or claim). Notwithstanding the foregoing, no
claim shall be brought under Section 7.2 hereof with respect to a breach of a
representation or warranty unless the Indemnified Persons, or any of them, at
any time prior to the applicable Survival Date, give the Indemnifying Persons a
Notice of Claim. Upon the giving of such written notice as aforesaid, the
Indemnified Persons, or any of them, shall have the right to commence legal
proceedings prior or subsequent to the Survival Date (as defined in Section 8.5
hereof) for the enforcement of their rights under Section 7.2 hereof.
7.4 Notice and Defense of Third Party Claims. Losses resulting from the
----------------------------------------
assertion of liability by third parties (each, a "Third Party Claim") shall be
subject to the following terms and conditions:
(a) The Indemnified Persons shall promptly give written notice to the
Indemnifying Persons of any Third Party Claim that might give rise to any Loss
by the Indemnified Persons, stating the nature and basis of such Third Party
Claim, and the amount thereof to the extent
49
known. Such notice shall be accompanied by copies of all relevant documentation
with respect to such Third Party Claim, including, without limitation, any
summons, complaint or other pleading that may have been served, any written
demand or any other document or instrument. Notwithstanding the foregoing, the
failure to provide notice as aforesaid will not relieve the Indemnifying Persons
from any liability which they may have to the Indemnified Persons under this
Agreement or otherwise (unless and only to the extent that such failure directly
results in the loss or compromise of any rights or defenses of the Indemnifying
Person and they were not otherwise aware of such action or claim).
(b) Upon receipt of notice of the Third Party Claim, the Indemnifying
Person shall then have thirty (30) days to advise the Indemnified Person whether
the Indemnifying Person accepts the defense of such claim, and the Indemnifying
Person shall have no obligation to the Indemnified Person for legal fees
incurred by the Indemnified Person after the date of any assumption of the
defense by the Indemnifying Person; provided, that notwithstanding the
foregoing, Alloy and Acquisition Sub shall have the right to control the defense
of any claim which seeks any equitable relief or permanent or temporary
injunction against any aspect of Alloy's or Acquisition Sub's business or
operations.
(c) If the Indemnifying Person determines to accept the defense of such
Third Party Claim, (i) it shall defend such Third Party Claim with counsel of
its own choice and at its own expense, and (ii) the Indemnified Person shall
have the right to be represented by its own counsel at its own expense, its
participation to be subject to reasonable direction of counsel for the
Indemnifying Person. If the Indemnifying Person fails to undertake the defense
of or settle or pay any such Third Party Claim within thirty (30) days after the
Indemnified Person has given written notice to the Indemnifying Person of the
claim, or if the Indemnifying Person, after having given such notification to
the Indemnified Person, fails within thirty (30) days, or at any time
thereafter, to defend to the reasonable satisfaction of the Indemnified Person,
settle or pay such claim, then the Indemnified Person may take any and all
necessary action to dispose of such claim; provided, however, that in no event
shall the Indemnified Person settle such claim without the prior consent of the
Indemnifying Person in accordance with clause (d) below.
(d) In the event the Indemnified Person desires to settle any Third Party
Claim, the defense of which has not been assumed by the Indemnifying Person, the
Indemnified Person shall advise the Indemnifying Person in writing of the amount
it proposes to pay in settlement thereof (the "Proposed Settlement"). The
Indemnifying Person shall have twenty (20) days after the Indemnifying Person's
receipt of the notice of the Proposed Settlement to advise the Indemnified
Person whether it accepts the Proposed Settlement. If the Indemnifying Person
notifies the Indemnified Person that it accepts the Proposed Settlement, the
Indemnified Person may offer the Proposed Settlement to the third party making
the claim. If, after approval by the Indemnifying Person, the Proposed
Settlement is not accepted by the party making such claim, any new Proposed
Settlement figure which the Indemnified Person may wish to present to the party
making such claim shall again first be presented to the Indemnifying Person in
accordance with the provisions of this clause (d).
50
(e) The Indemnifying Person may settle any Third Party Claim that it has
agreed to accept the defense of on any terms which it may deem reasonable;
provided, that the Indemnifying Person shall not without the Indemnified
Person's prior written consent, (i) settle or compromise such proceeding, claim
or demand, or consent to the entry of any judgment which does not include as an
unconditional term thereof the delivery by the claimant or plaintiff to the
Indemnified Person of a written release from all liability in respect of such
proceeding, claim or demand or (ii) settle or compromise any such proceeding,
claim or demand, in any manner that adversely affects the Indemnified Person.
7.5 Survival of Representations and Warranties. Subject to the further
------------------------------------------
provisions of this Section 7.5, the representations and warranties of Alloy and
Acquisition Sub and the representations and warranties made by MarketSource
shall survive the Closing Date until the date that is twenty-four (24) months
after the Closing Date; provided, however, that the representations and
-------- -------
warranties contained in Sections 3.1(a), (b), (h), (k), (l), (s), (u), (x) and
the first sentence of (i) and Fraud Claims shall survive in accordance with the
applicable statute of limitations related to such representations and warranties
or such Fraud Claims, as applicable. For convenience of reference, the date upon
which any representation and warranty contained herein shall terminate is
referred to herein as the "Survival Date." Anything contained herein to the
contrary notwithstanding, the representations and warranties of MarketSource
contained in this Agreement (including, without limitation, the Disclosure
Schedule) (i) are being given by MarketSource on behalf of itself and as an
inducement to Alloy and Acquisition Sub to enter into this Agreement (and
MarketSource acknowledges that Alloy and Acquisition Sub have expressly relied
thereon) and (ii) are solely for the benefit of the Alloy Indemnified Persons
and each of them. Accordingly, no third party (including, without limitation,
any securityholders of MarketSource capital stock or anyone acting on behalf of
any thereof) other than the Alloy Indemnified Persons, and each of them, shall
be a third party or other beneficiary of such representations and warranties and
no such third party shall have any rights of contribution against MarketSource,
Alloy or Acquisition Sub with respect to such representations or warranties or
any matter subject to or resulting in indemnification under this Article VII or
otherwise.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses. As used in this Agreement, "Transaction Costs" shall mean,
--------
with respect to any party, all actual, out-of-pocket expenses incurred by such
party to third parties, in connection with this Agreement and the Related
Agreements and all other transactions provided for herein and therein. Each
party hereto shall bear its own Transaction Costs in connection with the
transactions contemplated by this Agreement.
8.2 Entire Agreement. This Agreement (including the Disclosure Schedule
----------------
and the Exhibits attached hereto), the Related Agreements and the other writings
referred to herein contain the entire agreement among the parties hereto with
respect to the transactions
51
contemplated hereby and supersede all prior agreements or understandings,
written or oral, among the parties with respect thereto.
8.3 Interpretation. Descriptive headings are for convenience only and
--------------
shall not control or affect the meaning or construction of any provision of this
Agreement. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The word "herein" and similar references mean, except where a specific Section
or Article reference is expressly indicated, the entire Agreement rather than
any specific Section or Article. The table of contents and the headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
8.4 Knowledge Definition. As used in Section 3.1, the term "knowledge" and
--------------------
like phrases shall mean the actual knowledge of Xxxxxx X. Xxxxxx, Xxxxxxx Xxxxx
and the other officers, directors and Key Employees of MarketSource. As used in
Section 3.3, the term "knowledge" and like phrases shall mean the actual
knowledge of the Chief Corporate Development Officer and the General Counsel of
Alloy.
8.5 Notices. All notices or other communications which are required or
-------
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by nationally-recognized overnight courier or by registered or certified
mail, postage prepaid, return receipt requested, or by electronic mail with a
copy thereof to be delivered by mail (as aforesaid) within 24 hours of such
electronic mail, or by facsimile, with confirmation as provided above addressed
as follows:
(i) if to Alloy or Acquisition Sub, to:
Alloy, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
E-mail: xxxxx@xxxxx.xxx
---------------
52
(ii) if to MarketSource, to:
MarketSource Corporation
00 Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
Xxxxx, Xxxxxxxxx & Xxxxxxxxx
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
E-mail: xxxxxxxxxx@xxxxxx.xxx
---------------------
or to such other address as the party to whom notice is to be given may
have furnished to the other party in writing in accordance herewith. All such
notices or communications shall be deemed to be received (a) in the case of
personal delivery, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent, (c) in the case of facsimile transmission or electronic mail, upon
confirmed receipt, and (d) in the case of mailing, on the third business day
following the date on which the piece of mail containing such communication was
posted.
8.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts by original or facsimile signature, each such counterpart shall be
an original instrument, and all such counterparts together shall constitute one
and the same agreement.
8.7 Governing Law; Venue. This Agreement shall be governed by and
--------------------
construed in accordance with the laws of the State of New York without reference
to its conflicts of laws provisions. The parties irrevocably and unconditionally
submit to the exclusive jurisdiction of the federal courts sitting in New York
City over any suit, action or proceeding arising out of or relating to this
Agreement or any Related Agreement. The parties irrevocably and unconditionally
waive any objection to the laying of venue of any such suit, action or
proceeding brought in such court and any claim that any such suit, action or
proceeding brought in such court has been brought in an inconvenient forum. The
parties agree that a final judgment in any such suit, action or proceeding
brought in such court shall be conclusive and binding upon the parties and may
be enforced in any other courts to whose jurisdiction other parties are or may
be subject, by suit upon such judgment.
8.8 Benefits of Agreement. All the terms and provisions of this Agreement
---------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement shall not be
assignable by any party hereto without the consent of the other parties hereto;
provided, however, that anything contained herein to the
-------- -------
53
contrary notwithstanding, each of Alloy and Acquisition Sub may assign and
delegate any or all of its respective rights and obligations hereunder to any
other direct or indirect wholly-owned subsidiary of Alloy; provided further,
-------- -------
however, that any of the rights granted to and obligations of Alloy under this
-------
Agreement (other than the payment of the Purchase Price) may also be exercised
or performed by any entity controlled by or under common control with Alloy
(each, an "Alloy Affiliate"); provided that such Alloy Affiliate agrees to be
--------
bound by all of the applicable provisions hereof governing such exercise or
performance and that MarketSource promptly receives written notice of any such
exercise or performance.
8.9 Pronouns. As used herein, all pronouns shall include the masculine,
--------
feminine, neuter, singular and plural thereof whenever the context and facts
require such construction.
8.10 Amendment, Modification and Waiver. This Agreement shall not be
----------------------------------
altered or otherwise amended except pursuant to an instrument in writing signed
by Alloy, Acquisition Sub and MarketSource; provided, however, that any party to
-------- -------
this Agreement may waive in writing any obligation owed to it by any other party
under this Agreement. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
8.11 No Third Party Beneficiaries. Nothing express or implied in this
----------------------------
Agreement is intended to confer, nor shall anything herein confer, upon any
person other than the parties and the respective successors or assigns of the
parties, any rights, remedies, obligations or liabilities whatsoever, except to
the extent that such third person is an Indemnified Person or Indemnifying
Person in respect of the indemnification provided in accordance with Article VII
of this Agreement.
8.12 Consents. Except as otherwise expressly provided in this Agreement,
--------
any consent or approval of Alloy or Acquisition Sub requested or permitted
hereunder may be given or withheld in Alloy's or Acquisition Sub's sole
discretion, provided that, such consent or approval shall not be unreasonably
withheld.
8.13 Interpretation. This Agreement has been negotiated between the parties
--------------
and will not be deemed to be drafted by, or the product of, any party. As such,
this Agreement will not be interpreted in favor of, or against, any party.
8.14 No Joint Venture. No party hereto shall make any warranties or
----------------
representations, or assume or create any obligations, on the other party's
behalf except as may be expressly permitted hereunder or in writing by such
other party. Each party hereto shall be solely responsible for the actions of
all its respective employees, agents and representatives.
8.15 Specific Performance. The transactions contemplated by this Agreement
--------------------
are unique transactions and any failure on the part of MarketSource to complete
the transactions contemplated by this Agreement or any of the Related Agreements
on the terms of this Agreement or any of the Related Agreements will not be
fully compensable in damages and the breach or threatened breach of the
provisions of this Agreement or any of the Related
54
Agreements would cause Alloy and Acquisition Sub irreparable harm. Accordingly,
in addition to and not in limitation of any other remedies available to Alloy
and Acquisition Sub for a breach or threatened breach of this Agreement or any
of the Related Agreements, Alloy and Acquisition Sub will be entitled to
specific performance of this Agreement or any of the Related Agreements upon any
breach by MarketSource, and to an injunction restraining any such party from
such breach or threatened breach.
[Remainder of Page Intentionally Left Blank]
55
IN WITNESS WHEREOF, each of the parties hereto has caused this Asset
Purchase Agreement to be executed on its behalf as of the day and year first
above written.
ALLOY, INC.
By: /s/ Xxxx X. XxXxxxx
----------------------------------
Name: Xxxx X. XxXxxxx
--------------------------------
Title: VP / General Counsel
-------------------------------
ALLOY ACQUISITION SUB, INC.
By: /s/ Xxxx X. XxXxxxx
----------------------------------
Name: Xxxx X. XxXxxxx
--------------------------------
Title: Asst. Secretary
-------------------------------
MARKETSOURCE CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxx
--------------------------------
Title: President
-------------------------------
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
56
