Exhibit 99.1
AFFILIATE INVESTMENT REPRESENTATION
AND LOCKUP AGREEMENT
Alloy Online, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: (000) 000-0000
Re: Proposed issuance of shares (the "Shares") of Alloy Online, Inc.
("Parent") Common Stock, $0.01 par value per share (the "Common
Stock") to Xxxxxx X. Xxxxxxxxxxx ("Xxxxxxxxxxx") and Xxx
Xxxxxxxxx ("Xxxxxxxxx"), in connection with the merger (the
"Merger") of Alloy Acquisition Sub, Inc. ("Acquisition Sub") with
and into 00xx Xxxxxx Acquisition Corp. (the "Company") pursuant
to an Agreement and Plan of Reorganization, dated as of January
21, 2000, by and between Parent, Acquisition Sub, the Company,
Xxxxxxxxxxx and Brashares (the "Reorganization Agreement")
Ladies and Gentlemen:
Xxxxxxxxxxx and Xxxxxxxxx (collectively, the "Investors") have, in
connection with the transactions contemplated by the Reorganization Agreement,
been issued shares of Common Stock. In connection with such issuance, and as
required by the Reorganization Agreement, each of the Investors hereby
represents and warrants to you and agrees with you as follows:
1. The Investor has received and has had the opportunity to review certain
information relating to Parent and the Merger, including, without
limitation, copies of the following agreements and exhibits related to
the Merger and the following statements and reports filed by Parent
with the Securities and Exchange Commission (the "Commission"):
(a) The Reorganization Agreement, including the exhibits and
schedules attached thereto;
(b) Parent's Prospectus as filed with the Commission on May 14,
1999;
(c) Parent's Registration Statement on Form S-8 filed on November
10, 1999;
(d) Parent's Quarterly Report on Form 10-Q for the fiscal quarter
ended October 31, 1999;
(e) Parent's Quarterly Report on Form 10-Q for the quarter ended
July 31, 1999;
(f) Parent's Quarterly Report on Form 10-Q for the quarter ended
April 30, 1999; and
(g) Parent's Current Report on Form 8-K filed on December 21,
1999.
2. The Investor has checked the box below if he or she is an "Accredited
Investor," as such term is defined in Section 501(a) or Regulation D
("Regulation D") of the rules and regulations promulgated under the
Securities Act of 1933, as amended (the "Securities Act"). If the
Investor is not an Accredited Investor, he or she represents and
warrants that either alone or with his or hers purchaser
representative(s) (as such term is defined in Section 501(h) of
Regulation D) has such knowledge and experience in financial and
business xxxxxx that he or she is capable of evaluating the merits and
risks of the Merger and a prospective investment in the Shares.
"Accredited Investor" shall mean any person who comes within any of the
following categories:
(a) Any bank as defined in Section 3(a)(2) of the Securities Act
or any savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity; any broker or
dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934, as amended; any insurance company as
defined in Section 2(13) of the Securities Act; any investment
company registered under the Investment Company Act of 1940,
as amended, or a business development company as defined in
Section 2(a)(48) of the Securities Act; any Small Business
Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958, as amended; any plan
established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees,
is such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, as amended, if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and
loan association, insurance company, or registered investment
advisor, or if the employee benefit plan has total assets in
excess of $5,000,000, or, if a self-directed plan, with
investment decisions made solely by persons that are
Accredited Investors;
(b) Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940, as amended;
(c) Any organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, corporation,
Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(d) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any
director, executive officer, or general partner of a general
partner of that issuer;
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(e) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase
exceeds $1,000,000;
(f) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the
same income level in the current year;
(g) Any trust with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person
who meets the definition of a "purchaser representative" found
in Rule 501(h) of Regulation D; and
(h) Any entity in which all of the equity owners are Accredited
Investors.
|_| The Investor represents and warrants that he or she is an
"Accredited Investor."
3. Engagement of Purchaser Representative. If the Investor has engaged a
purchaser representative, the Investor has checked the following box
and indicated the name of such purchaser representative.
|_| --------------------------------------------------------------
The Investor has also attached all disclosure materials provided by
such purchaser representative to the Investor describing any material
relationship between the purchaser representative or has affiliates and
Parent or its affiliates that then exists, that is mutually understood
to be contemplated, or that has existed at any time during the previous
two years, and any compensation received or to be received as a result
of such relationship.
4. Opportunity to Investigate. The Investor has had an opportunity for a
reasonable period of time to ask questions of and receive answers from
Parent concerning Parent, the Shares and the terms and conditions of
the transactions contemplated by the Merger, and the Investor has had
an opportunity to obtain any additional information the Investor
considered necessary to verify the accuracy of the information
furnished in the documents listed in Section 1 above.
5. Investment Purpose. All Shares issued in connection with the Merger
that are distributed to the Investor will be so acquired by him or her
for his or hers own account and not on behalf of any other person. The
Investor will be so acquiring the Shares for investment and not for
distribution or with the present intent to divide his or hers
participation with others or of selling, assigning, transferring or
otherwise disposing of the Shares. It is understood that the Investor
may make bona fide gifts or distributions without consideration and
transfers by operation of law, so long as any donee or transferee
agrees
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not to sell, transfer or otherwise dispose of the Shares except as
provided herein and executes and delivers to Parent a copy of this
Agreement.
6. The Investor understands that:
(a) No Registration. The Shares have not been registered by Parent
under the Securities Act or any applicable state securities
laws (the "State Acts"), and, therefore, the Shares cannot be
sold or otherwise transferred unless either they are
registered under the Securities Act and any applicable State
Acts or an exemption from such registration is available.
Parent has not made any representations to the Investor that
it will register the Shares under the Securities Act or the
State Acts, except in the Registration Rights Agreement dated
the date hereof.
(b) Required Legends. The certificates evidencing the Shares will
include the legend set forth below, which the Investor has
read and understands:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES
LAWS OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THESE SECURITIES ARE ALSO SUBJECT TO AN INVESTMENT
REPRESENTATION AND LOCKUP AGREEMENT WITH THE CORPORATION WHICH
RESTRICTS THE TRANSFER THEREOF, A COPY OF WHICH CAN BE
OBTAINED FROM THE CORPORATION AT ITS EXECUTIVE OFFICES.
(c) Transfer Restrictions. By accepting the certificates bearing
the aforesaid legend, the Investor agrees that, for so long as
the lock-up provided under Section 9 herein is in effect,
prior to any transfer of the Shares represented by the
certificates, Investor shall give written notice to Parent
expressing his or her desire to effect such transfer and
describing briefly the proposed transfer. Upon receiving such
notice, Parent shall present copies thereof to its counsel and
the following provisions shall apply:
(i) if, in the opinion of Parent's counsel, the
proposed transfer of such Shares may be effected without
registration of such Shares under the Securities Act and the
State Acts, Parent shall promptly thereafter, and in any event
within five (5) business days, notify the Investor wishing to
transfer such Shares, whereupon such Investor shall entitled
to transfer such Shares, all in accordance with the terms of
the notice delivered by such Investor to Parent and upon such
further terms and conditions as shall be required by Parent to
ensure compliance with the Securities Act and the State Acts,
and Parent will deliver, upon surrender of the certificate
evidencing such Shares, in exchange therefor, a new
certificate not bearing a legend of the character set forth
above if such counsel reasonably
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believes that such legend is no longer required under the
Securities Act and the State Acts; and
(ii) if, in the opinion of Parent's counsel, the
proposed transfer of such Shares may not be effected without
registration of such Shares under the Securities Act and the
State Acts, a copy of such opinion shall, and in any event
within five (5) business days, be promptly delivered to the
stockholder who has proposed such transfer, and such proposed
transfer shall not be made unless such registration is then in
effect.
(d) Stop Transfer Orders. Parent may, from time to time, make stop
transfer notations in its records and deliver stop transfer
instructions to its transfer agent to the extent Parent
considers it necessary to ensure compliance with the
Securities Act and the State Acts.
7. Experience and Suitability. The Investor has knowledge and experience
in financial and business matters, knows of the high degree of risk
associated with investments generally, is capable of evaluating the
merits and risks of an investment in the Shares and is able to bear the
economic risk of an investment in the Shares in the amount
contemplated. The Investor has adequate means of providing for his or
hers current financial needs and contingencies and will have no current
or anticipated future needs for liquidity which would be jeopardized by
the investment in the Shares. The Investor can afford a complete loss
of his or hers investment in the Shares.
8. Substantial Degree of Risk. The Investor understands that an investment
in the Shares involves a substantial degree or risk, including, without
limitation, matters discussed under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in the Report on Form 10-Q for October 31, 1999. No
representation has been made regarding the future performance of Parent
or the future market value of the Shares.
9. Lock-Up Agreement. In order to induce Parent to enter into the
Reorganization Agreement, the Investor hereby agrees that he or she
will not, except with the prior written approval of Parent, directly or
indirectly offer to sell, contract to sell or otherwise sell or dispose
of any of the Shares, or engage in any other transaction which reduces
the risks of ownership, until the date six (6) months from the date
hereof with respect to one hundred percent (100%) of the Shares, and
for a period of twelve (12) months from the date hereof with respect to
eighty percent (80%) of the Shares. The Investor agrees and consents to
the entry of stop transfer instructions with Parent's transfer agent
against the transfer of Shares held by the Investor except in
compliance with the foregoing restrictions. Notwithstanding anything
contained herein to the contrary, the provisions of this paragraph
shall not be effective from and as of the first to occur of (i) the
acquisition of not less than ninety percent (90%) of the outstanding
capital stock of Parent by any other person and (ii) the effective date
of a registration statement under the Securities Act covering all of
the shares of Common Stock as to which this paragraph is then
applicable.
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10. Indemnification. The Investor recognizes that the issuance of Shares
will be based to a material extent upon his or hers representations,
warranties and agreements set forth in this Agreement, and the Investor
agrees on demand to indemnify and hold harmless Parent and each
officer, director, stockholder employee and affiliate thereof from and
against any and all loss, damage, liability or expense, including costs
and reasonable attorneys' fees, to which they may be put or which they
may incur by reason of, or in connection with, any misrepresentation of
any material fact the Investor has made in this Agreement, any breach
by the Investor of any agreement contained in this Agreement, or
arising out of the Investor's sale or distribution of any Shares in
violation of the Securities Act, the State Acts or this Agreement. All
representations, warranties and covenants and the indemnification
contained in this Agreement shall survive this Agreement and the
Investor's admission as a stockholder of Parent.
11. Miscellaneous.
(a) Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be
addressed to the receiving party's address set forth below or
to such other address as a party may designate by notice
hereunder, and shall be either (i) delivered by hand, (ii)
made by telecopy or facsimile transmission, (iii) sent by
overnight courier, or (iv) sent by registered mail, return
receipt requested, postage prepaid.
If to the undersigned, to the address set forth on
the signature page hereto.
If to Parent, to the address set forth at the top of
this Agreement.
All notices, requests, consents and other communications
hereunder shall be deemed to have been given either (i) if by
hand, at the time of the delivery thereof to the receiving
party at the address of such party set forth above, (ii) if
made by telecopy or facsimile transmission, at the time that
receipt thereof has been acknowledged by electronic
confirmation or otherwise, (iii) if sent by overnight courier,
on the next business day following the day such notice is
delivered to the courier service, or (iv) if sent by
registered mail, on the 5th business day following the day
such mailing is made.
(b) Entire Agreement. This Agreement, together with the
Reorganization Agreement and the Related Agreements (as such
term is defined in the Related Agreements) incorporated by
reference therein, embodies the entire agreement and
understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter
hereof. No statement, representation, warranty, covenant or
agreement of any kind not expressly set forth in this
Agreement shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this Agreement.
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(c) Further Assurances. Within ten (10) days after receipt of a
written request from Parent, the Investor agrees to provide
such information and to execute and deliver such documents as
reasonably may be necessary to comply with any and all laws
and ordinances to which Parent is subject.
(d) Modifications and Amendments. The terms and provisions of this
Agreement may be modified or amended only by written agreement
executed by the parties hereto.
(e) Waivers and Consents. The terms and provisions of this
Agreement may be waived, or consent for the departure
therefrom granted, only by written document executed by the
party entitled to the benefits of such terms or provisions. No
such waiver or consent shall be deemed to be or shall
constitute a waiver or consent with respect to any other terms
or provisions of this Agreement, whether or not similar. Each
such waiver or consent shall be effective only in the specific
instance and for the purpose for which it was given, and shall
not constitute a continuing waiver or consent.
(f) Assignment. This Agreement may not be transferred or assigned
without the prior written consent of Parent and any such
transfer or assignment shall be made only in accordance with
applicable laws and any such consent.
(g) Benefit. All statements, representations, warranties,
covenants and agreements in this Agreement shall be binding on
the parties hereto and shall inure to the benefit of the
respective successors and permitted assigns of each party
hereto. Nothing in this Agreement shall be construed to create
any rights or obligations except among the parties hereto, and
no person or entity shall be regarded as a third-party
beneficiary of this Agreement.
(h) Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall be construed in accordance with
and governed by the law of the State of New York, without
giving effect to the conflict of law principles thereof.
(i) Severability. If any court of competent jurisdiction shall
determine that any provision, or any portion thereof,
contained in this Agreement shall be unenforceable in any
respect, then such provision shall be deemed limited to the
extent that such court deems it enforceable, and as so limited
shall remain in full force and effect. In the event that such
court shall deem any such provision, or portion thereof,
wholly unenforceable, the remaining provisions of this
Agreement shall nevertheless remain in full force and effect.
(j) Interpretation. The parties hereto acknowledge and agree that:
(i) each party and its counsel have reviewed the terms and
provisions of this Agreement; (ii) the rule of construction to
the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of
this Agreement; and (iii) the terms and provisions of this
Agreement shall be construed fairly as to the parties hereto
and not in favor of or against any party, regardless of which
party was generally
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responsible for the preparation of this Agreement. Whenever
used herein, the singular number shall include the plural, the
plural shall include the singular, the use of any gender shall
include all persons.
(k) Headings and Captions. The headings and captions of the
various subdivisions of this Agreement are for convenience of
reference only and shall in no way modify, or affect the
meaning or construction of any of the terms or provisions
hereof.
(l) Enforcement. Each of the parties hereto acknowledges and
agrees that the rights acquired by each party hereunder are
unique and that irreparable damage would occur if any of the
provisions of this Agreement to be performed by the other
party were not performed in accordance with their specific
terms or were otherwise breached. Accordingly, in addition to
any other remedy to which the parties hereto are entitled at
law or in equity, each party hereto shall be entitled to an
injunction or injunctions to prevent breaches of this
Agreement by the other party and to enforce specifically the
terms and provisions hereof in any federal or state court to
which the parties have agreed hereunder to submit to
jurisdiction.
(m) No Waiver of Rights, Powers and Remedies. No failure or delay
by a party hereto in exercising any right, power or remedy
under this Agreement, and no course of dealing between the
parties hereto, shall operate as a waiver of any such right,
power or remedy of the party. No single or partial exercise of
any right, power or remedy under this Agreement by a party
hereto, nor any abandonment or discontinuance of steps to
enforce any such right, power or remedy, shall preclude such
party from any other or further exercise thereof or the
exercise of any other right, power or remedy hereunder. The
election of any remedy by a party hereto shall not constitute
a waiver of the right of such party to pursue other available
remedies. No notice to or demand on a party not expressly
required under this Agreement shall entitle the party
receiving such notice or demand to any other or further notice
or demand in similar or other circumstances or constitute a
waiver of the rights of the party giving such notice or demand
to any other or further action in any circumstances without
such notice or demand.
(n) Counterparts. This Agreement may be executed in one or more
counterparts, and by different parties hereto on separate
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
12. Under penalties of perjury, the undersigned hereby certifies that:
(a) THE UNDERSIGNED HAS CONSIDERED AND FULLY UNDERSTANDS ALL OF
THE RISKS INVOLVED IN MAKING AN INVESTMENT IN THE SECURITIES
OF PARENT.
(b) THE REPRESENTATIONS AND RESPONSES PROVIDED HERERIN BY THE
INVESTOR ARE TRUE AND CORRECT, AND THE INVESTOR ACKNOWLEDGES
THAT PARENT CAN RELY ON SUCH REPRESENTATIONS AND RESPONSES IN
CONNECTION WITH THE ISSUANCE OF THE SHARES TO THE INVESTOR IN
CONNECTION WITH THE MERGER.
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IN WITNESS WHEREOF, the undersigned has executed this Affiliate
Investment Representation and Lock-Up Agreement on this 21st day of January,
2000.
(For Co-owners, if applicable)
/s/ Xxxxxx X. Xxxxxxxxxxx
---------------------------------- -----------------------------------
Investor Signature Investor Signature
Xxxxxx X. Xxxxxxxxxxx
---------------------------------- -----------------------------------
Print Name Print Name
Investor's Address for Notice: Investor's Address for Notice:
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Facsimile: (___) ___-____ Facsimile: (___) ___-____
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The foregoing subscription for Securities of Alloy Online, Inc. is hereby
accepted.
ALLOY ONLINE, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
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Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
DATE: January 21, 2000
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