Exhibit 99.1
INVESTMENT REPRESENTATION
AND LOCKUP AGREEMENT
Alloy Online, Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Chief Financial Officer
Re: Proposed issuance of shares (the "Shares") of Alloy Online, Inc.
("Alloy") Common Stock, $0.01 par value per share (the "Common
Stock"), in connection with the acquisition (the "Merger") of
Xxxxxx Media Group, Inc. (the "Company") by Alloy pursuant to an
Agreement and Plan of Merger, dated as of April 11, 2001 (the
"Merger Agreement"), by and between Alloy, the Company, Carnegie
Communications, Inc., and the stockholders of the Company (the
"Stockholders")
Ladies and Gentlemen:
The undersigned has, in connection with the transactions contemplated
by the Merger Agreement, been issued shares of Common Stock. In connection with
such issuance, and as required by the Merger Agreement, the undersigned hereby
represents and warrants to you and agrees with you as follows, effective as of
the date hereof:
1. The undersigned has received and has had the opportunity to review
certain information relating to Alloy 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
Alloy with the Securities and Exchange Commission (the "Commission"):
(a) Form of Merger Agreement, including the exhibits and schedules
attached thereto;
(b) Alloy's Prospectus relating to the initial public offering of its
Common Stock filed with the Commission on May 14, 1999;
(c) Alloy's Annual Report on Form 10-K for the fiscal year ended
January 31, 2000 and filed with the Commission on May 1, 2000;
(d) Alloy's Quarterly Report on Form 10-Q for the quarter ended April
30, 2000 and filed with the Commission on June 14, 2000;
(e) Alloy's Quarterly Report on Form 10-Q for the quarter ended July
31, 2000 and filed with the Commission on September 14, 2000;
(f) Alloy's Quarterly Report on Form 10-Q for the quarter ended
October 31, 2000 and filed with the Commission on December 15,
2000; and
(g) Alloy's Registration Statement on Form S-8 filed with the
Commission on October 20, 2000.
2. The undersigned has checked the box below if he, she or it is an
"Accredited Investor," as such term is defined in Rule 501(a) of
Regulation D ("Regulation D") of the rules and regulations promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). If
the undersigned is not an Accredited Investor, he, she or it represents
and warrants that either alone or with his, her or its purchaser
representative(s) (as such term is defined in Rule 501(h) of Regulation
D) has such knowledge and experience in financial and business matters
that he, she or it 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 undersigned represents and warrants that he, she or it is an
"Accredited Investor."
3. Engagement of Purchaser Representative. If the undersigned has engaged
a purchaser representative, the undersigned has checked the following
box and indicated the name of such purchaser representative.
|_| ___________________________________________________
4. Opportunity to Investigate. The undersigned has had an opportunity for
a reasonable period of time to ask questions of and receive answers
from Alloy concerning Alloy, the Shares and the terms and conditions of
the transactions contemplated by the Merger Agreement, and the
undersigned has had an opportunity to obtain any additional information
the undersigned 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 undersigned will be so acquired by it for
its own account and not on behalf of any other person. The undersigned
will be so acquiring the Shares for investment and, except as set forth
in the following sentence, not for distribution or with the intent to
divide its participation with others or of selling, assigning,
transferring or otherwise disposing of the Shares. It is understood
that the undersigned may make bona fide gifts or distributions without
consideration, transfers by operation of law, so long as any donee or
transferee agrees not to sell, transfer or otherwise dispose of the
Shares except as provided herein and executes and delivers to Alloy a
Representation and Lock-Up Agreement in substantially the form hereof.
6. The undersigned understands that:
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(a) No Registration. The Shares have not been registered by Alloy
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. Alloy has not made any
representations that it will register the Shares under the
Securities Act or the State Acts, except in the Registration
Rights Agreement of even date herewith by and between Alloy and
the Stockholders (the "Registration Rights Agreement").
(b) Required Legends. The certificates evidencing the Shares will
include the legend substantially similar to that set forth below,
which the undersigned 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 ISSUER WHICH RESTRICTS THE TRANSFER THEREOF, A COPY OF WHICH
CAN BE OBTAINED FROM THE ISSUER AT ITS EXECUTIVE OFFICES.
(c) Transfer Restrictions. Subject to the lock-up provided under
Section 9 herein, by accepting the certificates bearing the
aforesaid legend, the undersigned agrees, prior to any transfer of
the Shares represented by the Certificates, to give written notice
to Alloy expressing its wish to effect such transfer and
describing briefly the proposed transfer. Upon receiving such
notice, Alloy shall present copies thereof to its counsel and the
following provisions shall apply:
(i) if, in the opinion of Alloy's counsel, the proposed
transfer of such Shares may be effected without registration of
such Shares under the Securities Act and the State Acts, Alloy
shall promptly thereafter (but in any event within 5 business days
of its receipt of the undersigned's request) notify the
undersigned, whereupon the undersigned shall be entitled to
transfer such Shares, all in accordance with the terms of the
notice delivered by the undersigned to Alloy and upon such further
terms and conditions as reasonably shall be required by Alloy to
ensure compliance with the Securities Act and the State Acts, and
Alloy 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
believes that such legend is no longer required under the
Securities Act and the State Acts; and
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(ii) if, in the opinion of Alloy's counsel, the proposed
transfer of such Shares may not be effected without registration
of such Shares under the Securities Act or the State Acts, a copy
of such opinion shall be promptly (but in any event within 5
business days of its receipt of the undersigned's request)
delivered to the undersigned, and such proposed transfer shall not
be made unless such registration is then in effect or otherwise
subsequently is permitted under the Securities Act and the State
Acts.
(d) Stop Transfer Orders. Alloy may, from time to time, make stop
transfer notations in its records and deliver stop transfer
instructions to its transfer agent to the extent Alloy reasonably
considers it necessary to ensure compliance with the Securities
Act and the State Acts.
7. Experience and Suitability. The undersigned 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 undersigned has adequate means of providing for its
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 undersigned can afford a complete
loss of its investment in the Shares.
8. Substantial Degree of Risk. The undersigned 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 Alloy's Quarterly Report on Form 10-Q for the
fiscal quarter ended October 31, 2000. No representation has been made
regarding the future performance of Alloy or the future market value of
the Shares.
9. Lock-Up Agreement. In order to induce Alloy to enter into the Merger
Agreement, each Stockholder hereby agrees that he, she and it will not,
except with the prior written approval of Alloy, engage in a
Disposition (as defined below) (i) with respect to 100% of the Shares
from the date hereof until the date of the effectiveness of the initial
registration statement filed in respect of the Shares (the
"Commencement Date") and (ii) of not more than one-twelfth (1/12) of
the Shares originally issued to such Stockholder in connection with the
Merger during the period from the Commencement Date until the date that
is exactly one month from the Commencement Date and during each
subsequent monthly period thereafter, up and to the date which is
exactly one year after the Commencement Date (the "Anniversary Date").
During the period from the Commencement Date up and to the Anniversary
Date, the undersigned agrees and consents to sell, contract or dispose
of such Shares only through BancBoston Xxxxxxxxx Xxxxxxxx, Inc. or
another securities firm selected by Alloy in its sole discretion. The
restrictions imposed by the two foregoing sentences shall cease to be
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in effect and shall have no further effect after the Anniversary Date.
A "Disposition" shall mean to directly or indirectly offer to sell,
contract to sell or otherwise sell or dispose of any of the Shares, or
enter into any other transaction which is designed to, or might
reasonably be expected to, result in the disposition (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise) of any right, title or interest in any of the Shares,
including, without limitation, by filing (or participating in the
filing of) a registration statement (other than pursuant to the
provisions of the Registration Rights Agreement) with the Commission in
respect of, or establishing or increasing a put equivalent position
within the meaning of Section 16 of the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission
promulgated thereunder. The undersigned agrees and consents to the
entry of stop transfer instructions with Alloy's transfer agent against
the transfer of Shares held by the undersigned except in compliance
with the foregoing restrictions. Notwithstanding anything contained
herein to the contrary, the provisions of this paragraph shall not be
affected in any manner by the effectiveness of any registration
statement under the Securities Act covering all or any part of the
Shares as to which this paragraph is then applicable.
10. Indemnification. The undersigned recognizes that the issuance of Shares
will be based to a material extent upon its representations, warranties
and agreements set forth in this Agreement, and the undersigned agrees
on demand to indemnify and hold harmless Alloy and its officers,
directors and agents from and against any and all loss, damage,
liability or expense, including costs and reasonable attorneys' fees,
to which they may be subject or which they may incur by reason of, or
in connection with, any misrepresentation of any material fact the
undersigned has made in this Agreement, any breach by the undersigned
in any material respect of any agreement contained in this Agreement,
or arising out of the undersigned'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
undersigned's admission as a stockholder of Alloy.
11. Miscellaneous.
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(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 Alloy, 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
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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 Merger
Agreement and the ancillary 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.
(c) Further Assurances. Within ten (10) days after receipt of a
written request from Alloy, the undersigned 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 Alloy 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 Alloy 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. In the event that any court of competent
jurisdiction shall determine that any provision, or any portion
thereof, contained in this Agreement shall be unenforceable in any
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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 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 in the event that 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
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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 certifies that:
(a) THE UNDERSIGNED HAS CONSIDERED AND FULLY UNDERSTANDING ALL OF THE
RISKS INVOLVED IN MAKING AN INVESTMENT IN THE SECURITIES OF ALLOY.
(b) THE REPRESENTATIONS AND RESPONSES PROVIDED HERERIN BY THE
UNDERSIGNED ARE TRUE AND CORRECT, AND THE UNDERSIGNED ACKNOWLEDGES
THAT ALLOY CAN RELY ON SUCH REPRESENTATIONS AND RESPONSES IN
CONNECTION WITH THE ISSUANCE OF THE SHARES TO THE UNDERSIGNED IN
CONNECTION WITH THE MERGER.
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IN WITNESS WHEREOF, the undersigned has executed this Agreement, or
caused it to be executed on its behalf, on this 11th day of April 2001.
STOCKHOLDERS:
/s/ Xxxx X. Xxxxxx, Xx.
------------------------------
Xxxx X. Xxxxxx, Xx.
/s/ Xxxxxxxx X. Xxxxxx
------------------------------
Xxxxxxxx X. Xxxxxx
Witness: THE XXXX X. XXXXXX REVOCABLE
COMMON TRUST DATED 5/7/79
/s/ Xxxxxxx Xxxx By: /s/ Xxxxxxxx X. Xxxxxx
------------------------ ------------------------------
Print Name: Xxxxxxx Xxxx Print Name: Xxxxxxxx X. Xxxxxx
Title: Trustee
Witness: THE XXXX X. XXXXXX IRREVOCABLE
NVC TRUST DATED DECEMBER 31, 1976
F/B/O XXXXXXXX XXXXX XXXXXX
/s/ Xxxxxxx Xxxx By: /s/ Xxxxxxxx X. Xxxxxx
------------------------ ------------------------------
Print Name: Xxxxxxx Xxxx Print Name: Xxxxxxxx X. Xxxxxx
Title: Trustee
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Witness: THE XXXX X. XXXXXX IRREVOCABLE
NVC TRUST DATED DECEMBER 31, 1976
F/B/O XXXXX XXXXXX XXXXXX
/s/ Xxxxxxx Xxxx By: /s/ Xxxxxxxx X. Xxxxxx
------------------------ ------------------------------
Print Name: Xxxxxxx Xxxx Print Name: Xxxxxxxx X. Xxxxxx
Title: Trustee
Witness: THE XXXX X. XXXXXX IRREVOCABLE NVC
TRUST DATED DECEMBER 31, 1976
F/B/O XXXX X. XXXXXX III
/s/ Xxxxxxx Xxxx By: /s/ Xxxxxxxx X. Xxxxxx
------------------------ ------------------------------
Print Name: Xxxxxxx Xxxx Print Name: Xxxxxxxx X. Xxxxxx
Title: Trustee
Witness: THE XXXX X. XXXXXX IRREVOCABLE
NVC TRUST DATED DECEMBER 31, 1976
F/B/O XXXX XXXX XXXXXX
/s/ Xxxxxxx Xxxx By: /s/ Xxxxxxxx X. Xxxxxx
------------------------ ------------------------------
Print Name: Xxxxxxx Xxxx Print Name: Xxxxxxxx X. Xxxxxx
Title: Trustee
Witness: THE XXXX X. XXXXXX IRREVOCABLE
NVC TRUST DATED DECEMBER 31, 1976
F/B/O XXXXX XXXX XXXXXX
/s/ Xxxxxxx Xxxx By: /s/ Xxxxxxxx X. Xxxxxx
------------------------ ------------------------------
Print Name: Xxxxxxx Xxxx Print Name: Xxxxxxxx X. Xxxxxx
Title: Trustee
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The foregoing Representation and Lock-up is hereby accepted.
ALLOY ONLINE, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer/Secretary
DATE: April 11, 2001
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