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.
("Parent") Common Stock, $0.01 par value per share (the "Common
Stock"), in connection with the acquisition (the
"Reorganization") of Xxxxx Marketing, Inc. (the "Company") by
Alloy Acquisition Corporation ("Acquisition Sub") pursuant to an
Agreement and Plan of Reorganization, dated as of July __, 2000,
by and between Parent, Acquisition Sub, the Company and SWI
Holdings, LLC ("SWI") (the "Reorganization Agreement")
Ladies and Gentlemen:
The undersigned has, 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,
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 Parent and the Reorganization,
including, without limitation, copies of the following agreements and
exhibits related to the Reorganization and the following statements and
reports filed by Parent with the Securities and Exchange Commission
(the "Commission"):
(a) Form of Reorganization Agreement, including the exhibits and
schedules attached thereto;
(b) Parent's Prospectus relating to the initial public offering of
its Common Stock filed with the Commission on May 14, 1999;
(c) Parent's Registration Statement on Form S-8 filed with the
Commission on November 10, 1999;
(d) Parent's Annual Report on Form 10-K for the fiscal year ended
January 31, 2000; and
(e) Parent's Quarterly Report on Form 10-Q for the quarter ended
April 30, 2000.
2. The undersigned has checked the box below if it 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
undersigned is not an Accredited Investor, it represents and warrants
that either alone or with its purchaser representative(s) (as such term
is defined in Section 501(h) of Regulation D) has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of the Reorganization 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 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.
[ ] __________________________________
The undersigned has also attached all disclosure materials provided by
such purchaser representative to the undersigned describing any
material relationship between the purchaser representative or its
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 undersigned 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 Reorganization 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
Reorganization 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 (including to its members) without consideration,
transfers by
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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 Parent a Representation and Lock-Up
Agreement in substantially the form hereof.
6. The undersigned 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 that it will register
the Shares under the Securities Act or the State Acts, except
in the Registration Rights Agreement of even date herewith.
(b) Required Legends. The certificates evidencing the Shares will
include the legend 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 CORPORATION WHICH
RESTRICTS THE TRANSFER THEREOF, A COPY OF WHICH CAN BE
OBTAINED FROM THE CORPORATION 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 (except
a distribution of the Shares for no consideration to the
members of the undersigned), to give written notice to Parent
expressing its wish 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:
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(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 (but in any event
within 5 business days of its receipt of the undersigned's
request) notify the undersigned, whereupon the undersigned
shall entitled to transfer such Shares, all in accordance with
the terms of the notice delivered by the undersigned to Parent
and upon such further terms and conditions as reasonably 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
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 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. 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
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 Parent's Report on Form 10-Q for the fiscal
quarter ended April 30, 2000. 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 undersigned hereby agrees that it will
not, except with the prior written approval of Parent or a distribution
by the undersigned to its members for no
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consideration, engage in a Disposition (as defined below) of more than
one-twelfth (1/12) of the Shares during the period from the date hereof
until the date which is exactly one month from the date hereof and
during each subsequent monthly period thereafter, up and to the date
which is exactly one year after the date hereof (the "Anniversary
Date'). The restriction imposed by the foregoing sentence shall cease
to be 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 Parent'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 of Common Stock as to which this paragraph is then
applicable.
10. Distribution of the Shares. In the event of any distribution of the
Shares by the undersigned to one of its members (a "Member"), it shall
be a condition to such distibution that such Member agree to the terms
of Sections 10, 11 and 12 of this Agreement. Under this Section 10,
such Member agrees that (i) it will not, except with the prior written
approval of the undersigned, engage in a Disposition of more than its
pro rata share of the Monthly Distribution Amount in each month prior
to the Anniversary Date, (ii) at the undersigned's request, the Parent
may enter stop transfer instructions with Parent's transfer agent to
enforce such restrictions, and (iii) in addition to any other remedies
at law or in equity, the undersigned and the other Members of the
undersigned shall be entitled to an injunction or injunctions to
prevent breaches of this Section 10 by such Member and to enforce
specifically the terms and provisions of this Section 10. The
restrictions imposed by this Section 10 shall cease to be in effect and
shall have no further effect after the Anniversary Date. The
undersigned agrees to provide Parent with such information as Parent
may reasonably request such that Parent may provide appropriate
instructions to Parent's transfer agent in connection with any
Disposition of Shares. Notwithstanding the foregoing, the Parent shall
have no liability to the undersigned or any Member for a breach of the
terms of this Section 10 by such Member; provided that in any event the
undersigned and any Indemnifying Members (as defined below) agree,
jointly and severally, to indemnify and hold Parent harmless from any
and all claims, and liabilities, judgments, penalties, losses, costs,
damages and expenses resulting therefrom, including reasonable
attorneys' fees (collectively, "Claims"), made by the undersigned, its
Members and/or third parties against Parent arising in connection with
this Section 10.
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"Indemnifying Members" shall mean, with respect to any Claims, any
Members whose actions directly or indirectly gave rise to or
contributed to such Claims.
11. 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 Parent 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 Parent.
12. 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 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
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this Agreement.
(c) Further Assurances. Within ten (10) days after receipt of a
written request from Parent, 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 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 Delaware, 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 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
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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
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
13. Under penalties of perjury, the undersigned certifies that:
(a) IT HAS CONSIDERED AND FULLY UNDERSTANDING ALL OF THE RISKS
INVOLVED IN MAKING AN INVESTMENT IN THE SECURITIES OF PARENT.
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(b) THE REPRESENTATIONS AND RESPONSES PROVIDED HERERIN BY THE
UNDERSIGNED ARE TRUE AND CORRECT, AND IT ACKNOWLEDGES THAT
PARENT CAN RELY ON SUCH REPRESENTATIONS AND RESPONSES IN
CONNECTION WITH THE ISSUANCE OF THE SHARES TO THE UNDERSIGNED
IN CONNECTION WITH THE REORGANIZATION.
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IN WITNESS WHEREOF, the undersigned has executed this Agreement on this
17 day of July, 2000.
SWI HOLDINGS, LLC
By: /s/ Xxxxx Xxxxx
--------------------------------
Name: Xxxxx Xxxxx
Title: Managing Member
The foregoing Representation and Lock-up is hereby accepted.
ALLOY ONLINE, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
DATE: July 17, 2000
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