Exhibit 99.1
INVESTMENT REPRESENTATION
AND LOCKUP AGREEMENT
Alloy, Inc.
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Attn: Chief Financial Officer
Re: Proposed issuance of shares (the "Shares") of Alloy, Inc. ("Parent")
Common Stock, $0.01 par value per share (the "Common Stock") in
connection with the merger (the "Merger") of Dan's Competition, Inc.
(the "Company") with and into Alloy Acquisition Sub, Inc.
("Acquisition Sub") pursuant to an Agreement and Plan of
Reorganization, dated as of September 28, 2001 (the "Reorganization
Agreement"), by and between Parent, Acquisition Sub, the Company, and
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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 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) 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 Annual Report on Form 10-K for the fiscal year ended January
31, 2001 and filed with the Commission on May 1, 2001;
(d) Parent's Quarterly Report on Form 10-Q for the quarter ended April
30, 2001 and filed with the Commission on June 14, 2001;
(e) Parent's Current Report on Form 8-K filed with the Commission on June
21, 2001;
(f) Parent's Current Report on Form 8-K filed with the Commission on July
10, 2001;
(g) Parent's Current Report on Form 8-K filed with the Commission on
August 13, 2001;
(h) Parent's Current Report on Form 8-K filed with the Commission on
August 14, 2001;
(i) Parent's Registration Statement on Form S-3 filed with the Commission
on August 3, 2001;
(j) Parent's Amended Current Report of Form 8-K/A filed with the
Commission on September 14, 2001;
(k) Parent's Amendment 1 to Registration Statement on Form S-3/A filed
with the Commission on September 14, 2001; and
(l) Parent's Quarterly Report on Form 10-Q for the quarter ended August
31, 2001 and filed with the Commission on September 14, 2001.
2. The undersigned has checked the box below confirming that he or she 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").
"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
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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;
(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 or she is an
"Accredited Investor."
3. Opportunity to Investigate. The undersigned has had an opportunity for a
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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.
4. Investment Purpose. All Shares issued in connection with the Merger that
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are distributed to the undersigned will be so acquired by him or her for
his or her 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 his or her participation with others or of selling,
assigning, transferring or otherwise disposing of the Shares. It is
understood that the undersigned
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may make bona fide gifts or distributions without consideration and
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 Parent a Representation and Lock-Up
Agreement in substantially the form hereof.
5. The undersigned understands that:
(a) No Registration. The Shares have not been registered by Parent under
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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 by and
between Parent and the Stockholders (the "Registration Rights
Agreement") and in the Reorganization Agreement.
(b) Required Legends. The certificates evidencing the Shares will include
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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 8
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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 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:
(i) if, in the opinion of Parent's counsel, the proposed transfer
of the Shares may be effected without registration thereof 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 be entitled to transfer such Shares, all in
accordance with the terms of the notice delivered by the undersigned
to Parent and
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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(s)
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
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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. Parent shall provide to the undersigned a copy of
any stop transfer instructions delivered to its transfer agent within
a reasonable period of time following deliver thereto.
6. Experience and Suitability. The undersigned has knowledge and experience
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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 therein in the amount contemplated. The undersigned
has adequate means of providing for his 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.
7. Substantial Degree of Risk. The undersigned understands that an investment
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in the Shares involves a substantial degree of risk, including, without
limitation, matters discussed under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in Parent's
Annual Report on Form 10-K for the fiscal year ended January 31, 2001. No
representation has been made regarding the future performance of Parent or
the future market value of the Shares.
8. Lock-Up Agreement. In order to induce Parent to enter into the
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Reorganization Agreement, each Stockholder hereby agrees that he or she
will not, except with the prior written approval of Parent, engage in a
Disposition (as defined below) (i) with respect to one hundred percent
(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 more than one-twelfth (1/12)
of the Shares originally issued to each 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
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the date which is exactly one year after the date hereof (the "Closing
Anniversary Date"). The restrictions imposed by the foregoing sentence
shall cease to be in effect and shall have no further effect after the
Closing Anniversary Date. The undersigned agrees and consents to sell,
contract or dispose of the Shares only through BancBoston ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Inc. or another securities firm selected by Parent in its sole
discretion, assuming that the sales commissions to be charged by such firm
are not materially in excess of market rates offered by comparable brokers.
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, but excluding gifts and
distributions permitted by Section 4 hereof. The undersigned agrees and
consents to the entry of stop transfer instructions with Parent's transfer
agent against the transfer of the 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 of the Shares as to
which this paragraph is then applicable.
9. Survival. The undersigned recognizes that the issuance of the Shares will
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be based to a material extent upon its representations, warranties and
agreements set forth in this Agreement. All representations, warranties
and covenants contained in this Agreement shall survive this Agreement and
the undersigned's admission as a stockholder of Parent.
10. Miscellaneous.
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(a) Notices. All notices or other communications which are required or
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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 Parent, to:
Alloy, Inc.
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Attention: President
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(ii) if to a Stockholder, to the address set forth on the signature
page hereto;
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.
(b) Entire Agreement. This Agreement, together with the Reorganization
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Agreement and the ancillary agreements incorporated by reference
therein (collectively, the "Transaction Documents"), 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 the Transaction Documents 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
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request from Parent, 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 securities laws and
ordinances to which Parent is subject.
(d) Modifications and Amendments. The terms and provisions of this
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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
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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
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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
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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.
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(h) Governing Law; Venue. This Agreement and the rights and obligations of
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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
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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)
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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
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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
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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
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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
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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
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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.
11. The undersigned 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 HEREIN BY THE UNDERSIGNED
ARE TRUE AND CORRECT, AND THE UNDERSIGNED 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
MERGER.
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IN WITNESS WHEREOF, each of the undersigned has executed this Investment
Representation and Lockup Agreement on this 28th day of September, 2001.
STOCKHOLDERS:
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The foregoing Investment Representation and Lockup Agreement is hereby accepted.
ALLOY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman/CEO
DATE: September 28, 2001
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