Exhibit 99.1
INVESTMENT REPRESENTATION
AND LOCKUP AGREEMENT
November 26, 2001
Alloy, Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Chief Financial Officer
Re: Proposed issuance of shares (the "Shares") of Alloy, Inc. ("Alloy")
common stock, $0.01 par value per share (the "Common Stock"), and a
warrant to purchase shares of Common Stock (the "Warrant"), in
connection with the sale of certain assets (the "Sale") of
MarketSource Corporation (the "Company") to Alloy Acquisition Sub,
Inc. ("Acquisition Sub") pursuant to an Asset Purchase Agreement,
dated as of November 26, 2001 (the "Asset Purchase Agreement"), by and
between Alloy, Acquisition Sub and the Company
Ladies and Gentlemen:
The undersigned has, in connection with the transactions contemplated by
the Asset Purchase Agreement, been issued shares of Common Stock and the
Warrant. In connection with such issuance, and as required by the Asset
Purchase 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 Sale, including, without limitation,
copies of the following agreements and exhibits related to the Sale and the
following statements and reports filed by Alloy with the Securities and
Exchange Commission (the "Commission"):
(a) Form of Asset Purchase 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, 2001 filed with the Commission on May 1, 2001 and amended on
October 10, 2001;
(d) Alloy's Quarterly Report on Form 10-Q for the quarter ended July 31,
2001 filed with the Commission on September 14, 2001 and amended on
October 24, 2001;
(e) Alloy's Amended Current Report on Form 8-K/A filed with the Commission
on September 14, 2001 and amended on October 10, 2001;
(f) Alloy's Current Report on Form 8-K filed with the Commission on
October 15, 2001;
(g) Alloy's Current Report on Form 8-K filed with the Commission on
November 6, 2001; and
(h) Alloy's Current Report on Form 8-K filed with the Commission on
November 13, 2001.
2. The undersigned has checked the box below confirming that 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").
"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
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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 it 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
Alloy concerning Alloy, the Shares, the Warrant, the Warrant Shares and the
terms and conditions of the transactions contemplated by the Asset Purchase
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 Sale that are
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distributed to the undersigned, the Warrant and all shares of Common Stock
issued upon the exercise thereof (the "Warrant Shares") will be so acquired
by it for its own account and not on behalf of any other person. The
undersigned will be so acquiring such Shares, the Warrant and the Warrant
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, the Warrant of the Warrant Shares. It is understood that the
undersigned may make bona fide gifts or distributions of the Shares 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 Alloy an Investment
Representation and Lockup Agreement in a form acceptable to Alloy.
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5 The undersigned understands that:
(a) No Registration. Neither the Shares, the Warrant nor the Warrant
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Shares have been registered by Alloy under the Securities Act or any
applicable state securities laws (the "State Acts"), and, therefore,
none of the Shares, the Warrant or the Warrant Shares can 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, the Warrant or the Warrant Shares under
the Securities Act or the State Acts, except in the Registration
Rights Agreement of even date herewith by and between Alloy, the
Company and Xxxxx Xxxxxxx (the "Registration Rights Agreement").
(b) Required Legends. The certificate(s) evidencing the Shares will
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include the legend substantially similar to that set forth below,
which the undersigned has read and understands:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES OR "BLUE-SKY"
LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM. ADDITIONALLY, THE TRANSFER OF
THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN SECTION 6.2
OF THE ASSET PURCHASE AGREEMENT DATED AS OF NOVEMBER 26, 2001 BETWEEN
ALLOY, INC., ALLOY ACQUISITION SUB, INC. AND MARKETSOURCE CORPORATION,
AND NO TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL
SUCH CONDITIONS HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF CERTAIN
OF SUCH CONDITIONS, ALLOY, INC. HAS AGREED TO DELIVER TO THE HOLDER
HEREOF A CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES
REPRESENTED HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF. COPIES
OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE
BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF ALLOY,
INC.
THESE SECURITIES ARE ALSO SUBJECT TO AN INVESTMENT REPRESENTATION AND
LOCKUP AGREEMENT, DATED AS OF NOVEMBER 26, 2001 WITH ALLOY, INC. WHICH
RESTRICTS THE TRANSFER THEREOF, A COPY OF WHICH CAN BE OBTAINED FROM
ALLOY, INC. AT ITS EXECUTIVE OFFICES."
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(c) Transfer Restrictions. Subject to the provisions of Section 8 hereof,
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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 the Shares may be effected without registration thereof 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(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 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
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notations in its records and deliver stop transfer instructions to its
transfer agent only to the extent Alloy reasonably considers it
necessary to ensure compliance with the Securities Act and the State
Acts.
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, the Warrant and the Warrant
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 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 Warrant or the Warrant Shares.
7. Substantial Degree of Risk. The undersigned understands that an investment
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in the Shares, the Warrant and the Warrant Shares involves a substantial
degree of risk, including, without limitation, matters discussed under the
caption "Management's
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Discussion and Analysis of Financial Condition and Results of Operations"
in Alloy's Annual Report on Form 10-K for the fiscal year ended January 31,
2001, as amended. No representation has been made regarding the future
performance of Alloy or the future market value of the Shares, the Warrant
or the Warrant Shares.
8. Lock-Up Agreement. In order to induce Alloy to enter into the Asset
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Purchase Agreement, the undersigned hereby agrees that it will not, except
with the prior written approval of Alloy, engage in a Disposition (as
defined below) (i) with respect to one hundred percent (100%) of the Shares
issued to the undersigned pursuant to the Asset Purchase Agreement from the
date hereof until the date of the effectiveness of the initial registration
statement filed in respect of the Shares (the "Commencement Date"); (ii) of
not more than 200,000 Shares (as such amount may be proportionately
adjusted to account for any stock split, combination, reclassification,
reorganization or similar event affecting the Common Stock) issued to the
undersigned pursuant to the Asset Purchase Agreement during each monthly
period from the Commencement Date until the date that is exactly three (3)
months from the Commencement Date; and (iii) of not more than one-ninth
(1/9th) of the number of Shares issued to the undersigned pursuant to the
Asset Purchase Agreement and not released from the restrictions set forth
in this Section 8 pursuant to clause (ii) above during each subsequent
monthly period thereafter, up and to the date which is exactly one year
after the Commencement Date (the "Anniversary Date"). The restrictions
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. Notwithstanding the foregoing, the undersigned may
transfer Shares to its stockholders as a dividend or a distribution upon
liquidation of the undersigned, provided that, any stockholder of the
undersigned receiving Shares shall, as a condition to such transfer,
execute and deliver to Alloy an Investment Representation and Lockup
Agreement in a form substantially similar to this Agreement (the
"Additional Lockup Agreements") and, provided further, that, the number of
Shares to be released from the restrictions set forth in this Section 8
shall be reduced on a pro rata basis based upon the number of Shares to be
released pursuant to the Additional Lockup Agreements; it being understood
that the allocation of the aggregate number of Shares to be released
pursuant to this Agreement and the Additional Lockup Agreements shall be
determined by the holders of the Shares, it being further understood that
in no event shall the aggregate number of Shares to be released from the
provisions of this Section 8 and the applicable provisions set forth in the
Additional Lockup Agreements as of any date exceed the aggregate number of
Shares that may be released from the provisions of this Section 8 as of
such date.
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The undersigned agrees and consents to the entry of stop transfer
instructions with Alloy'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. The undersigned agrees and consents to sell, contract or
dispose of the Shares only through BancBoston Xxxxxxxxx Xxxxxxxx, Inc. or
another securities firm mutually selected by Alloy and the Company.
9. Indemnification. The undersigned recognizes that the issuance of the
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Shares, the Warrant and the Warrant 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, the Warrant or any Warrant 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.
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 Alloy, to:
Alloy, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Chief Executive Officer
E-mail: xxxxx@xxxxx.xxx
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Facsimile: (000) 000-0000
with a copy to (which shall not constitute notice):
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Alloy, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
E-mail: xxxxx@xxxxx.xxx
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Facsimile: (000) 000-0000
(ii) if the undersigned, 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 Asset Purchase
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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
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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 securities laws and ordinances to
which Alloy 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 Alloy, and any such transfer or
assignment shall be made only in accordance with applicable laws and
any such consent.
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(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.
(h) Governing Law. This Agreement and the rights and obligations of the
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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.
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(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 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 ALLOY.
(b) THE REPRESENTATIONS AND RESPONSES PROVIDED HEREIN 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, THE WARRANT AND THE WARRANT SHARES TO THE
UNDERSIGNED IN CONNECTION WITH THE SALE.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the undersigned has executed this Investment
Representation and Lockup Agreement, or caused it to be executed on its behalf,
as of the day and year first above written.
MARKETSOURCE CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
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Title: President
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The foregoing Investment Representation and Lockup Agreement is hereby accepted.
ALLOY, INC.
By: /s/ Xxxx X. XxXxxxx
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Name: Xxxx X. XxXxxxx
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Title: VP / General Counsel
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[Signature Page to Investment Representation and Lockup Agreement]
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