Contract
Exhibit
3
EXECUTION
VERSION
This
Agreement, dated as of April 15, 2010, is by and among Alloy, Inc., a Delaware
corporation (the “Company”), and Xxxx X. Xxxxxxxxxx, an individual resident of
New York (“Kleinheinz”), and the entities signatories hereto
(collectively with Kleinheinz, the “Kleinheinz Group”).
WHEREAS,
the Company and the Kleinheinz Group have determined that the interests of the
Company and its stockholders would be best served by adding new directors to the
Company’s Board of Directors on the terms and conditions set forth in this
Agreement;
NOW,
THEREFORE, in consideration of the foregoing premises and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereby agree as
follows:
1. Representations and
Warranties of the Company. The Company represents and warrants as follows
as of the date hereof:
(a) The
Company has the corporate power and authority to execute, deliver and carry out
the terms and provisions of this Agreement and to consummate the transactions
contemplated hereby.
(b) This
Agreement has been duly and validly authorized, executed and delivered by the
Company, constitutes a valid and binding obligation and agreement of the
Company, and is enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting the rights of creditors and subject to general equity
principles.
(c) The
execution, delivery and performance of this Agreement by the Company does not
and will not (i) violate or conflict with any law, rule, regulation, order,
judgment or decree applicable to it, or (ii) result in any breach or
violation of or constitute a default (or an event which with notice or lapse of
time or both could become a default) under or pursuant to, or result in the loss
of a material benefit under, or give any right of termination, amendment,
acceleration or cancellation of, any organizational document, agreement,
contract, commitment, understanding or arrangement to which the Company is a
party or by which it is bound.
2. Representations and
Warranties of the Kleinheinz Group. Each of the members of the Kleinheinz
Group severally, and not jointly, represent and warrant with respect to himself
or itself as follows as of the date hereof:
(a) Such
party has the power and authority to execute, deliver and carry out the terms
and provisions of this Agreement and to consummate the transactions contemplated
hereby. Such party, if an entity, has the limited partnership or limited
liability
company power and authority, as applicable, to execute, deliver and carry out
the terms and provisions of this Agreement and to consummate the transactions
contemplated hereby.
(b) This
Agreement has been duly and validly authorized, executed, and delivered by such
member of the Kleinheinz Group, constitutes a valid and binding obligation and
agreement of such party, and is enforceable against such party in accordance
with its terms, except as enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
similar laws affecting the rights of creditors and subject to general equity
principles.
(c) Such
party is the “beneficial owner” of a number of shares of Common Stock as set
forth on the cover page relating to such member in the Schedule 13D filed
by the members of the Kleinheinz Group with the Securities and Exchange
Commission (the “SEC”) on December 18, 2009, as amended through and including
Amendment Xx. 0 xxxxxxx xxxxx Xxxxx 00, 0000 (xxx “Schedule 13D”). Except
for those Affiliates and Associates of such member with respect to whom a cover
page is included in the Schedule 13D, no other Affiliate or Associate of
such member beneficially owns any shares of Common Stock.
(d) The
execution, delivery and performance of this Agreement by each member of the
Kleinheinz Group does not and will not (i) violate or conflict with any
law, rule, regulation, order, judgment or decree applicable to him or it, or
(ii) result in any breach or violation of or constitute a default (or an
event which with notice or lapse of time or both could become a default) under
or pursuant to, or result in the loss of a material benefit under, or give any
right of termination, amendment, acceleration or cancellation of, any
organizational document, agreement, contract, commitment, understanding or
arrangement to which he or it is a party or by which he or it is
bound.
3. Definitions. For
purposes of this Agreement:
(a) The
terms “Affiliate” and “Associate” have the respective meanings set forth in
Rule 12b-2 promulgated by the SEC under the Securities Exchange Act of
1934, as amended (the “Exchange Act”), provided that neither “Affiliate” nor
“Associate” shall include (i) any person that is a publicly held concern and is
otherwise an Affiliate or Associate by reason of the fact that a principal of
any member of the Kleinheinz Group serves as a member of the board of directors
or similar governing body of such concern, (ii) such member of the board of
directors or other similar governing body of such concern or (iii) any entity
which is an Associate solely by reason of clause (1) of the definition of
Associate in Rule 12b-2; the terms “beneficial owner” and “beneficial ownership”
shall have the respective meanings as set forth in Rule 13d-3 promulgated
by the SEC under the Exchange Act; and the terms “person” or “persons” shall
mean any individual, corporation (including not-for-profit), general or limited
partnership, limited
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liability
company, joint venture, estate, trust, association, organization or other entity
of any kind or nature.
(b) “Board”
means the Board of Directors of the Company.
(c) “Common
Stock” means the Common Stock of the Company, $0.01 par value.
(d) “Corporate
Governance and Nominating Committee” means the Corporate Governance and
Nominating Committee of the Board.
(e) “Standstill
Period” means the period from the date of this Agreement until the earlier
of:
(i) the
date on which the Corporate Governance and Nominating Committee notifies
Kleinheinz pursuant to Section 4(g) below that it has not resolved to nominate
Xxxxxxx X. Xxxxxxx (“Xxxxxxx”) or the Additional Director for election to the
Board at the 2012 Annual Meeting;
(ii) the
date of the 2012 Annual Meeting; or
(iii) such
date, if any, as the Company has materially breached any of its commitments or
obligations set forth in Sections 1, 4(a), 4(b), 4(e), 4(f) and 4(g) of this
Agreement (the “Principal Obligations”).
4. Election of Xxxxxxx; Related
Matters.
(a) As
soon as reasonably practicable but in any event within five business days from
the date first listed above (the “Appointment Date”):
(i) In
accordance with the Company’s amended certificate of incorporation and amended
and restated bylaws, the Board shall, if required to meet its obligations
pursuant to this Agreement, adopt a resolution increasing the size of the Board
by one director, to a total of nine directors, effective as of the Appointment
Date;
(ii) In
accordance with the Company’s amended certificate of incorporation and amended
and restated bylaws, the Board shall elect Xxxxxxx as a director of the Company,
effective as of the Appointment Date, to serve as a member of the class of
directors scheduled to be next elected at the 2012 Annual Meeting of
Stockholders; and
(iii) The
Board shall revise the powers of the Administration Committee to limit the
Administration Committee’s power to authorize acquisitions to acquisitions which
either individually or combined do not
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exceed $1
million in purchase price during any fiscal quarter of the Company.
(b) After
giving effect to Section 4(a) and a readjustment of the class years of certain
directors, as of the Appointment Date, the Board shall consist of the following
members (or their respective successors duly nominated in accordance with the
Company’s amended certificate, amended and restated bylaws and Corporate and
Governance Committee charter and procedures, and duly elected by the Company’s
stockholders):
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Class of 2010
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Class of 2011
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Class of 2012
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Xxxxxxx
Xxxxx
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Xxxxxxx
X. Xxxxxxx
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Xxxxxxx
X. Xxxxxxx
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Xxxxxx
X. Xxxxxxx
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Xxxxx
X. Xxxxxx
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Xxxxxxx
Xxxxxxxxxx*
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Xxxxx
X. Xxxxxxx, Xx.
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Xxxxxxx
Xxxxxxx
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Xxxxxx
Xxxxxxx
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*Subject
to separate agreement
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(c) The
members of the Kleinheinz Group who filed the Schedule 13D shall promptly
file an amendment to the Schedule 13D reporting the entry into this
agreement, amending applicable items to conform to their respective obligations
hereunder, appending or incorporating by reference this Agreement as an exhibit
thereto and indicating that the members of Kleinheinz Group have withdrawn from
the “group” (within the meaning of Section 13(d)(3) of the Exchange Act) which
filed the Schedule 13D . Such members of the Kleinheinz Group shall provide to
the Company a reasonable opportunity to review and comment on such amendment in
advance of filing, and shall consider in good faith the reasonable comments of
the Company.
(d) So
long as the Company has complied and is complying with the Principal
Obligations, each member of the Kleinheinz Group shall cause all shares of
Common Stock owned of record and shall instruct the record owner, in case of all
shares of Common Stock beneficially owned but not of record, by it and their
respective Affiliates, as of the record date for the 2010 Annual Meeting of
Stockholders or the 2011 Annual Meeting of Stockholders, as the case may be, to
be present for quorum purposes and to be voted, and shall cause all shares of
Common Stock held by their respective Associates to be present for quorum
purposes and to be voted, in favor of all directors nominated by the Board for
election at the Company’s 2010 and 2011 Annual Meetings of
Stockholders.
(e) Within
the one year period following the 2010 Annual Meeting of Stockholders, the
Company and Xxxxxxx shall agree on a qualified, independent and experienced
executive with a strong media background (a “Qualified Executive”) to be elected
by the Board as a tenth member of the Board in the Class of 2012 (the
“Additional Director”), and in connection therewith and in accordance with the
Company’s amended certificate of incorporation and amended and
4
restated
bylaws, the Board shall adopt a resolution increasing the size of the Board by
one director, to a total of ten directors, effective as of the appointment date
of such Additional Director. If the Additional Director leaves the
Board (whether by resignation or otherwise) before the conclusion of the 2012
Annual Meeting of Stockholders, the Company and Xxxxxxx shall agree on a
replacement Qualified Executive to be elected within 60 days of such
resignation.
(f) The
Company agrees that the Board shall only be increased at any time prior to the
conclusion of the 2012 Annual Meeting of Stockholders in connection with the
appointment of Xxxxxxx and the Additional Director.
(g) At
least 15 days prior to the first date upon which a notice to the Secretary of
the Company of nominations of persons for election to the Board or the proposal
of business at the 2012 Annual Meeting would be considered timely under the
bylaws of the Company, the Corporate Governance and Nominating Committee will
notify Kleinheinz whether it has resolved to recommend Xxxxxxx and the
Additional Director for re-election to the Board at the 2012 Annual
Meeting.
5. Standstill.
Each of
the members of the Kleinheinz Group agrees that, during the Standstill Period
and provided that Company has complied and is complying with the Principal
Obligations, he or it will not, and he or it will cause each of such person’s
Affiliates or agents or other persons acting on his or its behalf not to, and
will cause his or its respective Associates not to:
(a) submit
any stockholder proposal (pursuant to Rule 14a-8 promulgated by the SEC
under the Exchange Act or otherwise) or any notice of nomination or other
business for consideration, or nominate any candidate for election to the Board,
other than as expressly permitted by this Agreement ;
(b) form,
join in or in any other way participate in a “partnership, limited partnership,
syndicate or other group” within the meaning of Section 13(d)(3) of the
Exchange Act with respect to the Common Stock or deposit any shares of Common
Stock in a voting trust or similar arrangement or subject any shares of Common
Stock to any voting agreement or pooling arrangement, other than solely with
other members of the Kleinheinz Group or one or more Affiliates of a member of
the Kleinheinz Group with respect to the Common Stock currently owned as set
forth in Section 2(c) of this Agreement or to the extent such a group may
be deemed to result with the Company or any of its Affiliates as a result of
this Agreement;
(c) solicit
proxies or written consents of stockholders, or otherwise conduct any nonbinding
referendum with respect to Common Stock, or make, or in any way participate in,
any “solicitation” of any “proxy” within the meaning of Rule 14a-1
promulgated by the SEC under the Exchange Act to vote, or advise, encourage or
5
influence
any person with respect to voting, any shares of Common Stock with respect to
any matter, or become a “participant” in any contested “solicitation” for the
election of directors with respect to the Company (as such terms are defined or
used under the Exchange Act and the rules promulgated by the SEC thereunder),
other than a “solicitation” or acting as a “participant” in support of all of
the nominees of the Board at the 2010 and 2011 Annual Meetings of
Stockholders;
(d) seek,
in any capacity other than as a member of the Board, to call, or to request the
call of, a special meeting of the stockholders of the Company, or seek to make,
or make, a stockholder proposal at any meeting of the stockholders of the
Company or make a request for a list of the Company’s stockholders (or otherwise
induce, encourage or assist any other person to initiate or pursue such a
proposal or request) or otherwise acting alone, or in concert with others, seek
to control or influence the governance or policies of the Company, except as
expressly permitted by this Agreement;
(e) effect
or seek to effect, in any capacity other than as a member of the Board
(including, without limitation, by entering into any discussions, negotiations,
agreements or understandings with any third person), offer or propose (whether
publicly or otherwise) to effect, or cause or participate in, or in any way
assist or facilitate any other person to effect or seek, offer or propose
(whether publicly or otherwise) to effect or cause or participate in
(i) any acquisition of any material assets or businesses of the Company or
any of its subsidiaries, (ii) any tender offer or exchange offer, merger,
acquisition or other business combination involving the Company or any of its
subsidiaries, or (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to the Company or
any of its subsidiaries;
(f) publicly
disclose, or cause or facilitate the public disclosure (including without
limitation the filing of any document or report with the SEC or any other
governmental agency or any disclosure to any journalist, member of the media or
securities analyst) of, any intent, purpose, plan or proposal to obtain any
waiver, or consent under, or any amendment of, any of the provisions of Section
4(d) or this Section 5, or otherwise seek (in any manner that would require
public disclosure by any of the members of the Kleinheinz Group or their
Affiliates or Associates) to obtain any waiver, consent under, or amendment of,
any provision of this Agreement;
(g) publicly
disparage any member of the Board or management of the Company;
(h) enter
into any arrangements, understandings or agreements (whether written or oral)
with, or advise, finance, assist or encourage, any other person that engages, or
offers or proposes to engage, in any of the foregoing; or
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(i) take
or cause or induce or assist others to take any action inconsistent with any of
the foregoing.
It is
understood and agreed that this Agreement shall not be deemed to prohibit
Kleinheinz from engaging in any lawful act in his capacity as a director of the
Company.
6. Non-public
Information. The Company and the Kleinheinz Group agree that the
Kleinheinz Group will not receive non-public information from the Company
regarding the Company, unless the Company and the Kleinheinz Group have
separately entered into a non-disclosure agreement with respect to such
information prior to the Kleinheinz Group receiving such
information.
7. Non-Disparagement.
During the Standstill Period and for a period of one year thereafter the Company
shall not publicly disparage any member of the Kleinheinz Group or any member of
the management of the Kleinheinz Group.
8. Specific Performance.
Each party hereto acknowledges and agrees, on behalf of itself and its
Affiliates, that irreparable harm would occur in the event any of the provisions
of this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties will be
entitled to specific relief hereunder, including, without limitation, an
injunction or injunctions to prevent and enjoin breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof in
any state or federal court in the State of Delaware, in addition to any other
remedy to which they may be entitled at law or in equity. Any requirements for
the securing or posting of any bond with such remedy are hereby
waived.
9. Jurisdiction. Each
party hereto agrees, on behalf of itself and its Affiliates, that any actions,
suits or proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby will be brought solely and exclusively in any
state or federal court in the State of Delaware (and the parties agree on behalf
of themselves and their respective Affiliates not to commence any action, suit
or proceeding relating thereto except in such courts), and further agrees that
service of any process, summons, notice or document by U.S. registered mail to
the respective addresses set forth in Section 13 of this Agreement will be
effective service of process for any such action, suit or proceeding brought
against any party in any such court. Each party, on behalf of itself and its
Affiliates, irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby, in the state or federal courts in the State of
Delaware, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an improper or inconvenient
forum.
10. Applicable Law. This
Agreement shall be governed in all respects, including validity, interpretation
and effect, by the laws of the State of Delaware applicable to contracts
executed and to be performed wholly within such state, without giving effect to
the choice of law principles of such state.
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11. Counterparts. This
Agreement may be executed in two or more counterparts which together shall
constitute a single agreement.
12. Entire Agreement; Amendment
and Waiver; Successors and Assigns. This Agreement contains the entire
understanding of the parties hereto with respect to, and supersedes all prior
agreements relating to, its subject matter. There are no restrictions,
agreements, promises, representations, warranties, covenants or undertakings
between the parties other than those expressly set forth herein. This Agreement
may be amended only by a written instrument duly executed by the parties hereto
or their respective successors or assigns. No failure on the part of any party
to exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
such right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law. The terms and conditions of this Agreement shall be binding upon, inure to
the benefit of, and be enforceable by the parties hereto and their respective
successors, heirs, executors, legal representatives, and assigns.
13. Notices. All notices,
consents, requests, instructions, approvals and other communications provided
for herein and all legal process in regard hereto shall be in writing and shall
be deemed validly given, made or served, (a) if given by telecopy, when
such telecopy is transmitted to the telecopy number set forth below, or to such
other telecopy number as is provided by a party to this Agreement to the other
parties pursuant to notice given in accordance with the provisions of this
Section, and the appropriate confirmation is received, or (b) if given by
any other means, when actually received during normal business hours at the
address specified in this Section, or at such other address as is provided by a
party to this Agreement to the other parties pursuant to notice given in
accordance with the provisions of this Section:
if to the
Company:
Alloy,
Inc.
000 Xxxx
00xx
Xxxxxx
00xx
Xxxxx
Xxx Xxxx, XX
00000
Facsimile:
(000) 000-0000
Attention:
Chief Executive Officer
with a copy
to:
Xxxxxx Xxxxx
Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxx
xx xxx Xxxxxxxx
Xxx Xxxx, XX
00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxx
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if to the
Kleinheinz Group or any member thereof:
Xxxxxxxxxx
Capital Partners, Inc.
000
Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx,
Xxxxx 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxx X. Xxxxxx
14. No Third-Party
Beneficiaries. Nothing in this Agreement is intended to confer on any
person other than the parties hereto or their respective successors and assigns,
and their respective Affiliates to the extent provided herein, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement.
[Signature page
follows.]
- -
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IN
WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly
authorized signatories of the parties as of the date first written
above.
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ALLOY,
INC.
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By:
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/s/
Xxxxxxx Xxxxxxx
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Xxxxxxx
Xxxxxxx
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Chief
Executive Officer
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XXXXXXXXXX
CAPITAL PARTNERS, INC.
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By:
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/s/
Xxxx X. Xxxxxxxxxx
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Name: Xxxx
X. Xxxxxxxxxx
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Title: President
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XXXXXXXXXX
CAPITAL PARTNERS LDC
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By:
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/s/
Xxxx X. Xxxxxxxxxx
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Name: Xxxx
X. Xxxxxxxxxx
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Title: Managing
Director
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GLOBAL
UNDERVALUED SECURITIES FUND, L.P.
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By:
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Xxxxxxxxxx
Capital Partners, Inc., its investment manager
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By:
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/s/
Xxxx X. Xxxxxxxxxx
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Name: Xxxx
X. Xxxxxxxxxx
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Title: President
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GLOBAL
UNDERVALUED SECURITIES FUND (QP), L.P.
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By:
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Xxxxxxxxxx
Capital Partners, Inc., its investment manager
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By:
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/s/
Xxxx X. Xxxxxxxxxx
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Name: Xxxx
X. Xxxxxxxxxx
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Title: President
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GLOBAL
UNDERVALUED SECURITIES FUND LTD.
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By:
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/s/
Xxxx X. Xxxxxxxxxx
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Name: Xxxx
X. Xxxxxxxxxx
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Title: Director
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GLOBAL
UNDERVALUED SECURITIES MASTER FUND, L.P.
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By:
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Global
Undervalued Securities, L.P., its general partner:
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By:
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Xxxxxxxxxx
Capital Partners, Inc., its investment manager
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By:
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/s/
Xxxx X. Xxxxxxxxxx
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Name: Xxxx
X. Xxxxxxxxxx
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Title: President
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XXXX
X. XXXXXXXXXX
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/s/
Xxxx X. Xxxxxxxxxx
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