Exhibit 99.1
INVESTMENT REPRESENTATION
AND LOCKUP AGREEMENT
Alloy Online, Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Chief Financial Officer
Re: Proposed issuance of shares (the "Shares") of Alloy Online, Inc.
("Parent") Common Stock, $0.01 par value per share (the
"Common Stock") in connection with the merger (the "Merger")
of CASS Communications, Inc. (the "Company") with and into
Alloy pursuant to an Agreement and Plan of Reorganization,
dated as of July 3, 2001 (the "Reorganization Agreement"), by
and between Parent, the Company and Xxxx X. Xxxxxxx (the
"Stockholder")
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, including the Warrant;
(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 424(b)(3) Prospectus filed with the Commission on
June 13, 2001;
(e) Parent's Quarterly Report on Form 10-Q for the quarter ended
April 30, 2001 and filed with the Commission on June 14, 2001;
and
(f) Parent's Current Report on Form 8-K filed with the Commission
on June 20, 2001.
2. The undersigned has checked the box below if he, she or it is an
"Accredited Investor," as such term is defined in Rule 501(a) of
Regulation D ("Regulation D") of the rules and regulations promulgated
under the Securities Act of 1933, as amended (the "Securities Act"). If
the undersigned is not an Accredited Investor, he, she or it represents
and warrants that either alone or with his, her or its purchaser
representative(s) (as such term is defined in Rule 501(h) of Regulation
D) has such knowledge and experience in financial and business matters
that he, she or it is capable of evaluating the merits and risks of the
Merger and a prospective investment in the Shares.
"Accredited Investor" shall mean any person who comes within any of the
following categories:
(a) Any bank as defined in Section 3(a)(2) of the Securities Act
or any savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity; any broker or
dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934, as amended; any insurance company as
defined in Section 2(13) of the Securities Act; any investment
company registered under the Investment Company Act of 1940,
as amended, or a business development company as defined in
Section 2(a)(48) of the Securities Act; any Small Business
Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958, as amended; any plan
established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees,
is such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of the Employee
Retirement Income Security Act of 1974, as amended, if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and
loan association, insurance company, or registered investment
advisor, or if the employee benefit plan has total assets in
excess of $5,000,000, or, if a self-directed plan, with
investment decisions made solely by persons that are
Accredited Investors;
(b) Any private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940, as amended;
(c) Any organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, corporation,
Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(d) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any
director, executive officer, or general partner of a general
partner of that issuer;
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(e) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase
exceeds $1,000,000;
(f) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the
same income level in the current year;
(g) Any trust with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person
who meets the definition of a "purchaser representative" found
in Rule 501(h) of Regulation D; and
(h) Any entity in which all of the equity owners are Accredited
Investors.
/ / The undersigned represents and warrants that he, she or it is
an "Accredited Investor."
3. Engagement of Purchaser Representative. If the undersigned has engaged
a purchaser representative, the undersigned has checked the following
box and indicated the name of such purchaser representative.
/ /
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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. The Shares issued in connection with the Merger
that are distributed to the undersigned will be so acquired by it for
its own account and not on behalf of any other person. The undersigned
will be so acquiring the Shares for investment and, except as set forth
in the following sentence, not for distribution or with the intent to
divide its participation with others or of selling, assigning,
transferring or otherwise disposing of the Shares. It is understood
that the undersigned may make bona fide gifts or distributions without
consideration, transfers by operation of law, so long as any donee or
transferee agrees not to sell, transfer or otherwise dispose of the
Shares, except as provided herein and executes and delivers to 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,
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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 Stockholder (the "Registration Rights Agreement").
(b) Required Legends. The certificates evidencing the Shares will
include the legend substantially similar to that set forth
below, which the undersigned has read and understands:
THE SECURITIES REPRESENTED 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 7.2 OF THE AGREEMENT
AND PLAN OF REORGANIZATION DATED AS OF JULY 3, 2001
AMONG ALLOY ONLINE, INC., ALLOY ACQUISITION SUB,
INC., CASS COMMUNICATIONS, INC. AND XXXX X. XXXXXXX
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 ONLINE INC. HAS AGREED TO DELIVER TO THE HOLDER
HEREOF AN ALLOY ONLINE, INC. 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 ONLINE, INC.
THESE SECURITIES ARE ALSO SUBJECT TO AN INVESTMENT
REPRESENTATION AND LOCKUP AGREEMENT, DATED AS OF
AUGUST 1, 2001 WITH ALLOY ONLINE, INC. WHICH
RESTRICTS THE TRANSFER THEREOF, A COPY OF WHICH CAN
BE OBTAINED FROM ALLOY ONLINE, INC. AT ITS EXECUTIVE
OFFICES."
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(c) Transfer Restrictions. Subject to the lock-up provided under
Section 9 herein, by accepting the certificates bearing the
aforesaid legend, the undersigned agrees, prior to any
transfer of the Shares represented by the Certificates, to
give written notice to Parent expressing his 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 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 Warrant or 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
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 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. The undersigned can afford a complete
loss of his investment in the Shares.
8. Substantial Degree of Risk. The undersigned understands that an
investment 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
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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.
9. Lock-Up Agreement. In order to induce Parent to enter into the
Reorganization Agreement, Stockholder hereby agrees that he will not,
except with the prior written approval of Parent, engage in a
Disposition (as defined below) (i) with respect to the 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"); (ii) of and not more than 221,700
Shares during the period from the Commencement Date until the date that
is exactly one (1) month from the Commencement Date and during each
subsequent monthly period thereafter, up and to the date that is
exactly four (4) months from the Commencement Date; and (iii) of not
more than an additional 430,000 Shares during the period from the six
(6) month anniversary of the Commencement Date up and to the date that
is exactly one (1) year after the Commencement Date (the "Anniversary
Date"). During the period from the Commencement Date up and to the
Anniversary Date, the undersigned agrees and consents to sell, contract
or dispose of such Shares only through BancBoston Xxxxxxxxx Xxxxxxxx,
Inc. or another securities firm mutually agreed to by Parent and
Stockholder. The restrictions imposed by the two foregoing sentences
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 as to which this paragraph is then applicable.
10. Indemnification. The undersigned recognizes that the issuance of the
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,
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warranties and covenants and the indemnification contained in this
Agreement shall survive this Agreement and the undersigned's admission
as a stockholder of Parent.
11. Miscellaneous.
(a) Notices. All notices or other communications which are
required or 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 Online, Inc.
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: President
Facsimile: (000) 000-0000
(ii) if to Stockholder, to:
CASS Communications, Inc.
0000 Xxxxxxx Xxx, Xxxxx 000
Xxxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxxx
Facsimile: (000) 000-0000
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 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.
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(c) Further Assurances. Within ten (10) days after receipt of a
written 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
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, which consent may
be withheld in Parent's sole discretion, 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 laws 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 shall not be employed in the interpretation of
this Agreement; and (iii) the terms and
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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.
12. 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.
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(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, the undersigned has executed this Investment
Representation and Lockup Agreement, or caused it to be executed on its behalf,
on this 1st day of August 2001.
STOCKHOLDER:
/s/ Xxxx X. Xxxxxxx
-----------------------------------
Xxxx X. Xxxxxxx
The foregoing Investment Representation and Lockup Agreement is hereby accepted.
ALLOY ONLINE, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman/CEO
DATE: August 1, 2001
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