Exhibit 99.1
AGREEMENT
This Agreement (this "Agreement") dated as of January 25, 2002 is
entered into by and between Alloy, Inc., a corporation organized under the laws
of Delaware (together with its successors, "Alloy"), and Xxxxxxxx International,
Ltd., a company domiciled in Bermuda (together with its successors, "Investor").
WHEREAS, Investor desires to purchase, and Alloy desires to sell and
issue, shares of Common Stock and a Warrant to purchase Common Stock of Alloy
pursuant to the terms and subject to the conditions contained in this Agreement;
WHEREAS, simultaneous with this Agreement, Freebord Manufacturing,
Inc. ("Freebord"), a corporation in which Investor holds an equity interest, is
entering into an Advertising and Marketing Services Agreement (the "Services
Agreement") with Alloy under which Alloy will provide certain marketing,
promotional and other related services as provided therein to Freebord in
exchange for the consideration provided therein; and
WHEREAS, as an inducement to Alloy to enter into the Services
Agreement with Freebord, Investor is entering into a Payment Guaranty in favor
of Alloy on the date hereof pursuant to which Investor agrees to guaranty
certain payments due to Alloy under the Services Agreement as specified therein.
NOW, THEREFORE, the parties hereto agree as follows:
1. Purchase and Sale. In consideration of and upon the basis of the
representations, warranties and agreements and subject to the terms and
conditions set forth in this Agreement:
(a) Investor agrees to purchase from Alloy, and Alloy agrees
to sell to Investor on the Closing Date, in accordance with Section 2, one
million three hundred sixty-seven thousand three hundred sixty-six
(1,367,366) shares (the "Initial Common Shares") of Alloy's common stock,
par value one cent ($0.01) per share ("Common Stock"), at a price of
Twenty-One Dollars and Ninety-Four Cents ($21.94) per share (the "Per
Share Purchase Price"), for an aggregate purchase price of Thirty Million
Dollars ($30,000,000). In addition, Alloy will issue to Investor on the
Closing Date one warrant in the form attached hereto as Annex A (a
"Warrant") to purchase from time to time up to an aggregate of eight
hundred eighty-eight thousand seven hundred eighty-eight (888,788) shares
(subject to the adjustments contained in the Warrant and this Agreement)
at a per share purchase price of Twenty-One Dollars and Ninety-Four Cents
($21.94). Investor will have the right to exercise the Warrant in the
manner, and subject to the terms, specified in this Agreement and in the
Warrant.
(b) The closing (the "Closing") of the sale of the Common
Stock will occur at 11:00 a.m., New York City time, on the second (2nd)
Business Day, after and excluding the date hereof, or at such other date
and time as Investor and Alloy will mutually agree (such date, the
"Closing Date").
(c) As used herein, the term "Common Shares" means all shares
of Common Stock issued and/or issuable under any provision of this
Agreement or upon exercise of the Warrant; the term "Investment
Securities" means the Warrant and all Common Shares; the term "Business
Day" means any day on which the Common Stock may be traded on the Nasdaq
or, if not admitted for trading on the Nasdaq, on any day other than a
Saturday, Sunday or holiday on which banks in New York City are required
or permitted to be closed; the term "Nasdaq NMS" means the Nasdaq National
Market System; and the term "Nasdaq" means the Nasdaq NMS, provided,
however, that if the Nasdaq NMS ceases to be the principal U.S. trading
market for the Common Stock, then "Nasdaq" will be deemed to mean the
principal U.S. national securities exchange (as defined in the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) on which the Common
Stock, is then traded, or if the Common Stock is not then listed or
admitted to trading on any national securities exchange but is designated
as a Nasdaq SmallCap Market Security by the NASD, then such market system,
or if the Common Stock is not listed or quoted on any of the foregoing,
then the OTC Bulletin Board.
2. Closing. The Closing will take place via facsimile on the Closing
Date in the manner set forth below; provided that Alloy shall cause its transfer
agent to deliver no later than two (2) Business Days following and excluding the
Closing Date original certificates representing shares of Common Stock via
Federal Express or another reputable overnight carrier to:
Xxxx Xxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx, XX 00000
Telephone: (000) 000-0000
In connection with the Closing, the following deliveries will be
made:
(a) Purchase Price. Investor will cause to be wire transferred
to Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP ("SASM&F") in escrow for
Alloy, in accordance with the instructions set forth in Section 17, the
aggregate purchase price of Thirty Million Dollars ($30,000,000) in
immediately available United States funds. Upon receipt of the Stock
Certificates (as defined below) and the Warrant, Investor shall cause
SASM&F to deliver to Alloy, in accordance with the instructions set forth
in Section 17, the aggregate purchase price of Thirty Million Dollars
($30,000,000).
(b) Common Stock Certificates. Upon receipt of written notice
from SASM&F that it has received payment of the aggregate purchase price
of Thirty Million Dollars ($30,000,000), Alloy shall deliver irrevocable
instructions to its transfer agent to deliver to SASM&F for the account of
Investor thirteen (13) stock certificates, each representing one hundred
thousand (100,000) shares of Common Stock and one (1) certificate
representing sixty-seven thousand three hundred sixty-six (67,366) shares
of Common Stock, duly executed by Alloy in definitive form (collectively,
the "Stock Certificates") and Alloy shall deliver to SASM&F one Warrant
duly executed by Alloy in definitive form, in each case duly registered on
the books of Alloy in the name of
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Investor or, as instructed by Investor, of any of its affiliates. Investor
shall cause SASM&F to hold the Stock Certificates and Warrant in escrow
for Investor until Alloy confirms receipt of the wire transfer of the
aggregate purchase price from SASM&F, at which time Investor shall cause
SASM&F to deliver the Stock Certificates and Warrant to Investor.
(c) Closing Documents. The closing documents required by
Sections 11 and 12 will be delivered to Investor and Alloy, respectively.
(d) Delivery Notice. An executed copy of the delivery notice
in the form attached hereto as Annex B will be delivered to Investor.
The deliveries specified in this Section 2 will be deemed to occur
simultaneously as part of a single transaction, and no delivery will be deemed
to have been made until all such deliveries have been made.
3. Representations and Warranties of Alloy. Alloy makes the
following representations and warranties, which are true, correct and complete
in all respects on the date hereof and shall be true, correct and complete on
the Closing Date, subject to the exceptions set forth on the Disclosure Schedule
attached hereto:
(a) Alloy has been duly incorporated and is validly existing
in good standing under the laws of Delaware.
(b) The execution, delivery and performance of this Agreement
and the Warrant (including the authorization, sale, issuance and delivery
of the Investment Securities) have been duly authorized by all requisite
corporate action on the part of Alloy and no further consent or
authorization of Alloy, its Board of Directors or its stockholders is
required, except as otherwise contemplated by this Agreement.
(c) This Agreement and the Warrant have been duly executed and
delivered by Alloy and, when this Agreement and the Warrant are duly
authorized, executed and delivered by Investor, will be valid and binding
agreements enforceable against Alloy in accordance with their terms,
subject to bankruptcy, insolvency, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity. The issuance of the
Investment Securities is not and will not be subject to any preemptive
right or rights of first refusal that have not been properly waived or
complied with.
(d) Alloy has full corporate power and authority necessary to
(i) own and operate its properties and assets, (ii) execute and deliver
this Agreement and the Warrant, (iii) perform its obligations hereunder
and thereunder (including, but not limited to, the issuance of the
Investment Securities) and (iii) carry on its business as presently
conducted and as presently proposed to be conducted. Alloy and its
subsidiaries are duly qualified and are authorized to do business and are
in good standing as foreign corporations in all jurisdictions in which the
nature of their activities and of their properties (both owned and leased)
makes such qualification necessary, except for those
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jurisdictions in which failure to do so would not, individually or in the
aggregate, be reasonably expected to have a material adverse effect on (i)
the business affairs, assets, results of operations or prospects of Alloy
and its subsidiaries, taken as a whole (a "Material Adverse Effect") or
(ii) the transactions contemplated by, or Alloy's ability to perform
under, this Agreement or the Warrant.
(e) No consent, approval, authorization or order of any court,
governmental agency or other body is required for execution and delivery
by Alloy of this Agreement or the performance by Alloy of any of its
obligations hereunder and under the Warrant, other than the approval of
the SEC of the Registration Statement to be filed pursuant to the terms
hereof.
(f) Neither the execution and delivery by Alloy of this
Agreement nor the performance by Alloy of any of its obligations hereunder
and under the Warrant:
(i) violates, conflicts with, results in a breach of, or
constitutes a default (or an event which with the giving of notice
or the lapse of time or both would be reasonably likely to
constitute a default) or creates any rights in respect of any person
under (A) the certificates of incorporation or by-laws of Alloy or
any of its subsidiaries, (B) any decree, judgment, order, law,
treaty, rule, regulation or determination of any court, governmental
agency or body, or arbitrator having jurisdiction over Alloy or any
of its subsidiaries or any of their respective properties or assets,
(C) the terms of any bond, debenture, indenture, credit agreement,
note or any other evidence of indebtedness, or any agreement, stock
option or other similar plan, lease, mortgage, deed of trust or
other instrument to which Alloy or any of its subsidiaries is a
party, by which Alloy or any of its subsidiaries is bound, or to
which any of the properties or assets of Alloy or any of its
subsidiaries is subject, (D) the terms of any "lock-up" or similar
provision of any underwriting or similar agreement to which Alloy or
any of its subsidiaries is a party, or (E) any rule or regulation of
the Nasdaq applicable to Alloy or the transactions contemplated
hereby; or
(ii) results in the creation or imposition of any lien,
charge or encumbrance upon any Investment Securities or upon any of
the properties or assets of Alloy or any of its subsidiaries.
(g) Alloy has validly reserved for issuance to Investor one
million three hundred sixty-seven thousand three hundred sixty-six
(1,367,366) shares of Common Stock pursuant to this Agreement and nine
hundred seventy-seven thousand six hundred sixty-seven (977,667) shares of
Common Stock for issuance upon exercise of the Warrant. When issued to
Investor against payment therefor, each Investment Security:
(i) will have been duly and validly authorized, duly and
validly issued, fully paid and non-assessable;
(ii) will be free and clear of any security interests,
liens, claims or other encumbrances; and
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(iii) will not have been issued or sold in violation of
any preemptive or other similar rights of the holders of any
securities of Alloy or any other person.
(h) Alloy satisfies all maintenance criteria of the Nasdaq NMS
and, to the knowledge of Alloy, no present set of facts or circumstances
will (with the passage of time or the giving of notice or both or neither)
cause any of the Common Stock to be delisted from the Nasdaq NMS.
Immediately after their issuance, (i) all of the Initial Common Shares
will, upon issuance and delivery to Investor as provided in Section 2(b),
be duly listed and admitted for trading on the Nasdaq NMS and (ii) all of
the Common Shares issuable upon exercise of the Warrant will be duly
listed and admitted for trading on the Nasdaq. Alloy knows of no reason
that would prevent all of the Common Shares, when issued, from being duly
listed and admitted for trading on all of the markets where shares of
Common Stock are traded, including the Nasdaq NMS.
(i) Except as disclosed in Alloy's SEC Filings on or before
the date immediately before and excluding the date hereof, there is no
pending or, to the best knowledge of Alloy, threatened action, suit,
proceeding or investigation before any court, governmental agency or body,
or arbitrator having jurisdiction over Alloy or any of its subsidiaries,
or to the knowledge of Alloy any of its affiliates, that would materially
affect the execution by Alloy of, or the performance by Alloy of its
obligations under, this Agreement or the Warrant, or that would otherwise
have a Material Adverse Effect.
(j) Since May 13, 1999 none of Alloy's filings with the United
States Securities and Exchange Commission (the "SEC") under the Securities
Act of 1933, as amended (the "Securities Act") or under Section 13(a) or
15(d) of the Exchange Act (each an "SEC Filing") has contained any untrue
statement of a material fact or has omitted to state any material fact
necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading (except as set
forth in amendments or supplements to such SEC Filings made before and
excluding the date hereof). Since the date of Alloy's most recent SEC
Filing, there has not been, and Alloy is not aware of, any development or
condition that is reasonably likely to result in a Material Adverse
Effect. Alloy's SEC Filings made before and excluding the date hereof
fully disclose all material negative information concerning Alloy and its
subsidiaries. Investor acknowledges that the existence and terms of this
Agreement will not be disclosed prior to the filing by Alloy of the report
on Form 8-K referenced in Section 7(i) of this Agreement.
(k) The offer and sale of the Investment Securities to
Investor pursuant to this Agreement will, subject to the accuracy of
Investor's representations and warranties contained in Section 5 hereof
and compliance by Investor with the applicable covenants and agreements
contained in Section 9 hereof, be made in accordance with an exemption
from the registration requirements of the Securities Act and any
applicable state law. Neither Alloy nor any agent on its behalf has
solicited or will solicit any offers to sell or has offered to sell or
will offer to sell all or any part of the Investment Securities to any
person or persons so as to bring the sale of such Investment Securities by
Alloy within the registration provisions of the Securities Act.
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(l) As of immediately before the Closing Date, the authorized
capital stock of Alloy consists of fifty million (50,000,000) shares of
Common Stock, par value one cent ($0.01), and ten million (10,000,000)
shares of preferred stock, par value of one cent ($0.01) ("Preferred
Stock"). As of January 14, 2002, (A) thirty-three million five hundred
fifty-seven thousand seven hundred seventy-one (33,557,771) shares of
Common Stock and one thousand seven hundred sixty-five (1,765) shares of
Series B Convertible Preferred Stock were issued and outstanding, (B) nine
million seven hundred fifty thousand three hundred eighty-five (9,750,385)
shares of Common Stock and no shares of Preferred Stock are currently
reserved and subject to issuance upon the exercise of outstanding stock
options, warrants or other convertible rights, (C) eight thousand two
hundred seventy-five (8,275) shares of Common Stock are held in the
treasury of Alloy, and (D) up to six hundred forty-eight thousand six
hundred thirty-five (648,635) additional shares of Common Stock may be
issued under the employee benefit plans set forth on Schedule 3(l) hereto.
All of the outstanding shares of Common Stock are, and all shares of
capital stock which may be issued pursuant to stock options, warrants or
other convertible rights will be, when issued and paid for in accordance
with the respective terms thereof, duly authorized, validly issued, fully
paid and non-assessable, free of any preemptive rights in respect thereof
and issued in material compliance with all applicable state and federal
laws concerning issuance of securities. As of the date hereof, except as
set forth above, and except for shares of Common Stock or other securities
issued upon conversion, exchange, exercise or purchase associated with the
securities, options, warrants, rights and other instruments referenced
above, no shares of capital stock or other voting securities of Alloy are
outstanding, no equity equivalents, interests in the ownership or earnings
of Alloy or other similar rights are outstanding, and there are no
existing options, warrants, calls, subscriptions or other rights or
binding agreements or commitments relating to the capital stock of Alloy
or any of its subsidiaries or obligating Alloy or any of its subsidiaries
to issue, transfer, sell or redeem any shares of capital stock, or other
equity interest in, Alloy or any of its subsidiaries or obligating Alloy
or any of its subsidiaries to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement or commitment.
Attached hereto as Schedule 3(l) is a true and correct list as of the date
of this Agreement of all outstanding options, warrants, calls,
subscriptions and other rights or binding agreements or commitments
relating to the issuance of additional shares of capital stock of Alloy
and with respect to each a description of the number and class of
securities and the exercise price thereof.
(m) Solvency. The sum of the assets of Alloy, both at a fair
valuation and at present fair salable value, exceeds its liabilities,
including contingent liabilities. Alloy has sufficient capital with which
to conduct its business as presently conducted and as proposed to be
conducted. Alloy has not incurred debt, and does not intend to incur debt,
beyond its ability to pay such debt as it matures. For purposes of this
paragraph, "debt" means any liability on a claim, and "claim" means (x) a
right to payment, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured, or unsecured, or (y) a right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured, or unsecured. With respect to any such contingent liabilities,
such liabilities are computed at the amount
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which, in light of all the facts and circumstances existing at the time,
represents the amount which can reasonably be expected to become an actual
or matured liability.
(n) Audited Financials. Attached hereto as Annex C is a true,
correct and complete copy of (i) the report of Xxxxxx Xxxxxxxx LLP dated
March 9, 2001 (except with respect to the matters discussed in Note 15, as
to which the date is April 12, 2001), together with the accompanying
consolidated financial statements and schedules of Alloy at January 31,
2001 and the results of Alloy's operations and cash flows for each of the
three (3) years in the period ended January 31, 2001, as such report
appears in the Annual Report on Form 10-K for the fiscal year ended
January 31, 2001 filed by Alloy with the SEC (the "Auditor Report") and
(ii) at the Closing, Alloy shall deliver the written consent of Xxxxxx
Xxxxxxxx LLP to the inclusion of its report described in clause (i)
herein.
(o) Equivalent Value. As of the Closing Date, the
consideration that Alloy is receiving from Investor is equivalent in value
to the consideration Investor is receiving from Alloy pursuant to this
Agreement. As of the Closing Date, under the terms of this Agreement,
Alloy is receiving fair consideration from Investor for the agreements,
covenants, representations and warranties made by Alloy to Investor.
(p) No Non-Public Information. Except as set forth in Schedule
3(p) attached hereto, Investor has not requested from Alloy, and Alloy has
not furnished to Investor, any material non-public information concerning
Alloy or its subsidiaries.
4. Registration Provisions; Maximum Number.
(a) Alloy will, as soon as practicable, but no later than
February 25, 2002, and at its own expense, file a Registration Statement
(as defined below) under the Securities Act covering the resale of all of
the Common Shares and will use its best efforts to cause such Registration
Statement to be declared effective on or before April 25, 2002 (the
"Required Registration Date"). Pursuant to the preceding sentence, Alloy
will register pursuant to such Registration Statement not less than the
number of shares of Common Stock equal to the total of (i) the number of
Common Shares issued under this Agreement and the Warrant and (ii) one
hundred ten percent (110%) of the number of Common Shares issuable under
the Warrant (as of any given date, the "Registrable Number"). Alloy will
promptly amend such Registration Statement (or, if necessary, file a new
Registration Statement) at any time that the Registrable Number exceeds
the number of Common Shares then registered and freely tradable so that
following such amendment (or filing) the Registrable Number (as determined
on such date) of Common Shares will be registered and freely tradable.
(b) The registration statement filed or required to be filed
under the Securities Act in accordance with Section 4(a) hereof, along
with any amendments and additional registration statements, is referred to
as the "Registration Statement." Alloy will provide prompt written notice
to Investor when the Registration Statement has been declared effective by
the SEC.
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(c) Alloy will: (A) use its best efforts to keep the
Registration Statement effective until the earlier of (x) the later of (i)
the second anniversary of the issuance of the last Common Share that may
be issued, or (ii) such time as all of the Common Shares issued or
issuable hereunder can be sold by Investor or any of its affiliates
pursuant to Rule 144 under the Securities Act ("Rule 144") immediately
without compliance with the registration requirements of the Securities
Act or (y) the date all of the Common Shares issued or issuable will have
been sold by Investor and its affiliates (such later period, the
"Registration Period"); (B) prepare and file with the SEC such amendments
and supplements to the Registration Statement and the prospectus used in
connection with the Registration Statement (as so amended and supplemented
from time to time, the "Prospectus") as may be necessary to comply with
the provisions of the Securities Act with respect to the disposition of
all Common Shares by Investor or any of its affiliates; (C) furnish such
number of Prospectuses and other documents incident thereto, including any
amendment of or supplement to the Prospectus, as Investor from time to
time may reasonably request; (D) use its best efforts to cause all Common
Shares to be listed on each securities exchange and quoted on each
quotation service on which similar securities issued by Alloy are then
listed or quoted; (E) provide a transfer agent and registrar for all
Common Shares and a CUSIP number for all Common Shares; (F) use its best
efforts to otherwise comply with all applicable rules and regulations of
the SEC, the Nasdaq NMS and any other exchange or quotation service on
which the Common Shares are obligated to be listed or quoted under this
Agreement; and (G) file the documents required of Alloy and otherwise
obtain and maintain requisite blue sky clearance in (x) New York and all
other jurisdictions in which any of the shares of Common Stock were
originally sold and (y) all other states specified in writing by Investor,
provided, however, that as to this clause (y), Alloy will not be required
to qualify to do business or consent to service of process in any state in
which it is not now so qualified or has not so consented. Investor will
have five (5) Business Days after and excluding the date Alloy delivers a
draft Registration Statement to Investor to review, revise and/or approve
the description of the selling stockholder, plan of distribution and all
other references to Investor and its affiliates contained in each
Registration Statement and Prospectus.
(d) Alloy will furnish to Investor upon request a reasonable
number of copies of a supplement to or an amendment of any Prospectus as
may be necessary in order to facilitate the public sale or other
disposition of all or any of the Common Shares by Investor or any of its
affiliates pursuant to the Registration Statement.
(e) With a view to making available to Investor and its
affiliates the benefits of Rule 144 and Form S-3 under the Securities Act,
Alloy covenants and agrees to: (A) make and keep available adequate
current public information (within the meaning of Rule 144(c)) concerning
Alloy, until the earlier of (x) the second (2nd) anniversary of the
issuance of the last Common Share to be issued or (y) such date as all of
the Common Shares have been resold by Investor or any of its affiliates;
and (B) furnish to Investor upon request, as long as Investor owns any
Common Shares, (x) a written statement by Alloy that it has complied with
the reporting requirements of the Securities Act and the Exchange Act, (y)
a copy of the most recent annual or quarterly report of Alloy, and (z)
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such other information as may be reasonably requested in order to avail
Investor and its affiliates of Rule 144 or Form S-3 with respect to such
Common Shares.
(f) Notwithstanding anything else in this Section 4 if, at any
time during which a Prospectus is required to be delivered in connection
with the sale of any Common Shares, Alloy determines in good faith and
upon the advice of its outside legal counsel that a development has
occurred or a condition exists as a result of which the Registration
Statement or the Prospectus contains a material misstatement or omission,
or that a material transaction in which Alloy is engaged or proposes to
engage would require an immediate amendment to the Registration Statement,
a supplement to the Prospectus, or a filing under the Exchange Act or
other public disclosure of material information and the disclosure of such
transaction would be premature or injurious to the consummation of the
transaction, Alloy will promptly notify Investor thereof by telephone and
in writing. Upon receipt of such notification, Investor and its affiliates
will immediately suspend all offers and sales of Common Shares pursuant to
the Registration Statement. In such event, Alloy will amend or supplement
the Registration Statement and the Prospectus or make such filings or
public disclosures as promptly as practicable and will use its best
efforts to take such other steps as may be required to permit sales of the
Common Shares thereunder by Investor and its affiliates in accordance with
applicable federal and state securities laws. Alloy will promptly notify
Investor after it has determined in good faith that such sales have become
permissible in such manner and will promptly deliver copies of the
Registration Statement and the Prospectus (as so amended or supplemented,
if applicable) to Investor in accordance with paragraphs (c) and (d) of
this Section 4. Notwithstanding the foregoing, (A) under no circumstances
will Alloy be entitled to exercise its right to suspend sales of any
Common Shares as provided in this Section 4(f) and pursuant to the
Registration Statement more than twice in any twelve (12)-month period
(subject to Section 9(d)(v)), (B) the period during which such sales may
be suspended (each a "Blackout Period") at any time will not exceed thirty
(30) calendar days, and (C) no Blackout Period may commence less than
thirty (30) calendar days after the end of the preceding Blackout Period.
(g) Upon the commencement of a Blackout Period pursuant to
this Section 4, Investor will notify Alloy of any contract to sell,
assign, deliver or otherwise transfer any Common Shares (each a "Sales
Contract") that Investor or any of its affiliates has entered into prior
to receiving notice of the commencement of such Blackout Period and that
may require delivery of such Common Shares during such Blackout Period,
which notice will contain the aggregate sale price and quantity of Common
Shares pursuant to such Sales Contract. Within two (2) Business Days of
receipt of such notice, Alloy will notify Investor of its election either
(i) to terminate the Blackout Period and, as promptly as practicable,
amend or supplement the Registration Statement or the Prospectus in order
to correct the material misstatement or omission and deliver to Investor
copies of such amended or supplemented Registration Statement and
Prospectus in accordance with paragraphs (c) and (d) of this Section 4, or
(ii) to continue the Blackout Period in accordance with this paragraph. If
Alloy elects to continue the Blackout Period (or Alloy elects to terminate
the Blackout Period, but the Blackout Period is not terminated before the
latest date that the Investor may consummate the transaction contemplated
by the Sales Contract), and Investor or any of its affiliates are
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therefore unable to consummate the sale of Common Shares pursuant to the
Sales Contract (such unsold Common Shares, the "Unsold Common Shares"),
Alloy will promptly indemnify each Investor Indemnified Party against any
Proceeding that each Investor Indemnified Party may incur arising out of
or in connection with Investor's breach or alleged breach of any such
Sales Contract, and Alloy will reimburse each Investor Indemnified Party
for any reasonable costs or expenses (including legal fees) incurred by
such party in investigating or defending any such Proceeding
(collectively, the "Indemnification Amount"); provided, however, that the
Indemnification Amount shall be reduced by an amount equal to the number
of Unsold Common Shares multiplied by the positive difference, if any,
between (x) the actual per share price received by Investor or any of its
affiliates upon the sale of the Unsold Common Shares (if such sale occurs
within three Business Days of the end of the Blackout Period) or the
closing sale price of the Common Stock on Nasdaq on the third Business Day
after the end of the Blackout Period (if the Unsold Common Shares are not
sold by Investor or any of its affiliates within three Business Days of
the end of the Blackout Period) and (y) the per share price for the Unsold
Common Shares provided in such Sales Contract. If Alloy elects to
terminate the Blackout Period, Investor shall use reasonable efforts to
extend the consummation date of such Sales Contract until after such
Blackout Period ends; provided, however, that Investor shall not be
required to take any action with respect to such Sales Contract that would
have a negative financial effect on Investor.
(h) In addition to any other remedies available to Investor
under this Agreement or at law or equity, if the Registration Statement
has not been declared effective by the Required Registration Date or such
Registration Statement is not available with respect to all Common Shares
at any time on or after the Required Registration Date (except during a
Blackout Period permitted under Section 4(f) (which shall not include a
Blackout Period prohibited under Section 9(d)(iv) or (v)), during the
period the Investor is prohibited from selling under a "market stand-off"
agreement required under Section 9(d) and, with respect to any Common
Shares that are issued or issuable as a result of any adjustment under
this Agreement or the Warrant including, without limitation, an adjustment
resulting from a Restatement or a dilutive issuance, the period during
which Alloy is permitted to amend or file a new Registration Statement
pursuant to Section 4(a) to effect the registration of such additional
Common Shares, provided that such amended or new Registration Statement
shall be effective within 45 days of the commencement of such period),
then the number of shares issuable pursuant to the Warrant will be
increased by an amount equal to five percent (5%) of the number of Common
Shares then issuable pursuant to the Warrant for each month (and for any
portion of a month), compounded monthly, that such Registration Statement
will not have been declared effective or such Registration Statement is
not available with respect to all Common Shares.
(i) The aggregate number of Common Shares issuable upon
exercise of the Warrant, when combined with all shares of Common Stock
then beneficially owned (as determined pursuant to Exchange Act Rule
13d-3) by Investor, will not exceed the Maximum Number of shares of Common
Stock. The "Maximum Number" equals the sum of three million two hundred
seventy-one thousand eight hundred eighty-three (3,271,883) plus the
Exercisable Number. The "Exercisable Number" is initially zero (0)
10
and thereafter may be increased upon expiration of a sixty-five (65) day
period (the "Notice Period") after Investor delivers a notice (a "65 Day
Notice") to Alloy designating an aggregate number of Common Shares in
excess of the Maximum Number which will be issuable upon exercise of the
Warrant. A 65 Day Notice may be given at any time. From time to time
following the Notice Period, Common Stock may be issued to Investor on any
Business Day for any quantity of Common Stock, such that the aggregate
number of shares of Common Stock issued hereunder is less than or equal to
the Maximum Number.
(j) Investor shall furnish to Alloy such information regarding
itself and the intended method of disposition of its Common Shares as is
necessary to assure compliance with applicable federal and state
securities laws or is otherwise necessary to enable Alloy to comply with
its obligations under this Agreement. All information to be included in
any filing with the SEC or state securities law agency shall be provided
by Investor in writing.
5. Representations and Warranties of Investor. Investor makes the
following representations and warranties, which are true, correct and complete
in all respects on the date hereof and shall be true, correct and complete on
the Closing Date, subject to the exceptions set forth on the Disclosure Schedule
attached hereto:
(a) Investor has been duly incorporated and is validly
existing under the laws of Bermuda.
(b) The execution, delivery and performance of this Agreement
by Investor have been duly authorized by all requisite corporate action
and no further consent or authorization of Investor, its Board of
Directors or its stockholders is required. This Agreement has been duly
executed and delivered by Investor and, when duly authorized, executed and
delivered by Alloy, will be a valid and binding agreement enforceable
against Investor in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
(c) Neither the execution and delivery by Investor of this
Agreement nor the performance by Investor of any of its obligations
hereunder or under the Warrant violates, conflicts with, results in a
breach of, or constitutes a default (or an event which with the giving of
notice or the lapse of time or both would be reasonably likely to
constitute a default) or creates any rights in respect of any person under
(i) the certificate of incorporation or by-laws of Investor, (ii) any
decree, judgment, order, law, treaty, rule, regulation or determination of
any court, governmental agency or body, or arbitrator having jurisdiction
over Investor or any of its affiliates or any of their respective
properties or assets, or (iii) the terms of any agreement, document or
other instrument to which Investor or any of its affiliates is a party, by
which Investor or any of its affiliates is bound, or to which any of the
properties or assets of Investor or any of its affiliates is subject,
except such violations, conflicts, breaches, defaults or rights that would
not reasonably be expected to materially impair Investor's ability to
enter into this Agreement or to perform its obligations hereunder.
11
(d) Investor understands that no United States federal or
state agency has passed on, reviewed or made any recommendation or
endorsement of the Investment Securities.
(e) Investor is an "accredited investor" as such term is
defined in Regulation D promulgated under the Securities Act.
(f) Investor is purchasing the Investment Securities for its
own account for investment only and not with a view to, or for resale in
connection with, the public sale or distribution thereof in the United
States, except pursuant to sales registered under the Securities Act or
exempt from such registration.
(g) Investor understands that the Investment Securities are
being or will be offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal securities
laws and that Alloy is relying on the truth and accuracy of, and
Investor's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Investor set forth herein in order
to determine the availability of such exemptions and the eligibility of
Investor to acquire the Investment Securities.
6. Notice of Proposed Issuance of Capital Stock.
(a) If, at any time prior to the earlier of (i) the date
eighteen months after and excluding the date of this Agreement and (ii)
such date following the Closing Date as Investor ceases to own at least
six hundred eighty-three thousand six hundred eighty-three (683,683)
shares of Common Stock acquired hereunder or under the Warrant, Alloy
desires to enter into a binding agreement for the sale or issuance of any
Offered Securities, Alloy shall provide notice to Investor of its desire
to enter into such an agreement. Upon written request from Investor within
two (2) Business Days after and excluding the date such notice is
delivered, Alloy shall describe, in writing, the material terms of such
sale or issuance and the identity of the proposed purchasers (the
"Proposed Issuance Notice"). Upon request by Investor within two (2)
Business Days following and excluding the date of receipt of the Proposed
Issuance Notice, Alloy shall discuss the proposed sale or issuance with
Investor in good faith and provide Investor with such other information
regarding the proposed sale or issuance as Investor may reasonably request
for at least five (5) Business Days prior to entering into any such
agreement; provided, that so long as Alloy has complied in all material
respects with the provisions of this Section 6, nothing in this Section 6
shall prohibit Alloy from entering into an agreement for the sale or
issuance of Offered Securities with any other person on substantially
similar terms (or on terms more favorable to Alloy) as those contained in
the Proposed Issuance Notice. The term "Offered Securities" means any
shares of, or securities convertible into, exercisable or exchangeable
for, or whose value is derived in whole or in part from, any shares of any
class of Alloy's capital stock.
(b) Alloy's obligations pursuant to Section 6(a) will not
apply to any proposed issuance or sale of:
12
(i) Offered Securities issued in connection with the
acquisition of a bona fide operating company or assets for use in
Alloy's business or any business that Alloy proposes to engage in
following such acquisition, whether through purchase, merger,
consolidation, tender offer or otherwise, provided that the primary
purpose of Alloy entering into any such transaction will not be to
raise capital, directly or indirectly, or otherwise to avoid the
requirements of this Section 6;
(ii) Common Stock issued pursuant to any stock split,
dividend or distribution payable in additional shares of Common
Stock or other securities or rights convertible into, or entitling
the holder thereof to receive directly or indirectly, additional
shares of Common Stock without payment of any consideration by such
holder;
(iii) Offered Securities issuable or issued to
employees, consultants or directors of Alloy directly or pursuant to
a stock option plan, employee stock purchase plan or restricted
stock plan, or other similar arrangements related to compensation
for services in effect on the date of this Agreement, or similar
plans or arrangements approved by Alloy's Board of Directors after
the date hereof, in each case in the ordinary course of business;
provided, that "ordinary course of business" for these purposes
shall include stock option or warrant grants to officers and
employees previously employed by the seller or its affiliates in an
acquisition described in clause (b)(i) above.
(iv) Common Stock issued upon the exercise of any
options or warrants to purchase Common Stock outstanding on the date
hereof or upon conversion of any securities convertible into Common
Stock outstanding on the date hereof, in each case in accordance
with the terms of such options, warrants or securities in effect on
the date hereof;
(v) Offered Securities issued or issuable to any bank or
equipment lessor in a transaction primarily for non-equity financing
purposes (which transaction, by way of illustration and without
limitation, shall not include notes convertible or exchangeable for
Common Stock or other equity securities of Alloy);
(vi) Offered Securities issued or issuable to strategic
partners in transactions primarily for the purposes of establishing
(1) strategic alliances in the media, advertising, direct marketing,
entertainment, leisure, retail or wholesale distribution industries
or (2) contractual relationships with persons who will assist in the
marketing and promoting of Alloy and its subsidiaries and their
respective products and services (and not primarily for financing
purposes);
(vii) Common Stock issued in a bona fide firm commitment
underwritten offering to the public with net proceeds of at least
twenty-five million dollars ($25,000,000) to Alloy, after
underwriter's discounts or
13
commissions and other fees or expenses, that has been underwritten
by a nationally recognized investment bank;
(viii) Offered Securities issued or issuable in
connection with the implementation of a "poison pill" or similar
anti-takeover mechanism; or
(ix) Common Stock issued or issuable upon exercise of
the Warrant.
(c) Investor agrees to hold all information received by it
pursuant to, or as a result of Alloy's performance of its obligations
under, Section 6(a) including, without limitation, all information set
forth in the Proposed Issuance Notice and all other information provided
to Investor as contemplated by Section 6(a) ("Confidential Information")
in confidence, and agrees that it shall not, directly or indirectly, use
any Confidential Information for any purpose whatsoever other than to
evaluate the proposed issuance of Offered Securities as contemplated by
Section 6(a) or disclose any Confidential Information to any person or
entity, except as required by law (and then only after providing Alloy
with notice of such requirement and an opportunity to contest such
requirement). For purposes hereof, "Confidential Information" will be
deemed not to include any information that: (i) is or becomes generally
available to the public other than as a direct or indirect result of the
disclosure of any of such information by Investor; (ii) is or becomes
available to Investor from a source other than Alloy or any of its agents
or representatives, provided that such source is not bound by any
obligation of confidentiality or similar obligation to Alloy or any other
person or entity with respect to any of such information; or (iii) was in
Investor's possession prior to the time it was received by Investor as
evidenced by Investor's written records.
7. Covenants of Alloy. Alloy covenants and agrees with Investor as
follows:
(a) For so long as Investor owns or has the right to purchase
any Investment Securities, and for a period of one (1) year thereafter,
Alloy will use its best efforts to (i) maintain the eligibility of the
Common Stock for listing on the Nasdaq NMS, (ii) regain the eligibility of
the Common Stock for listing or quotation on the Nasdaq NMS, in the event
that the Common Stock is delisted by the Nasdaq NMS, and (iii) obtain
listing or quotation on another national securities exchange or quotation
system if the Common Stock is not relisted on the Nasdaq NMS and
thereafter maintain or regain the eligibility of the Common Stock for
listing or quotation on such exchange or quotation system.
(b) Restatements.
(i) If a Restatement occurs on or before the date that
is sixty days following the effective date of the first Registration
Statement filed pursuant to the provisions of Section 4(a) to be
declared effective (provided that if the Registration Statement is
not available for all Common Shares during such sixty-day period or
if there should occur a "market stand-off" during such sixty-day
period, then such period shall be extended by one Business Day for
each Business
14
Day that the Registration Statement is not so available or Investor
is subject to such "market stand-off"), then Alloy shall issue to
Investor, within three Business Days of the date that Investor
delivers a written notice to Alloy electing one of the time periods
specified in clause (aa) or (bb) below, an additional number of
shares of Common Stock, if any, equal to the quotient of (x) the
product of (A) the number of Initial Common Shares multiplied by (B)
(i) the Per Share Purchase Price minus (ii) the lesser of (xx) the
Average Price calculated as of, or (yy) the average of the Daily
Prices for the five Business Days ending on and including, either of
the following dates, in the sole discretion of the Investor: (aa)
the date forty Business Days after and excluding the related
Restatement Date and (bb) the date forty Business Days after and
excluding any date on which Alloy files restated financial
statements with the SEC with respect to such Restatement divided by
(y) the price determined in clause (x)(B)(ii). In no event shall the
number of shares of Common Stock issuable under this Section 7(b)(i)
exceed the number of Initial Common Shares.
(ii) If a Restatement occurs after the date that is
sixty days following the effective date of the first Registration
Statement filed pursuant to the provisions of Section 4(a) to be
declared effective (provided that if the Registration Statement is
not available for all Common Shares during such sixty-day period or
if there should occur a "market stand-off" during such sixty-day
period, then such period shall be extended by one Business Day for
each Business Day that the Registration Statement is not so
available or Investor is subject to such "market stand-off") and
before the first (1st) anniversary of such effective date, then
Alloy shall issue to Investor, within three Business Days of the
date that Investor delivers a written notice to Alloy electing one
of the time periods specified in clause (aa) or (bb) below, an
additional number of shares of Common Stock, if any, equal to the
quotient of (x) the product of (A) the number of shares of Common
Stock purchased under this Agreement or under the Warrant and held
by Investor and its affiliates on the date that Investor delivers
notice to Alloy as is required above multiplied by (B) (i) the
Average Price calculated as of ten Business Days before and
excluding the Restatement Date minus (ii) the lesser of (xx) the
Average Price calculated as of, or (yy) the average of the Daily
Prices for the five Business Days ending on and including, either of
the following dates, in the sole discretion of the Investor: (aa)
the date forty Business Days after and excluding the related
Restatement Date and (bb) the date forty Business Days after and
excluding any date on which Alloy files restated financial
statements with the SEC with respect to such Restatement divided by
(y) the price determined in clause (x)(B)(ii) above. In no event
shall the number of shares of Common Stock issuable under this
Section 7(b)(ii) exceed the number of shares of Common Stock
purchased under this Agreement or under the Warrant and held by
Investor and its affiliates on such Restatement Date.
(iii) Alloy shall deliver to Investor a written notice
within five (5) Business Days of each Restatement, (a) stating the
date on which a Restatement has occurred and (b) including the
documents in which the Restatement was publicly disclosed. Only one
issuance of additional shares of
15
Common Stock pursuant to clause (i) or (ii) above with respect to
any announcement of an intention to restate and the subsequent
related filing of restated financial statements shall be permitted,
so long as the content of such announcement and of such subsequent
related filing shall not materially differ.
(iv) "Restatement" means that Alloy restates or
announces its intention to restate, in any material way, any portion
of its Closing Date Financial Statements as included (i) in a Form
10-K or Form 10-Q filed with the SEC in the form of an amendment
thereto, (ii) in a Form 8-K or in any other filing made with the
SEC, or (iii) in a press release or other form of media, except (A)
as is required as a result of a change occurring after the date of
this Agreement in (x) applicable law or (y) generally accepted
accounting principles promulgated by the Financial Accounting
Standards Board or the SEC, which change is implemented by Alloy in
the manner and at the time prescribed by such law or such generally
accepted accounting principle or (B) for pro forma financial
statements filed with the SEC in connection with an acquisition,
which restatement relates primarily to the financial statements of
the acquired company for the period prior to the effective date of
such acquisition.
(v) "Closing Date Financial Statements" means all
financial statements (including the notes thereto) filed by Alloy
with the SEC or publicly announced by Alloy on or before the Closing
Date.
(vi) "Restatement Date" means, at the option of and
pursuant to the determination of the Investor (as designated in a
notice from Investor to Alloy), any date on which a Restatement
occurs (including, with respect to any Restatement, the date of an
announcement by Alloy of its intention to restate any portion of its
financial statements or the date on which is filed an amended Form
10-K, amended Form 10-Q or Form 8-K or issuance of a press release
in respect of the matters described in such announcement or the date
on which such Restatement is filed with the SEC).
(vii) "Average Price" means, with respect to any
reference date, the average of the Daily Prices of the Common Stock
for the thirty (30) Business Days ending on and including such
reference date, subject to adjustment for stock splits,
recombinations, stock dividends and the like.
(viii) "Daily Price" means, on any date, the amount per
share of the Common Stock, equal to (i) the daily volume-weighted
average price on the Nasdaq or, if no such sale takes place on such
date, the average of the closing bid and asked prices on the Nasdaq
thereof on such date, in each case as reported by Bloomberg, L.P.
(or by such other person as the Investor and Alloy may agree), or
(ii) if such Common Stock is not then listed or admitted to trading
on the Nasdaq, the higher of (x) the book value per share thereof as
determined by any firm of independent public accountants of
recognized standing selected by the Board of Directors of Alloy as
of the last calendar day of any month ending within sixty (60)
calendar days preceding the date as of which the determination is to
be made
16
or (y) the fair value per share thereof determined in good faith by
an independent, nationally recognized appraisal firm selected by the
Investor and reasonably acceptable to Alloy (whose fees and expenses
shall be borne by Alloy), subject to adjustment for stock splits,
recombinations, stock dividends and the like.
(c) Alloy will provide Investor with a reasonable opportunity,
which will not be less than two (2) full Business Days, to review and
comment on any public disclosure by Alloy of information regarding this
Agreement and the transactions contemplated hereby, before such public
disclosure. Beginning on the date hereof and for so long as Investor owns
or has the right to purchase any Investment Securities and for a period of
ninety (90) calendar days thereafter, Alloy will promptly notify Investor
immediately following any press release or other widely disseminated
information that is given to stockholders, analysts, or members of the
media.
(d) Alloy will make all filings required by law with respect
to the transactions contemplated hereby.
(e) Alloy will comply with the terms and conditions of the
Warrant.
(f) For so long as Investor holds any Investment Securities,
at or promptly following the time of filing of each of its quarterly
reports on Form 10-Q with the SEC, Alloy will deliver to Investor a review
report relating to the final consolidated unaudited financial statements
contained therein, prepared by Xxxxxx Xxxxxxxx LLP, or another nationally
recognized accounting firm, in accordance with Statements of Auditing
Standard No. 71.
(g) Alloy will use commercially reasonable efforts to cause
the Common Shares to be eligible for book-entry transfer through The
Depository Trust Company (or any successor thereto) as soon as practicable
after the date of this Agreement and thereafter to use commercially
reasonable efforts to maintain such eligibility.
(h) If on any date the aggregate number of Common Shares
issuable under this Agreement and the Warrant exceeds the number of Common
Shares then reserved for issuance, then Alloy shall reserve for issuance
within three (3) Business Days of such date such additional number of
Common Shares as to make the total number of shares so reserved not less
than the aggregate number of Common Shares so issuable.
(i) Alloy will, within one (1) Business Day after and
excluding the Closing Date file a report with the SEC on Form 8-K with
respect to the material terms of this Agreement and the Warrant, attaching
this Agreement and the Warrant as exhibits thereto.
(j) Within three (3) Business Days of a written request by
Investor, Alloy will deliver a notice to Investor stating the increase, if
any, in the aggregate number of shares of Common Stock then outstanding
over the number outstanding specified in Section 3(l).
17
(k) Alloy will file a Notice of Sale of Securities pursuant to
Regulation D under the Securities Act and make all required filings
pursuant to state securities laws (which filings will be made within the
period of time required by the applicable federal and state securities
laws); provided, that Investor shall provide, in writing, all information
about Investor and its affiliates reasonably necessary in connection with
such filings.
(l) If Alloy implements a stockholder rights plan or "poison
pill," proper provision shall be made under such plan so that none of
holding or transfer of the Common Shares and exercise of the Warrant will
create, or may satisfy a condition for the creation of, any rights in any
person under such plan.
(m) Within ten (10) Business Days of a written request by
Investor, Alloy shall deliver to Investor a certificate of the Chief
Executive Officer and the Chief Financial Officer of Alloy dated as of the
date of delivery and stating that Alloy has complied in all material
respects with all of the covenants contained in Section 7 of this
Agreement, provided that Alloy shall be obligated to deliver no more than
one (1) such certificate in any six (6)-month period.
8. Consolidation, Merger, Etc. In case Alloy is a party to any
transaction that results in a Change of Control (as defined in the Warrant),
Investor and its assigns will, in addition to the rights contained in this
Agreement, have the rights set forth in the Warrant regarding such Change of
Control. Alloy agrees that it will not enter into an agreement with an Acquirer
resulting in a Change of Control unless such agreement expressly obligates the
Acquirer to assume all of Alloy's obligations under this Agreement and the
Warrant. Alloy will provide Investor with written notice of any proposed
transaction resulting in a Change of Control within one (1) Business Day after
such proposed transaction is publicly announced by any person. Thereafter, Alloy
will notify Investor promptly of any material developments with respect to such
transaction (i) that are publicly announced or (ii) if Investor has provided to
Alloy a confidentiality agreement in a form reasonably satisfactory to Alloy
prior to the occurrence of any such material development, that have not been
publicly announced, provided that, if Investor delivers such confidentiality
agreement following the date of the occurrence of any such material development
that has not been publicly announced, Alloy shall notify Investor of such
material development promptly following receipt of such confidentiality
agreement "Acquirer" means, in connection with any Change in Control, the
continuing or surviving corporation of a consolidation or merger with Alloy (if
other than Alloy), the transferee of all or substantially all of the properties
or assets of Alloy, the corporation consolidating with or merging into Alloy in
a consolidation or merger in connection with which the Common Stock of Alloy is
changed into or exchanged for stock or other securities of any other person or
cash or any other property, the entity or group acting in concert acquiring or
possessing the power to cast the majority of the eligible votes at a meeting of
Alloy's stockholders at which directors are to be elected or, in the case of a
capital reorganization or reclassification, Alloy.
9. Covenants of Investor. Investor hereby covenants and agrees with
Alloy that:
18
(a) Neither Investor, nor any of its affiliates, will at any
time offer or sell any Investment Securities other than pursuant to an
effective registration statement under the Securities Act or pursuant to
an available exemption therefrom.
(b) Neither Investor, nor any of its affiliates, will engage
in "short sales" (as defined in Rule 3b-3 of the Exchange Act) of Common
Stock or of securities issued by Alloy, which are convertible, exercisable
or exchangeable (directly or indirectly and with or without consideration)
into Common Stock.
(c) Investor agrees that it will not issue a press release or
other public media announcement regarding the transactions contemplated
hereby without the prior written approval of Alloy. For purposes of this
paragraph activities such as, but not limited to, the providing of
information in discussions by Investor or its affiliates or on the website
of Investor or its affiliates or the inclusion of information in marketing
materials distributed by Investor or its affiliates in the ordinary course
of business shall not constitute a press release or other public media
announcement.
(d) If requested by Alloy and a nationally-recognized
investment bank in a firm commitment underwritten public offering of
Common Stock with net proceeds of at least twenty-five million dollars
($25,000,000) to Alloy, after underwriter's discounts or commissions and
other fees or expenses, Investor shall enter into a "market stand-off"
agreement not to sell any Common Shares (other than Common Shares included
in the registration) during the ninety-five (95) day period (or such
shorter period, if so notified by Alloy in writing) commencing on a date
(the "Commencement Date") that is at least five (5) Business Days
following and excluding the date on which Alloy requests Investor to enter
into such a "market stand-off" agreement, provided that:
(i) If the closing of such public offering has not
occurred within 15 Business Days following the Commencement Date,
such "market stand-off" agreement shall be automatically terminated
as of the sixteenth (16th) Business Day following the Commencement
Date;
(ii) This Section 9(d) shall not apply unless:
(1) Investor together with its affiliates owns at least
the greater of one million (1,000,000) shares of Common
Stock or three percent (3%) of the Common Stock issued
and outstanding (in either case, including for such
purposes Common Shares issuable upon exercise of the
unexercised portion of the Warrant if the Daily Price on
the date such "market stand-off" agreement is entered
into is greater than the Warrant Price (as that term is
defined in the Warrant) in effect on such date) on the
date such "market stand-off" agreement is entered into,
(2) such "market stand-off" agreement is entered into on
or before the fourth (4th) anniversary of the date of
this Agreement,
19
(3) each of the following shall be bound by and have
entered into "market stand-off" agreements containing
substantially the same terms and conditions as the
agreement executed or to be executed by Investor, the
form of which agreement shall have been provided to
Investor at least five (5) Business Days before the
commencement of such "market stand-off" agreement:
(A) all executive officers, directors and
affiliates of Alloy, and
(B) all other holders of Common Stock (and their
affiliates) who acquired such Common Stock in a private
transaction with Alloy, who (individually, or together
as a "group" as that term is used in Section 13(d) of
the Exchange Act) beneficially own (excluding shares of
Common Stock acquired in open-market transactions) at
least the greater of one million (1,000,000) such shares
of Common Stock or three percent (3%) of the Common
Stock issued and outstanding on the commencement date of
such "market stand-off" agreement; and
(4) Alloy shall have notified Investor of the
Commencement Date at least five (5) Business Days but
not more than twenty (20) Business Days before such
Commencement Date;
(iii) Investor shall not be required to enter into a
subsequent "market stand-off" agreement under this Section 9(d)
prior to the first (1st) anniversary of the termination of the
"market stand-off" agreement entered into by Investor pursuant to
this Section 9(d) prior to such subsequent "market stand-off"
agreement, except that in the event that a "market stand-off"
agreement is automatically terminated pursuant to clause (i) above,
Investor may be required to enter into no more than one (1)
subsequent "market stand-off" agreement (a "Retry Stand-Off")
(whether or not such Retry Stand-Off agreement is automatically
terminated pursuant to clause (i) above) under this Section 9(d)
prior to the first (1st) anniversary of the date of such automatic
termination; provided, that notice of such Retry Stand-Off agreement
under Section 9(d)(ii)(4) shall be given no sooner than ten (10)
Business Days after the date of such automatic termination;
(iv) No Blackout Period shall be permitted during the
sixty (60) day period before and excluding the commencement date of
such "market stand-off" agreement. Alloy shall use its best efforts
to prevent a Blackout Period from occurring during the sixty (60)
day period after and excluding the termination of the stand-off
period provided in this Section 9(d). Any Blackout Period occurring
during either of the sixty-day periods described in this subsection
(iv) will not qualify as a Blackout Period permitted under Section
4(f) for purposes of the provisions of Section 4(h);
20
(v) Notwithstanding the provisions of subsection (iv)
above, no more than one Blackout Period shall be permitted during
any one (1)-year period which includes a Retry Stand-Off;
(vi) Alloy shall (and shall cause such underwriter to)
use its best efforts to cause such stand-off period not to exist or,
if it does exist, to terminate at the earliest practicable date; and
(vii) The obligations described in this Section 9(d)
shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms that may be
promulgated in the future, or a registration relating solely to a
transaction on Form S-4 or similar forms that may be promulgated in
the future.
10. Legend. Investor understands that the certificates or other
instruments representing the Investment Securities will bear a restrictive
legend composed of exactly the following words (and a stop transfer order may be
placed against transfer of such certificates or other instruments prohibiting
the transfer of such certificates or other instruments except in compliance with
such legend):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
COVERING SUCH SECURITIES, OR (2) THE SALE IS MADE IN ACCORDANCE WITH RULE
144 OR ANOTHER APPLICABLE EXEMPTION UNDER THE SECURITIES ACT."
The legend set forth above will be removed and Alloy will issue a
certificate without such legend to any holder of Investment Securities if,
unless otherwise required by state securities laws, (i) such shares are sold
pursuant to an effective Registration Statement under the Securities Act, or
pursuant to Rule 144 under the Securities Act or (ii) such holder provides Alloy
with an opinion of counsel, in a generally acceptable form, to the effect that a
public sale, assignment or transfer of the Investment Securities may be made
without registration under the Securities Act.
11. Conditions Precedent to Investor's Obligations. The obligations
of Investor hereunder are subject to the performance by Alloy of its obligations
hereunder and to the satisfaction of the following additional conditions
precedent, unless expressly waived in writing by Investor:
(a) On the Closing Date, (i) the representations and
warranties made by Alloy in this Agreement will be true and correct; (ii)
Alloy will have complied fully with all of the covenants and agreements in
this Agreement; and (iii) Investor will have
21
received a certificate of the Chief Executive Officer and the Chief
Financial Officer of Alloy dated such date and to such effect.
(b) On the Closing Date, Alloy will have delivered to Investor
an opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
reasonably satisfactory to Investor, dated the date of delivery,
substantially in the form attached hereto as Annex D.
(c) On the Closing Date, Investor will have received a letter
from Xxxxxx Xxxxxxxx LLP to the effect that, as of such date, it consents
to the inclusion in this Agreement of the Auditor Report.
(d) On the Closing Date, the Registrable Number will be duly
listed and admitted for trading on the Nasdaq NMS or, if not then listed,
Alloy will have made an application to list and admit for trading the
Registrable Number on the Nasdaq NMS the Registrable Number will be duly
listed and admitted for trading on the Nasdaq NMS as promptly as
practicable thereafter but no later than 10 days thereafter.
12. Conditions Precedent to Alloy's Obligations. The obligations of
Alloy hereunder are subject to the performance by Investor of its obligations
hereunder and to the satisfaction (unless expressly waived in writing by Alloy)
of the additional conditions precedent that, on the Closing Date: (i) the
representations and warranties made by Investor in this Agreement will be true
and correct; (ii) Investor will have complied fully with all the covenants and
agreements in this Agreement; and (iii) Alloy will have received on each such
date a certificate of an appropriate officer of Investor dated such date and to
such effect.
13. Fees and Expenses. Each of Investor and Alloy agrees to pay its
own expenses incident to the performance of its obligations hereunder,
including, but not limited to the fees, expenses and disbursements of such
party's counsel, except as is otherwise expressly provided in this Agreement.
14. Non-Performance.
(a) If Alloy, at any time, fails to deliver the Investment
Securities to Investor required to be delivered pursuant to this
Agreement, in accordance with the terms and conditions of this Agreement
or of the Warrant, for any reason other than the failure of any condition
precedent to Alloy's obligations hereunder or the failure by Investor to
comply with its obligations hereunder, then Alloy will (without limitation
to Investor's other remedies at law or in equity):
(i) indemnify and hold Investor harmless against any
loss, claim or damage, including without limitation, incidental and
consequential damages, arising from or as a result of such failure
by Alloy; and
(ii) reimburse Investor for all of its reasonable
out-of-pocket expenses, including fees and disbursements of its
counsel, incurred by Investor in connection with this Agreement and
the transactions contemplated herein and therein.
22
(b) If Investor fails to deliver the purchase price for the
Investment Securities at the Closing for any reason other than a failure
of any condition precedent to Investor's obligations hereunder or the
failure by Alloy to comply with its obligations hereunder, then Investor
will (without limitation to Alloy's other remedies at law or in equity)
reimburse Alloy for all of its reasonable, documented out-of-pocket
expenses, including fees and disbursements of its counsel, incurred by
Alloy in connection with this Agreement and the transactions contemplated
herein and therein.
15. Indemnification.
(a) Indemnification of Investor. Alloy hereby agrees to
indemnify Investor and each of its officers, directors, employees,
consultants, agents, attorneys, accountants, and affiliates and each
person that controls (within the meaning of Section 20 of the Exchange
Act) any of the foregoing persons (each an "Investor Indemnified Party")
against any claim, demand, action, liability, damages, loss, cost or
expense (including, without limitation, legal fees and expenses incurred
by such Investor Indemnified Party in investigating or defending any such
Proceeding) (a "Proceeding"), that it may reasonably incur in connection
with any of the transactions contemplated hereby arising out of or based
upon:
(i) any untrue or alleged untrue statement of a material
fact in a SEC Filing by Alloy or any of its affiliates or any person
acting on its or their behalf or omission or alleged omission to
state therein any material fact necessary in order to make the
statements, in the light of the circumstances under which they were
made, not misleading by Alloy or any of its affiliates or any person
acting on its or their behalf, other than any untrue or alleged
untrue statement of a material fact or omission or alleged omission
to state therein any material fact, in any case, resulting from any
information provided by Investor or any of its affiliates in writing
expressly for inclusion in such SEC Filing;
(ii) any of the representations or warranties made by
Alloy herein or under the Warrant being untrue or incorrect at the
time such representation or warranty was made; and
(iii) any breach or non-performance by Alloy of any of
its covenants, agreements or obligations under this Agreement and
Warrant;
provided, however, that the foregoing indemnity will not apply to any Proceeding
to the extent that it arises out of, or is based upon, the gross negligence or
willful misconduct of Investor in connection therewith.
(b) Indemnification of Alloy. Investor hereby agrees to
indemnify Alloy and each of its officers, directors, employees,
consultants, agents, attorneys, accountants, and affiliates and each
person that controls (within the meaning of Section 20 of the Exchange
Act) any of the foregoing persons against any Proceeding, that it may
reasonably incur in connection with any of the transactions contemplated
hereby arising out of or based upon:
23
(i) any untrue or alleged untrue statement of a material
fact included in an SEC Filing by Alloy or any of its affiliates or
any person acting on its or their behalf, which statement was
provided by Investor in writing expressly for inclusion in such SEC
Filing, or omission or alleged omission to state any such material
fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading by Alloy or
any of its affiliates or any person acting on its or their behalf;
(ii) any of the representations or warranties made by
Investor herein being untrue or incorrect at the time such
representation or warranty was made; and
(iii) any breach or non-performance by Investor of any
of its covenants, agreements or obligations under this Agreement;
provided, however, that the foregoing indemnity will not apply to any Proceeding
to the extent that it arises out of, or is based upon, the gross negligence or
willful misconduct of Alloy in connection therewith.
(c) Conduct of Claims.
(i) Whenever a claim for indemnification arises under
this Section 15, the party seeking indemnification (the "Indemnified
Party"), will notify the party from whom such indemnification is
sought (the "Indemnifying Party") in writing of the Proceeding and
the facts constituting the basis for such claim in reasonable
detail;
(ii) The Indemnifying Party shall have the right to
participate in and to assume the defense of any Proceeding;
provided, however, that the Indemnified Party shall have the right
to retain its own counsel (in addition to any local counsel), with
the reasonably incurred fees and expenses of one such counsel (in
addition to any local counsel) to be paid by the Indemnifying Party,
if representation of the Indemnified Party by the counsel retained
by the Indemnifying Party would be inappropriate under applicable
standards of professional conduct due to actual or potential
conflicting interests between the Indemnified Party and the other
party represented by such counsel in such Proceeding; and
(iii) No Indemnifying Party will, without the prior
written consent of the Indemnified Parties (which consent will not
be unreasonably withheld), settle or compromise or consent to the
entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Section 15 unless such
settlement, compromise or consent (A) includes an unconditional
release of each Indemnified Party from all liability arising out of
such litigation, investigation,
24
proceeding or claim and (B) does not include a statement as to or an
admission of fault, culpability or a failure to act by or on behalf
of any Indemnified Party.
16. Survival of the Representations, Warranties, etc. The respective
representations, warranties, and agreements made herein by or on behalf of the
parties hereto will remain in full force and effect, regardless of any
investigation made by or on behalf of the other party to this Agreement or any
officer, director or employee of, or person controlling or under common control
with, such party and will survive delivery of and payment for any Investment
Securities issuable hereunder.
17. Notices. All communications hereunder will be in writing and
delivered as set forth below.
(a) If sent to Investor, all communications will be deemed
delivered: if delivered by hand, on the day received by Investor; if sent
by reputable overnight courier, on the next Business Day; and if
transmitted by facsimile to Investor, on the date transmitted (provided
such facsimile is later confirmed), in each case to the following address
(unless otherwise notified in writing of a substitute address):
Xxxxxxxx International, Ltd.
c/o A. S. & K. Services Ltd.
Xxxxx Xxxxx
00 Xxxxx Xxxxxx
Xxxxxxxx XX XX
Bermuda
Attention: Xxxxxxxx Xxxxxx, Corporate Administrator
Telephone: 000-000-0000
Facsimile: 000-000-0000
with a copy to:
Xxxxxxxx Asset Management, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy (which copy will not constitute notice) to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0000 Xxx Xxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
25
(b) If sent to Alloy, all communications will be deemed
delivered: if delivered by hand, on the day received by Alloy; if sent by
reputable overnight courier, on the next Business Day; and if or
transmitted by facsimile to Alloy, on the date transmitted (provided such
facsimile is later confirmed), in each case to the following address
(unless otherwise notified in writing of a substitute address):
Alloy, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy (which copy will not constitute notice) to:
Alloy, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
000 Xxxxxxxxxxxx Xxx., X.X.
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To the extent that any funds will be delivered to SASM&F by wire transfer in
escrow for Alloy, unless otherwise instructed by SASM&F, such funds should be
delivered in accordance with the following wire instructions:
Citibank Private Banking
Xxx Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Service Officer: Xx. Xxxx Xxxxxx
Telephone: (000) 000-0000
Account Number: 200018513
ABA Number: 000000000
To the extent that any funds will be delivered to Alloy by wire transfer, unless
otherwise instructed by Alloy, such funds should be delivered in accordance with
the following wire instructions:
26
Alloy, Inc.
Account Number: 323880029
ABA Number: 000000000
Bank: X.X. Xxxxxx Xxxxx Bank
Account Name: Alloy Online Concentration Account
18. Miscellaneous.
(a) The parties may execute and deliver this Agreement as a
single document or in any number of counterparts, manually, by facsimile
or by other electronic means, including contemporaneous xerographic or
electronic reproduction by each party's respective attorneys. Each
counterpart will be an original, but a single document or all counterparts
together will constitute one instrument that will be the agreement. This
Agreement will become effective when each party executes and delivers this
Agreement to the other party.
(b) This Agreement will inure to the benefit of and be binding
upon the parties hereto, their respective successors and assigns and, with
respect to Section 15 hereof, will inure to the benefit of their
respective officers, directors, employees, agents, affiliates and
controlling persons, and no other person will have any right or obligation
hereunder. Alloy may not assign this Agreement. Notwithstanding anything
to the contrary in this Agreement, Investor may assign, pledge,
hypothecate or transfer any of the rights and associated obligations
contemplated by this Agreement (including, but not limited to, the Warrant
and the Common Shares), in whole or in part, at its sole discretion
(including, but not limited to, assignments, pledges, hypothecations and
transfers in connection with financing or hedging transactions with
respect to this Agreement, the Warrant, and the Common Shares), provided
that any such assignment, pledge, hypothecation or transfer must comply
with applicable federal and state securities laws. No person acquiring
Common Stock from Investor pursuant to a public market purchase will
thereby obtain any of the rights contained in this Agreement. This
Agreement constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties
hereto with respect to the subject matter of this Agreement. Except as
provided in this Section 18(b), this Agreement is not intended to confer
upon any person other than the parties hereto any rights or remedies
hereunder.
(c) This Agreement will be governed by, and construed in
accordance with, the internal laws of the State of New York, and each of
the parties hereto hereby submits to the non-exclusive jurisdiction of any
state or federal court in the Southern District of New York and any court
hearing any appeal therefrom, over any suit, action or proceeding against
it arising out of or based upon this Agreement (a "Related Proceeding").
Each of the parties hereto hereby waives any objection to any Related
Proceeding in such courts whether on the grounds of venue, residence or
domicile or on the ground that the Related Proceeding has been brought in
an inconvenient forum.
(d) Each party represents and acknowledges that, in the
negotiation and drafting of this Agreement and the other instruments and
documents required or contemplated hereby, it has been represented by and
relied upon the advice of counsel of
27
its choice. Each party hereby affirms that its counsel has had a
substantial role in the drafting and negotiation of this Agreement and
such other instruments and documents. Therefore, each party agrees that no
rule of construction to the effect that any ambiguities are to be resolved
against the drafter will be employed in the interpretation of this
Agreement and such other instruments and documents.
(e) Without prejudice to other rights or remedies hereunder
(including any specified interest rate), and except as otherwise expressly
set forth herein, interest will be due on any amount that is due pursuant
to this Agreement and has not been paid when due, calculated for the
period from and including the due date to but excluding the date on which
such amount is paid at the prime rate of U.S. money center banks as
published in The Wall Street Journal (or if The Wall Street Journal does
not exist or publish such information, then the average of the prime rates
of three U.S. money center banks agreed to by the parties) plus two
percent (2%).
(f) Investor and Alloy stipulate that the remedies at law of
the parties hereto in the event of any default or threatened default by
either party in the performance of or compliance with any of the terms of
this Agreement and the Warrant are not and will not be adequate and that,
to the fullest extent permitted by law, such terms may be specifically
enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the
terms hereof or otherwise.
(g) Any and all remedies set forth in this Agreement and the
Warrant: (i) will be in addition to any and all other remedies Investor or
Alloy may have at law or in equity, (ii) will be cumulative, and (iii) may
be pursued successively or concurrently as each of Investor and Alloy may
elect. The exercise of any remedy by Investor or Alloy will not be deemed
an election of remedies or preclude Investor or Alloy, respectively, from
exercising any other remedies in the future.
(h) Alloy agrees that the parties have negotiated in good
faith and at arms' length concerning the transactions contemplated herein,
and that Investor would not have agreed to the terms of this Agreement
without each and every of the terms, conditions, protections and remedies
provided herein and in the Warrant. Except as specifically provided
otherwise in this Agreement, Alloy's obligations to indemnify and hold
Investor harmless in accordance with Section 15 of this Agreement are
obligations of Alloy that Alloy promises to pay to Investor when and if
they become due. Alloy will record any such obligations on its books and
records in accordance with U.S. generally accepted accounting principles.
(i) This Agreement may be amended, modified or supplemented in
any and all respects, but only by a written instrument signed by Investor
and Alloy expressly stating that such instrument is intended to amend,
modify or supplement this Agreement.
(j) Each of the parties will cooperate with the others and use
its best efforts to prepare all necessary documentation, to effect all
necessary filings, to obtain all
28
necessary permits, consents, approvals and authorizations of all
governmental bodies and other third parties, and to do all other things
necessary to consummate the transactions contemplated by this Agreement.
(k) For purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires: (i) the terms
defined in this Agreement have the meanings assigned to them in this
Agreement and include the plural as well as the singular, and the use of
any gender herein will be deemed to include the other gender and neuter
gender of such term; (ii) accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with U.S. generally
accepted accounting principles; (iii) references herein to "Articles,"
"Sections," "Subsections," "Paragraphs" and other subdivisions without
reference to a document are to designated Articles, Sections, Subsections,
Paragraphs and other subdivisions of this Agreement, unless the context
will otherwise require; (iv) a reference to a Subsection without further
reference to a Section is a reference to such Subsection as contained in
the same Section in which the reference appears, and this rule will also
apply to Paragraphs and other subdivisions; (v) the words "herein,"
"hereof," "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular provision; (vi) the term
"include" or "including" will mean without limitation; (vii) the table of
contents to this Agreement and all section titles or captions contained in
this Agreement or in any Schedule or Exhibit annexed hereto or referred to
herein are for convenience only and will not be deemed a part of this
Agreement and will not affect the meaning or interpretation of this
Agreement; (viii) any agreement, instrument or statute defined or referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by
succession of comparable successor statues and references to all
attachments thereto and instruments incorporated therein; and (ix)
references to a person are also to its permitted successors and assigns
and, in the case of an individual, to his or her heirs and estate, as
applicable.
(l) If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or
public policy all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect. If the final judgment of a
court of competent jurisdiction or other authority declares that any term
or provision hereof is invalid, void or unenforceable, the parties agree
that the court making such determination will have the power to reduce the
scope, duration, area or applicability of the term or provision, to delete
specific words or phrases, or to replace any invalid, void or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto will negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the
fullest extent possible.
(m) Time will be of the essence in this Agreement.
29
(n) All dollar ($) amounts set forth herein and in the Warrant
refer to United States dollars. All payments hereunder and thereunder will
be made in lawful currency of the United States of America.
(o) Notwithstanding anything herein to the contrary, all
measurements and references related to share prices and share numbers
herein will be, in each instance, appropriately adjusted for stock splits,
recombinations, stock dividends and the like.
[SIGNATURE PAGE FOLLOWS]
30
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.
ALLOY, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
-----------------------------------
Title: Chief Financial Officer
----------------------------------
XXXXXXXX INTERNATIONAL, LTD., by its
duly authorized investment advisor,
XXXXXXXX ASSET MANAGEMENT, INC.
By: /s/ Xxxx X. Xxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxx
-----------------------------------
Title: Vice Chairman
----------------------------------
By: /s/ Xxxxx X. Xxxxx
-------------------------------------
Name: Xxxxx X. Xxxxx
-----------------------------------
Title: Deputy CEO
----------------------------------
31
ANNEX A
[FORM OF WARRANT TO PURCHASE
COMMON STOCK OF ALLOY, INC.]
A-1
ANNEX B
[FORM OF DELIVERY NOTICE]
[date]
Xxxxxxxx International, Ltd.
C/x Xxxxxxxx Asset Management, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Ladies and Gentlemen:
Reference is made to the Agreement (the "Agreement") dated as of
January 25, 2002 by and between Alloy, Inc. ("Alloy") and Xxxxxxxx
International, Ltd. ("Investor"). Capitalized terms not otherwise defined herein
will have the meanings ascribed thereto in the Agreement.
Attached hereto is an irrevocable letter to American Stock Transfer
& Trust Company, Alloy's transfer agent (the "Transfer Agent"), instructing the
Transfer Agent to issue to Investor thirteen (13) original stock certificates,
each representing one hundred thousand (100,000) shares of Common Stock and one
(1) original stock certificate representing sixty-seven thousand three hundred
sixty-six (67,366) shares of Common Stock, purchased by Investor on the date
hereof with a copy of the overnight courier air xxxx which will be used to ship
such stock certificates. We have the executed original stock certificates and
other documents required to be delivered in connection with the Closing Date.
Upon our confirmation of the payment of the thirty million dollar ($30,000,000)
aggregate purchase price therefor to Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP to
hold in escrow on our behalf, we will send the attached letter to the Transfer
Agent.
Attached hereto as Exhibit 1 is a true, correct and complete copy of
the most recent report of Xxxxxx Xxxxxxxx LLP to the Board of Directors and
Stockholders of Alloy, together with the accompanying consolidated financial
statements and schedules of Alloy, as such report appears in the most recent
Annual Report on Form 10-K/A filed by Alloy with the SEC, as well as all
Quarterly Reports on Form 10-Q filed by Alloy with the SEC since the date of
such Form 10-K/A, together with all amendments thereto.
ALLOY, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
B-1
Exhibit 1
AUDITOR REPORT
[see attached]
1-1
ANNEX C
[AUDITOR REPORT]
C-1
ANNEX D
[FORM OF LEGAL OPINION]
D-1
TABLE OF CONTENTS
1. Purchase and Sale .................................................... 1
2. Closing .............................................................. 2
3. Representations and Warranties of Alloy .............................. 3
4. Registration Provisions; Maximum Number .............................. 7
5. Representations and Warranties of Investor ........................... 11
6. Notice of Proposed Issuance of Capital Stock ......................... 12
7. Covenants of Alloy ................................................... 14
8. Consolidation, Merger, Etc ........................................... 18
9. Covenants of Investor ................................................ 18
10. Legend .............................................................. 21
11. Conditions Precedent to Investor's Obligations ...................... 21
12. Conditions Precedent to Alloy's Obligations ......................... 22
13. Fees and Expenses ................................................... 22
14. Non-Performance ..................................................... 22
15. Indemnification ..................................................... 23
16. Survival of the Representations, Warranties, etc .................... 25
17. Notices ............................................................. 25
18. Miscellaneous ....................................................... 27
ANNEXES
FORM OF WARRANT ......................................................... A
FORM OF DELIVERY NOTICE ................................................. B
AUDITOR REPORT .......................................................... C
FORM OF LEGAL OPINION ................................................... D
65 Day Notice ........................................................... 11
Acquirer ................................................................ 18
Agreement ............................................................... 1
Alloy ................................................................... 1
Articles ................................................................ 29
Auditor Report .......................................................... 7
Average Price ........................................................... 16
Blackout Period ......................................................... 9
Business Day ............................................................ 2
claim ................................................................... 6
Closing ................................................................. 1
Closing Date ............................................................ 1
Closing Date Financial Statements ....................................... 16
Commencement Date ....................................................... 19
Common Shares ........................................................... 2
Common Stock ............................................................ 1
Confidential Information ................................................ 14
Daily Price ............................................................. 16
debt .................................................................... 6
Exchange Act ............................................................ 2
Exercisable Number ...................................................... 10
Freebord ................................................................ 1
Indemnification Amount .................................................. 10
Indemnified Party ....................................................... 24
Indemnifying Party ...................................................... 24
Initial Common Shares ................................................... 1
Investment Securities ................................................... 2
Investor ................................................................ 1
Investor Indemnified Party .............................................. 23
Material Adverse Effect ................................................. 4
Maximum Number .......................................................... 10
Nasdaq .................................................................. 2
Nasdaq NMS .............................................................. 2
Notice Period ........................................................... 11
Offered Securities ...................................................... 12
Paragraphs .............................................................. 29
Per Share Purchase Price ................................................ 1
Preferred Stock ......................................................... 6
Proceeding .............................................................. 23
Proposed Issuance Notice ................................................ 12
Prospectus .............................................................. 8
Registrable Number ...................................................... 7
Registration Period ..................................................... 8
Registration Statement .................................................. 7
Related Proceeding ...................................................... 27
Required Registration Date .............................................. 7
Restatement ............................................................. 16
Restatement Date ........................................................ 16
Retry Stand-Off ......................................................... 20
Rule 144 ................................................................ 8
Sales Contract .......................................................... 9
SASM&F .................................................................. 2
SEC ..................................................................... 5
SEC Filing .............................................................. 5
Sections ................................................................ 29
Securities Act .......................................................... 5
Services Agreement ...................................................... 1
Stock Certificates ...................................................... 2
Subsections ............................................................. 29
Unsold Common Shares .................................................... 10
Warrant ................................................................. 1