Registration Rights Agreement - Alloy Designs Inc.
Execution Copy
REGISTRATION RIGHTS AGREEMENT
November 24, 1998
To each of the several Purchasers named in
Exhibit 1.01 to the Series A Convertible Preferred
Stock Purchase Agreement of even date herewith
(the "Purchasers")
Dear Madams and Sirs:
This will confirm that in consideration of the Purchasers' agreement on
the date hereof to purchase up to 1,487,843 shares (the "Preferred Shares") of
Series A Convertible Preferred Stock, par value $.01 per share ("Preferred
Stock"), of Alloy Designs, Inc., a Delaware corporation (the "Company"),
pursuant to the Series A Convertible Preferred Stock Purchase Agreement of even
date herewith (the "Purchase Agreement") between the Company and you, and as an
inducement to you to consummate the transactions contemplated by the Purchase
Agreement, the Company covenants and agrees with each of you as follows:
1. Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, par value $.01 per
share, of the Company, as constituted as of the date of this Agreement.
"Conversion Shares" shall mean shares of Common Stock issued or
issuable upon conversion of the Preferred Shares, and any shares of capital
stock received in respect thereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Purchasers" shall mean those persons listed on Exhibit 1.01 to the
Purchase Agreement.
"Registration Expenses" shall mean the expenses so described in
Section 8.
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"Restricted Stock" shall mean (1) the Conversion Shares, excluding
Conversion Shares which have been (a) registered under the Securities Act
pursuant to an effective registration statement filed thereunder and disposed of
in accordance with the registration statement covering them or (b) publicly sold
pursuant to Rule 144 under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section
8.
2. Restrictive Legend. Each certificate representing Preferred Shares,
Conversion Shares or Restricted Stock shall, except as otherwise provided in
this Section 2 or in Section 3, be stamped or otherwise imprinted with a legend
substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or applicable state securities laws.
These securities have been acquired for investment and not with a view to
distribution or resale, and may not be sold mortgaged, pledged, hypothecated or
otherwise transferred without an effective registration statement for such
securities under the Securities Act of 1933 and applicable state securities
laws, or the availability of an exemption from the registration provisions of
the Securities Act of 1933 and applicable state securities laws."
A certificate shall not bear such legend if in the opinion of counsel reasonably
satisfactory to the Company the securities being sold thereby may be publicly
sold without registration under the Securities Act.
3. Notice of Proposed Transfer. Prior to any proposed transfer of any
Preferred Shares, Conversion Shares or Restricted Stock (other than under the
circumstances described in Sections 4, 5 or 6), the holder thereof shall give
written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner of the proposed transfer and, if requested
by the Company, shall be accompanied by an opinion of counsel reasonably
satisfactory to the Company to the effect that the proposed transfer may be
effected without registration under the Securities Act, whereupon the holder of
such stock shall be entitled to transfer such stock in accordance with the terms
of its notice; provided, however, that no such opinion of counsel shall be
required for a transfer to one or more partners of the transferor (in the case
of a transferor that is a partnership), to one or more members of the transferor
(in the case of a transferor that is a limited liability company) or to an
affiliated corporation (in the case of a transferor that is a corporation);
provided, further, however, that any transferee other than a partner or
affiliate of the transferor shall execute and deliver to the Company a
representation letter in form reasonably satisfactory to the Company's counsel
to the effect that the transferee is acquiring Restricted Stock for its own
account, for investment purposes and without any view to distribution thereof.
Each certificate for Preferred Shares or Conversion Shares transferred as above
provided shall bear the legend set forth in Section 2, except that such
certificate shall not bear such legend if (i) such transfer is in accordance
with
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the provisions of Rule 144 (or any other rule permitting public sale without
registration under the Securities Act) or (ii) the opinion of counsel referred
to above is to the further effect that the transferee and any subsequent
transferee (other than an affiliate of the Company) would be entitled to
transfer such securities in a public sale without registration under the
Securities Act. The restrictions provided for in this Section 3 shall not apply
to securities which are not required to bear the legend prescribed by Section 2
in accordance with the provisions of that Section.
4. Required Registration.
(a) Beginning at any time three years from the date of this
Agreement, the holders of Restricted Stock constituting at least seventy-five
percent (75%) in interest of the total shares of Restricted Stock then
outstanding may request the Company to register under the Securities Act all or
any portion of the shares of Restricted Stock held by such requesting holder or
holders for sale in the manner specified in such notice, provided that the
aggregate price to the public of such offering would exceed $5,000,000 and
provided that if such request occurs prior to the Company's initial public
offering such request shall be subject to the opinion of the managing
underwriter that such an offering would not adversely affect the marketing of
such shares. For purposes of this Section 4 and Sections 5, 6, 13(a) and 13(d),
the term "Restricted Stock" shall be deemed to include the number of shares of
Restricted Stock which would be issuable to a holder of Preferred Shares upon
conversion of all shares of Preferred Stock held by such holder at such time;
provided, however, that the only securities which the Company shall be required
to register pursuant hereto shall be shares of Common Stock; provided, further,
however, that, in any underwritten public offering contemplated by this Section
4 or Sections 5 and 6, the holders of Preferred Shares shall be entitled to sell
such Preferred Shares to the underwriters for conversion and sale of the shares
of Common Stock issued upon conversion thereof. Notwithstanding anything to the
contrary contained herein, no request may be made under this Section 4 within
180 days after the effective date of a registration statement filed by the
Company covering a firm commitment underwritten public offering in which the
holders of Restricted Stock shall have been entitled to join pursuant to
Sections 5 or 6.
(b) Following receipt of any notice under this Section 4, the
Company shall immediately notify all holders of Restricted Stock and Preferred
Shares from whom notice has not been received and such holders shall then be
entitled within 30 days thereafter to request the Company to include in the
requested registration all or any portion of their shares of Restricted Stock.
The Company shall use its best efforts to register under the Securities Act, for
public sale in accordance with the method of disposition described in paragraph
(a) above, the number of shares of Restricted Stock specified in such notice
(and in all notices received by the Company from other holders within 30 days
after the giving of such notice by the Company). The Company shall be obligated
to register Restricted Stock pursuant to this Section 4 on two occasions only;
provided, however, that such obligation shall be deemed satisfied only when a
registration statement covering all shares of Restricted Stock specified in
notices received as aforesaid for sale in accordance with the method of
disposition specified by the requesting holders, shall have become effective or
if such registration statement has been
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withdrawn prior to the consummation of the offering at the request of the
Investors (other than as a result of a material adverse change in the business
or financial condition of the Company) and, if such method of disposition is a
firm commitment underwritten public offering, all such shares shall have been
sold pursuant thereto. The Company shall not be obligated to register, pursuant
to this Section 4, the Restricted Stock of any holder who fails to provide
promptly to the Company such information as the Company may reasonably request
at any time to enable the Company to comply with any applicable law or
regulation or to facilitate preparation of the registration statement.
(c) The Company (or at the option of the Company, the holders of
Common Stock) shall be entitled to include in any registration statement
referred to in this Section 4, for sale in accordance with the method of
disposition specified by the requesting holders, shares of Common Stock to be
sold by the Company for its own account or such other holders, except as and to
the extent that, in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would
adversely affect the marketing of the Restricted Stock to be sold. Except for
registration statements on Form S-4, S-8 or any successor thereto, the Company
will not file with the Commission any other registration statement with respect
to its Common Stock, whether for its own account or that of other stockholders,
from the date of receipt of a notice from requesting holders pursuant to this
Section 4 until the completion of the period of distribution of the registration
contemplated thereby.
(d) If the holders requesting such registration intend to distribute
the Restricted Stock covered by their request by means of an underwriting, they
shall so advise the Company as a part of their request made pursuant to this
Section 4 and the Company shall include such information in the written notice
referred to in paragraph (b) above. The right of any holder to registration
pursuant to this Section 4 shall be conditioned upon such holder's agreeing to
participate in such underwriting and to permit inclusion of such holder's
Restricted Stock in the underwriting. If such method of disposition is an
underwritten public offering, the holders of at least a majority in interest of
the shares of Restricted Stock to be sold in such offering may designate the
managing underwriter of such offering, subject to the approval of the Company,
which approval shall not be unreasonably withheld or delayed. A holder may elect
to include in such underwriting all or a part of the Restricted Stock it holds.
(e) If in the opinion of the managing underwriter the inclusion of
all of the Restricted Stock requested to be registered under this Section would
adversely affect the marketing of such shares, after any shares to be sold by
the Company or other holders of Common Stock have been excluded, shares to be
sold by the holders of Restricted Stock shall be excluded in such manner that
the shares to be sold shall be allocated among the selling holders pro rata
based on their ownership of Restricted Stock.
5. Incidental Registration. If the Company at any time (other than
pursuant to Section 4 or Section 6) proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Forms S-4, S-8 or another form not
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available for registering the Restricted Stock for sale to the public), each
such time it will give written notice to all holders of outstanding Restricted
Stock of its intention so to do. Upon the written request of any such holder
received by the Company within 30 days after the giving of any such notice by
the Company to register any of its Restricted Stock, the Company will use its
best efforts to cause the Restricted Stock as to which registration shall have
been so requested to be included in the securities to be covered by the
registration statement proposed to be filed by the Company, all to the extent
requisite to permit the sale or other disposition by the holder (in accordance
with such written request) of such Restricted Stock so registered. In the event
that any registration pursuant to this Section 5 shall be, in whole or in part,
an underwritten public offering of Common Stock, the number of shares of
Restricted Stock to be included in such an underwriting may be reduced (pro rata
among the requesting holders based upon the number of shares of Restricted Stock
held by such requesting holders) if and to the extent that the managing
underwriter shall be of the opinion that such inclusion would adversely affect
the marketing of the securities to be sold by the Company therein; provided,
however, that such number of shares of Restricted Stock shall not be reduced if
any shares are to be included in such underwriting for the account of any person
other than the Company or requesting Purchasers holding Restricted Stock.
Notwithstanding the foregoing provisions, the Company may withdraw any
registration statement referred to in this Section 5 without thereby incurring
any liability to the holders of Restricted Stock.
6. Registration on Form S-3. If at any time (i) a holder or holders of
Restricted Stock then outstanding request that the Company file a registration
statement on Form S-3 or any successor thereto for a public offering of all or
any portion of the shares of Restricted Stock held by such requesting holder or
holders, the reasonably anticipated aggregate price to the public of which would
exceed $750,000, and (ii) the Company is a registrant entitled to use Form S-3
or any successor thereto to register such shares, then the Company shall use its
best efforts to register under the Securities Act on Form S-3 or any successor
thereto, for public sale in accordance with the method of disposition specified
in such notice, the number of shares of Restricted Stock specified in such
notice. Whenever the Company is required by this Section 6 to use its best
efforts to effect the registration of Restricted Stock, each of the procedures
and requirements of Section 4 (including but not limited to the requirement that
the Company notify all holders of Restricted Stock from whom notice has not been
received and provide them with the opportunity to participate in the offering)
shall apply to such registration, provided, however, that there shall be no
limitation on the number of registrations on Form S-3 which may be requested and
obtained under this Section 6.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Company's obligation under this Agreement to register Restricted
Stock under the Securities Act on registration statements ("Registration
Statements") may, upon the reasonable determination of the Board of Directors
made only once during any 12-month period, be suspended in the event and during
such period as unforeseen circumstances (including without limitation (i) an
underwritten primary offering by the Company (which includes no secondary
offering) if the Company is advised in writing by its underwriters that the
registration of the Restricted Stock would have a material adverse effect on the
Company's offering, or (ii) pending negotiations relating to, or consummation
of, a transaction or the occurrence of an
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event which would require additional disclosure of material information by the
Company in Registration Statements or such other filings, as to which the
Company has a bona fide business purpose for preserving confidentiality or which
renders the Company unable to comply with Securities and Exchange Commission
(the "SEC") requirements) exist (such unforeseen circumstances being hereinafter
referred to as a "Suspension Event") which would make it impractical or
unadvisable for the Company to file the Registration Statements or such other
filings or to cause such to become effective. Such suspension shall continue
only for so long as such event is continuing but in no event for a period longer
than ninety (90) days. The Company shall notify the Purchasers of the existence
and nature of any Suspension Event.
7. Registration Procedures. If and whenever the Company is required by the
provisions of Sections 4, 5 or 6 to use its best efforts to effect the
registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to Section 4,
shall be on Form S-1 or other form of general applicability satisfactory to the
managing underwriter selected as therein provided) with respect to such
securities and use its best efforts to cause such registration statement to
become and remain effective for the period of the distribution contemplated
thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers' intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and each such
amendment and supplement thereto (in each case including all exhibits) and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter reasonably shall request;
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by
such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
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(f) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, and promptly prepare
and furnish to such seller a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Restricted Stock, such prospectus shall not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing;
(g) if the offering is underwritten and at the request of any seller
of Restricted Stock, use its best efforts to furnish to such seller on the date
that Restricted Stock is delivered to the underwriters for sale pursuant to such
registration: (i) a copy of an opinion dated such date of counsel representing
the Company for the purposes of such registration, addressed to the underwriters
and to such seller, to such effect as reasonably may be requested by counsel for
the underwriters, and (ii) a letter dated such date from the independent public
accountants retained by the Company, addressed to the underwriters and to such
seller, stating that they are independent public accountants within the meaning
of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration statement or
the prospectus, or any amendment or supplement thereof, comply as to form in all
material respects with the applicable accounting requirements of the Securities
Act, and such letter shall additionally cover such other financial matters
(including information as to the period ending no more than five business days
prior to the date of such letter) with respect to such registration as such
underwriters reasonably may request;
(h) upon reasonable notice and at reasonable times make available
for inspection by each seller of Restricted Stock, any underwriter participating
in any distribution pursuant to such registration statement, and any attorney,
accountant or other agent retained by such seller or underwriter, reasonable
access to all financial and other records, pertinent corporate documents and
properties of the Company, as such parties may reasonably request, and cause the
Company's officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or agent in
connection with such registration statement;
(i) cooperate with the selling holders of Restricted Stock and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Restricted Stock to be sold, such certificates to
be in such denominations and registered in such names as such holders or the
managing underwriters may request at least two business days prior to any sale
of Restricted Stock; and
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(j) permit any holder of Restricted Stock which holder, in the sole
and exclusive judgment, exercised in good faith, of such holder, might be deemed
to be a controlling person of the Company, to participate in good faith in the
preparation of such registration or comparable statement and to require the
insertion therein of material, furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel should be included.
For purposes of Section 7(a) and 7(b) and of Section 4(c), the
period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby and
180 days after the effective date thereof.
In connection with each registration hereunder, the sellers of
Restricted Stock will furnish to the Company in writing such information
requested by the Company with respect to themselves and the proposed
distribution by them as reasonably shall be necessary in order to assure
compliance with federal and applicable state securities laws and to make the
registration statement correct, accurate and complete in all respects with
respect to such sellers; provided, however, that this requirement shall not be
deemed to limit any disclosure obligation arising out of any seller's
relationship to the Company if one of such seller's agents or affiliates is an
officer, director or control person of the Company. In addition, the sellers
shall, if requested by the Company, execute such other agreements, which are
reasonably satisfactory to them and which shall contain such provisions as may
be customary and reasonable in order to accomplish the registration of the
Restricted Stock.
In connection with each registration pursuant to Sections 4, 5 or 6
covering an underwritten public offering, the Company and each seller agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of the Company's size and investment stature.
8. Expenses. All expenses incurred by the Company in complying with
Sections 4, 5 and 6, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees and expenses of one counsel for the selling holders of Restricted Stock in
connection with the registration of Restricted Stock, fees of the National
Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents
and registrars, costs of any insurance which might be obtained, but excluding
any Selling Expenses, are called "Registration Expenses." All underwriting
discounts and selling commissions applicable to the sale of Restricted Stock and
the fees and expenses of more than one counsel for the selling holders of
Restricted Stock in connection with the registration of Restricted Stock are
called "Selling Expenses."
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The Company will pay all Registration Expenses in connection with
each registration statement under Sections 4, 5 or 6. All Selling Expenses in
connection with each registration statement under Sections 4, 5 or 6 shall be
borne by the participating sellers in proportion to the number of shares sold by
each, or by such participating sellers other than the Company (except to the
extent the Company shall be a seller) as they may agree.
9. Indemnification.
(a) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 4, 5 or 6, the Company will, to
the extent permitted by law, indemnify and hold harmless each holder of
Restricted Stock, its officers and directors, each underwriter of such
Restricted Stock thereunder and each other person, if any, who controls such
seller or underwriter within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which such holder,
officer, director, underwriter or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in any registration statement under which such Restricted Stock was registered
under the Securities Act pursuant to Sections 4, 5 or 6, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, (ii) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by the
Company filed in any state or other jurisdiction in order to qualify any or all
of the Restricted Stock under the securities laws thereof (any such application,
document or information herein called a "Blue Sky Application"), (iii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, (iv)
any violation by the Company or its agents of any rule or regulation promulgated
under the Securities Act applicable to the Company or its agents and relating to
action or inaction required of the Company in connection with such registration,
or (v) any failure to register or qualify the Restricted Stock in any state
where the Company or its agents has affirmatively undertaken or agreed in
writing that the Company (the undertaking of any underwriter chosen by the
Company being attributed to the Company) will undertake such registration or
qualification on the seller's behalf (provided that in such instance the Company
shall not be so liable if it has undertaken its best efforts to so register or
qualify the Restricted Stock) and will reimburse each such holder, and such
officer and director, each such underwriter and each such controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case (i) if
and to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with information furnished by any such
seller, any such underwriter or any such controlling person in writing
specifically for use in such registration statement or prospectus, or (ii) in
the case of a sale directly by such holder of Restricted Stock (including a sale
of such Restricted Stock through any underwriter retained by such holder of
Restricted Stock to engage in a distribution solely on behalf of such holder of
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Restricted Stock), such untrue statement or alleged untrue statement or omission
or alleged omission was contained in a preliminary prospectus and corrected in a
final or amended prospectus, and such holder of Restricted Stock failed to
deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of Restricted Stock to the person asserting any such
loss, claim, damage or liability in any case where such delivery is required by
the Securities Act or any state securities laws.
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 4, 5 or 6, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each other holder of
Restricted Stock, each underwriter and each person who controls any underwriter
within the meaning of the Securities Act, against all losses, claims, damages or
liabilities, joint or several, to which the Company or such officer, director,
other seller, underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement under which such Restricted Stock was registered
under the Securities Act pursuant to Sections 4, 5 or 6, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or any Blue Sky Application or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse the Company and each such officer, director, other seller,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, provided, however, that such seller will be
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such seller, as such, furnished
in writing to the Company by such seller specifically for use in such
registration statement or prospectus, and provided, further, however, that the
liability of each seller hereunder shall be limited to the proportion of any
such loss, claim, damage, liability or expense which is equal to the proportion
that the public offering price of the shares sold by such seller under such
registration statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds received
by such seller from the sale of Restricted Stock covered by such registration
statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 9 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 9 if and to the extent the indemnifying party is prejudiced by such
omission. In case
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any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate in and, to the extent it shall wish, to
assume and undertake the defense thereof with counsel satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 9 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected; provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that the interests of the indemnified party reasonably may be deemed
to conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 9 but is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 9 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling holder or any such controlling
person in circumstances for which indemnification is provided under this Section
9, then, and in each such case, the Company and such holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Restricted Stock offered by the registration statement
bears to the public offering price of all securities offered by such
registration statement, and the Company is responsible for the remaining
portion; provided, however, that, in any such case, (A) no such holder of
Restricted Stock will be required to contribute any amount in excess of the
proceeds received from the sale of all such Restricted Stock offered by it
pursuant to such registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.
(e) The indemnities provided in this Section 9 shall survive the
transfer of any Restricted Stock by such holder.
10. Changes in Common Stock or Preferred Stock. If, and as often as, there
is any change in the Common Stock or the Preferred Stock by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions
<PAGE> 12
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hereof so that the rights and privileges granted hereby shall continue with
respect to the Common Stock or the Preferred Stock as so changed.
11. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Stock to the public without registration, at all times
after 90 days after any registration statement covering a public offering of
securities of the Company under the Securities Act shall have become effective,
the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Restricted Stock without
registration.
12. Representations and Warranties of the Company. The Company represents
and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Charter or By-laws of the Company or any provision of any
indenture, agreement or other instrument to which it or any or its properties or
assets is bound, conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture, agreement
or other instrument or result in the creation or imposition of any lien, charge
or encumbrance of any nature whatsoever upon any of the properties or assets of
the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent the
indemnification provisions herein may be deemed not enforceable.
13. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto (including without
limitation transferees of any
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Preferred Shares or Restricted Stock), whether so expressed or not; provided,
however, that registration rights conferred herein on the holders of Preferred
Shares or Restricted Stock shall only inure to the benefit of a transferee of
Preferred Shares or Restricted Stock if (i) there is transferred to such
transferee at least 50,000 shares of Restricted Stock (appropriately adjusted
for any subdivision or combination) originally issued pursuant to the Purchase
Agreement to the direct or indirect transferor of such transferee or (ii) such
transferee is a partner, shareholder or affiliate of a party hereto and
provided, further, that such transferee executes a writing agreeing to be bound
by the provisions of this Agreement.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage prepaid, or telexed, in the case of
non-U.S. residents, addressed as follows:
if to the Company or any other party hereto, at the address of such
party set forth in the Purchase Agreement or in a certain Stockholders'
Agreement by and among the parties hereto dated as of the date hereof with a
copy to the Company's counsel as indicated therein;
if to any subsequent holder of Preferred Shares or Restricted Stock,
to it at such address as may have been furnished to the Company in writing by
such holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Preferred Shares or
Restricted Stock) or to the holders of Preferred Shares or Restricted Stock (in
the case of the Company) in accordance with the provisions of this paragraph.
(c) This Agreement shall be construed and enforced in accordance
with and governed by the General Corporation Law of the State of Delaware as to
matters within the scope thereof, and as to all other matters shall be governed
by and construed in accordance with the internal law of The Commonwealth of
Massachusetts.
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the holders
of at least seventy-five percent (75%) in interest of the then outstanding
shares of Restricted Stock. Notwithstanding the foregoing, no such amendment or
modification shall be effective if and to the extent that such amendment or
modification grants to any one or more Purchasers any rights more favorable than
any rights granted to all other Purchasers or otherwise treats any one or more
Purchasers differently than all other Purchasers.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) The obligations of the Company to register shares of Restricted
Stock under Sections 4, 5 or 6 shall terminate six years after completion of an
underwritten public
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offering of shares of Common Stock in which the net proceeds received by the
Company shall be at least $15 million and the per share price paid by the public
for such shares shall represent a valuation of the Company of not less than
$75,000,000.
(g) If requested in writing by the underwriters for the initial
underwritten public offering of securities of the Company, each holder of
Restricted Stock who is a party to this Agreement shall agree not to sell
publicly any shares of Restricted Stock or any other shares of Common Stock
(other than shares of Restricted Stock or other shares of Common Stock being
registered in such offering), without the consent of such underwriters, for a
period of not more than 180 days following the effective date of the
registration statement relating to such offering; provided, however, that all
persons entitled to registration rights with respect to shares of Common Stock
who are not parties to this Agreement and all executive officers and directors
of the Company shall also have agreed not to sell publicly their Common Stock
under the circumstances and pursuant to the terms set forth in this Section
13(g).
(h) The Company shall not grant to any third party any registration
rights comparable to or more favorable than any of those contained herein, so
long as any of the registration rights under this Agreement remains in effect.
(i) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this letter, whereupon this Agreement shall be a
binding agreement between the Company and you.
Very truly yours,
ALLOY DESIGNS, INC.
By:
--------------------------
Name:
Title:
AGREED TO AND ACCEPTED as of the date
first above written.
Purchasers named in Exhibit 1.01 to
the Purchase Agreement:
BRAND EQUITY VENTURES I, L.P.
By: Brand Equity Partners I, LLC,
General Partner
By:
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Manager
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J. Edward Diamond