<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1999
REGISTRATION NO. 333-74159
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ALLOY ONLINE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5961 04-3310676
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
115 WEST 30TH STREET, #201
NEW YORK, NY 10001
(212) 244-4307
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MATTHEW C. DIAMOND
CHIEF EXECUTIVE OFFICER
ALLOY ONLINE, INC.
115 WEST 30TH STREET, #201
NEW YORK, NY 10001
(212) 244-4307
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
JONATHAN L. KRAVETZ, ESQ. ALEXANDER D. LYNCH, ESQ.
MINTZ, LEVIN, COHN, FERRIS, KENNETH R. MCVAY, ESQ.
GLOVSKY AND POPEO, P.C. BROBECK, PHLEGER & HARRISON LLP
ONE FINANCIAL CENTER 1633 BROADWAY, 47TH FLOOR
BOSTON, MA 02111 NEW YORK, NY 10019
(617) 542-6000 (212) 581-1600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth an itemization of all estimated expenses,
all of which we will pay, in connection with the issuance and distribution of
the securities being registered:
<TABLE>
<CAPTION>
UNDERWRITER AMOUNT
- ----------- ------
<S> <C>
SEC Registration Fee........................................ $12,788
Nasdaq National Market Listing Fee..........................
NASD Fee.................................................... 5,100
Printing and engraving fees.................................
Registrant's counsel fees and expenses......................
Accounting fees and expenses................................
Blue Sky expenses and counsel fees..........................
Transfer agent and registrar fees...........................
Miscellaneous...............................................
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our restated certificate of incorporation (the "Charter") provides that we
shall indemnify and advance expenses to the fullest extent permitted by Section
145 of the Delaware General Corporation Law ("DGCL"), as amended from time to
time, to each person who is or was one of our directors or officers and the
heirs, executors and administrators of such a person. Any expenses, including
attorneys' fees, incurred by a person who is or was one of our directors or
officers, and the heirs, executors and administrators of such a person in
connection with defending any such proceeding in advance of its final
disposition shall be paid by us; provided, however, that if the DGCL requires an
advancement of expenses incurred by an indemnitee in his capacity as a director
or officer, and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan, shall be made only upon delivery to us of an undertaking by or on behalf
of such indemnitee, to repay all amounts so advanced, if it shall ultimately be
determined that such indemnitee is not entitled to be indemnified for such
expenses. Notwithstanding the aforementioned indemnification provisions, we may,
at the discretion of our chief executive officer, enter into indemnification
agreements with directors or officers.
Section 145 of the DGCL provides that a corporation has the power to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the corporation, by
reason of the fact that such director or officer or former director or officer
is or was a director, officer, employee or agent of the corporation, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by them in connection with such
action, suit or proceeding, if such person shall have acted in good faith and in
a manner reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding,
provided that such person had no reasonable cause to believe his or her conduct
was unlawful, except that, if such action shall be in the right of the
corporation, no such indemnification shall be provided as to any claim, issue or
matter as to which such person shall have been judged to have been liable to the
corporation unless and to the extent that the Court of Chancery of the State of
Delaware, or any court in which such suit or action was brought, shall determine
upon application that, in view of all of the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as such
court shall deem proper.
II-1
<PAGE> 3
The Charter, which will be filed prior to the completion of our initial
public offering of securities, contains a provision to limit the personal
liability of our directors to the fullest extent permitted by Section 102(b)(7)
of the DGCL, as amended. In addition, the Restated bylaws, which will become
effective prior to the completion of the offering of securities, provide that we
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, other than an action
by us or in our right, by reason of the fact that he is or was one of our
directors, officers, employees or agents, or is or was serving at our request as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
our best interests, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. See Exhibit 3.1,
"Restated Certificate of Incorporation of Alloy."
As permitted by the DGCL, the Charter, which will be filed prior to the
completion of the offering, provides that, subject to certain limited
exceptions, none of our directors shall be liable to us or our stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (1) for any breach of the director's duty of loyalty to us or our
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) for the unlawful
payment of dividends on or redemption or repurchase of our capital stock or (4)
for any transaction from which the director derived an improper personal
benefit. The effect of this provision is to limit our ability and our
stockholders' ability through stockholder derivative suits on our behalf to
recover monetary damages against a director for the breach of certain fiduciary
duties as a director, including breaches resulting from grossly negligent
conduct. In addition, the Charter and Restated bylaws provide that we shall, to
the fullest extent permitted by the DGCL, indemnify all of our directors and
officers and that we may, to the extent permitted by the DGCL, indemnify our
employees and agents.
We have agreed to indemnify the underwriters against certain liabilities,
including civil liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Set forth in chronological order is information regarding shares of common
stock issued and options and warrants granted by the registrant since March
1996. Also included is the consideration, if any, received by the registrant for
such shares and options and information relating to the section of the
Securities Act of 1933, as amended (the "Securities Act"), or rule of the
Securities and Exchange Commission under which exemption from registration was
claimed.
During the course of 1997, the registrant issued 1,200,000 shares of common
stock at a purchase price of $0.125 per share (after giving effect to the 4000
for 1 stock split in June 1997) to Samuel A. Gradess, Chief Financial Officer
and a Director of the registrant, for aggregate consideration of $150,000.
In June 1997, the registrant issued and sold a total of 2,422,189 shares of
common stock in a private placement to 36 investors at a price of $0.98 per
share for an aggregate gross consideration of $2,365,000. Purchasers in this
offering also received warrants to purchase additional shares of common stock
for nominal consideration that provided the purchasers with dilution protection
in the event of certain future sales of equity securities by the registrant.
These warrants were exercised in July 1998 and, in accordance with their terms,
a total of 630,817 additional shares of common stock were issued to the
purchasers upon such exercise.
In June 1997, the registrant's 1997 Employee, Director and Consultant Stock
Option Plan was approved and adopted by the Board of Directors and the
stockholders of the registrant. In November 1998, the Board of Directors and the
stockholders of the registrant approved and adopted an amendment to the plan
that increased the total number of shares of common stock for which options may
be granted under it. Since June 1997, options to purchase a total of 690,392
shares of common stock have been granted. As of March 5, 1999, 321,352 of these
options had been exercised.
II-2
<PAGE> 4
In January 1998, the registrant issued and sold a total of 864,499 shares
of common stock in a private placement to 19 investors at a price of $1.95 per
share for an aggregate gross consideration of $1,688,500.
In March 1998, the registrant issued a warrant to purchase 10,000 shares of
common stock with an exercise price of $3.00 per share to Mr. Ronald Demer. The
warrant was issued in connection with a lease financing agreement. As of March
5, 1999 the warrant had not been exercised. Mr. Demer has given notice that he
will exercise these warrants upon consummation of the offering.
In May 1998, the registrant issued warrants to purchase a total of 426,152
shares of common stock in connection with a private placement of promissory
notes to 31 investors. The warrants had an initial exercise price of $6.165 per
share. The exercise price was reduced to $5.68 per share following the issue and
sale of shares of Series A convertible preferred stock in November 1998 and
February 1999. The registrant issued an additional warrant to purchase 22,429
shares of common stock to Ladenburg Thalmann & Co. Inc., as a portion of the
consideration for its services as placement agent for this offering of notes and
warrants. This warrant contained substantially the same terms as the warrants
issued to the purchasers. All of the warrants described in this paragraph are
outstanding and none have been exercised.
In November 1998 and February 1999 the registrant issued and sold a total
of 1,487,843 shares of Series A convertible preferred stock in a private
placement to two investors at a price of $3.391 per share for an aggregate gross
consideration of $5,045,275.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 14 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part
of this Registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE> 5
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
*1.1 Form of Underwriting Agreement
*3.1 Restated Certificate of Incorporation of the Registrant
*3.2 Restated Bylaws of the Registrant
*4.1 Form of Common Stock Certificate
*4.2 See Exhibits 3.1 and 3.2 for provisions of the Restated
Certificate of Incorporation and Restated Bylaws of the
Registrant defining the rights of holders of common stock of
the Registrant
*5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. with respect to the legality of securities being
registered
10.1 Agreement of Lease, dated November 30, 1998, between One
Fifteen West Assoc., L.P. and the Registrant
*10.2 1997 Employee, Director and Consultant Stock Option Plan, as
amended
+10.3 Fulfillment Services Agreement, dated July 23, 1997, by and
between Harrison Fulfillment Services, Inc. and the
Registrant
+10.4 Amendment to Fulfillment Services Agreement, dated September
1, 1997, by and between Harrison Fulfillment Services, Inc.
and the Registrant
+10.5 Second Amendment to Fulfillment Services Agreement, dated
October 9, 1998, by and between Harrison Fulfillment
Services, Inc. and the Registrant
+10.6 Agreement, dated June 19, 1998, between iName, a Division of
GlobeComm, Inc., and the Registrant
+10.7 Services Agreement, dated February 9, 1999, between OneSoft
Corporation and the Registrant
+10.8 Mailing List Purchase Agreement, dated February 22, 1999,
between Just Nikki, Inc. and the Registrant
+10.9 Standard Merchant Terms and Insertion Order, dated November
18, 1998 between Yahoo! Shopping and the Registrant
+10.10 Top Tier E-Sales Agreement Form, dated December 9, 1998,
between Catalog City and the Registrant
+10.11 Agreement, dated March 8, 1999, between Internet Fashion
Mall, LLC and the Registrant
+10.12 Memorandum of Understanding, dated January 28, 1999, between
Primedia Consumer Marketing and the Registrant
+*10.13 Memorandum of Understanding between Elektra Entertainment
Group and the Registrant
10.14 [Intentionally Blank]
**10.15 Stockholder and Voting Agreement, dated as of June 30, 1997,
between the stockholders named on Schedule I thereto and
Samuel A. Gradess, James K. Johnson, Jr. and Matthew Diamond
**10.16 Amendment No. 1, dated August 25, 1997, to Stockholder and
Voting Agreement, dated June 30, 1997
**10.17 Stockholder Agreement, dated November 24, 1998, between the
stockholders named on Schedule I thereto and Samuel A.
Gradess, James K. Johnson, Jr. and Matthew Diamond
*10.18 Employment Agreement, effective as of the closing of this
offering, between Matthew C. Diamond and the Registrant
*10.19 Employment Agreement, effective as of the closing of this
offering, between James K. Johnson, Jr. and the Registrant
*10.20 Employment Agreement, effective as of the closing of this
offering, between Samuel A. Gradess and the Registrant
**10.21 Employment letter, dated February 22, 1999, between Neil
Vogel and the Registrant
</TABLE>
II-4
<PAGE> 6
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
**10.22 Non-Competition and Confidentiality Agreement, dated
November 24, 1998, between Matthew C. Diamond and the
Registrant
**10.23 Non-Competition and Confidentiality Agreement, dated
November 24, 1998, between James K. Johnson, Jr. and the
Registrant
**10.24 Non-Competition and Confidentiality Agreement, dated
November 24, 1998, between Samuel A. Gradess and the
Registrant
10.25 Non-Competition and Confidentiality Agreement, dated
February 22, 1999, between Neil Vogel and the Registrant
10.26 Master Equipment Lease Agreement between Ronald Demer and
the Registrant dated March 11, 1998
+10.27 Agreement, dated April 6, 1998, between Ladenburg Thalmann &
Co. Inc. and the Registrant
+10.28 Agreement, dated October 12, 1998, between Ladenburg
Thalmann & Co. Inc. and the Registrant
10.29 [Intentionally Blank]
**10.30 Non-Qualified Stock Option Agreement, dated August 14, 1998,
to purchase 250,000 shares of common stock of the
Registrant, between the Registrant and Robert E. Kerson
**10.31 Letter Agreement, dated August 14, 1998, between Robert E.
Kerson and the Registrant
*10.32 Form of Non-Qualified Stock Option Agreement to purchase
shares of common stock of Alloy Online, Inc.
*10.33 Form of Incentive Stock Option Agreement to purchase shares
of common stock of Alloy Online, Inc.
10.34 Form of 1997 Stock and Warrant Subscription Agreement
10.35 Form of May 1998 Subscription Agreement between the
Registrant and each of Peter Graham, Peter M. Graham
Purchase Money Plan, and Neil Vogel
10.36 Form of May 1998 Promissory Note issued by the Registrant to
Peter Graham, Peter M. Graham Purchase Money Plan, and Neil
Vogel
10.37 Form of Warrant, dated May 13, 1998, to purchase common
stock of the Registrant issued to Ladenburg Thalmann & Co.
Inc., Peter Graham, Peter M. Graham Purchase Money Plan, and
Neil Vogel
**10.38 Series A Convertible Preferred Stock Purchase Agreement,
dated November 24, 1998, between Brand Equity Ventures I,
L.P. and the Registrant
**10.39 Registration Rights Agreement, dated November 24, 1998, by
and among Brand Equity Ventures I, L.P. and Alloy Online,
Inc.
10.40 Flexible Standardized 401(k) Profit Sharing Plan Adoption
Agreement
**23.1 Consent of Arthur Andersen LLP
**23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. (see Exhibit 5.1)
**24.1 Powers of Attorney (See Signature Page)
**27.1 Financial Data Schedule
</TABLE>
- ------------
* To be filed by amendment.
** Previously filed with the SEC.
+ Confidential treatment requested as to certain portions, which portions have
been omitted and filed separately with the SEC.
(B) FINANCIAL STATEMENT SCHEDULES
Financial Statements Schedules are omitted because the information is
included in the Financial Statements or notes thereto.
II-5
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has duly caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on March 23, 1999.
ALLOY ONLINE, INC.
By: /s/ MATTHEW C. DIAMOND
------------------------------------
Matthew C. Diamond
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MATTHEW C. DIAMOND Chief Executive Officer, March 23, 1999
- ------------------------------------------------ Treasurer and Director
Matthew C. Diamond (principal executive
officer)
* Chief Operating Officer, March 23, 1999
- ------------------------------------------------ President and Director
James K. Johnson, Jr.
* Chief Financial Officer, March 23, 1999
- ------------------------------------------------ Secretary and Director
Samuel A. Gradess (principal financial and
accounting officer)
* Director March 23, 1999
- ------------------------------------------------
Peter M. Graham
* Director March 23, 1999
- ------------------------------------------------
David Yarnell
</TABLE>
* By executing his name hereto on March 23, 1999, Matthew C. Diamond is signing
this document on behalf of the persons indicated above pursuant to powers of
attorney duly executed by such persons and filed with the Securities and
Exchange Commission.
By: /s/ MATTHEW C. DIAMOND
----------------------------------
Matthew C. Diamond
(Attorney-in-Fact)
II-6
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ------------
<C> <S> <C>
*1.1 Form of Underwriting Agreement
*3.1 Restated Certificate of Incorporation of the Registrant
*3.2 Restated Bylaws of the Registrant
*4.1 Form of Common Stock Certificate
*4.2 See Exhibits 3.1 and 3.2 for provisions of the Restated
Certificate of Incorporation and Restated Bylaws of the
Registrant defining the rights of holders of common stock of
the Registrant
*5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. with respect to the legality of securities being
registered
10.1 Agreement of Lease, dated November 30, 1998, between One
Fifteen West Assoc., L.P. and the Registrant
*10.2 1997 Employee, Director and Consultant Stock Option Plan, as
amended
+10.3 Fulfillment Services Agreement, dated July 23, 1997, by and
between Harrison Fulfillment Services, Inc. and the
Registrant
+10.4 Amendment to Fulfillment Services Agreement, dated September
1, 1997, by and between Harrison Fulfillment Services, Inc.
and the Registrant
+10.5 Second Amendment to Fulfillment Services Agreement, dated
October 9, 1998, by and between Harrison Fulfillment
Services, Inc. and the Registrant
+10.6 Agreement, dated June 19, 1998, between iName, a Division of
GlobeComm, Inc., and the Registrant
+10.7 Services Agreement, dated February 9, 1999, between OneSoft
Corporation and the Registrant
+10.8 Mailing List Purchase Agreement, dated February 22, 1999,
between Just Nikki, Inc. and the Registrant
+10.9 Standard Merchant Terms and Insertion Order, dated November
18, 1998 between Yahoo! Shopping and the Registrant
+10.10 Top Tier E-Sales Agreement Form, dated December 9, 1998,
between Catalog City and the Registrant
+10.11 Agreement, dated March 8, 1999, between Internet Fashion
Mall, LLC and the Registrant
+10.12 Memorandum of Understanding, dated January 28, 1999, between
Primedia Consumer Marketing and the Registrant
+*10.13 Memorandum of Understanding between Elektra Entertainment
Group and the Registrant
10.14 [Intentionally Blank]
**10.15 Stockholder and Voting Agreement, dated as of June 30, 1997,
between the stockholders named on Schedule I thereto and
Samuel A. Gradess, James K. Johnson, Jr. and Matthew Diamond
**10.16 Amendment No. 1, dated August 25, 1997, to Stockholder and
Voting Agreement, dated June 30, 1997
**10.17 Stockholder Agreement, dated November 24, 1998, between the
stockholders named on Schedule I thereto and Samuel A.
Gradess, James K. Johnson, Jr. and Matthew Diamond
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ------------
<C> <S> <C>
*10.18 Employment Agreement, effective as of the closing of this
offering, between Matthew C. Diamond and the Registrant
*10.19 Employment Agreement, effective as of the closing of this
offering, between James K. Johnson, Jr. and the Registrant
*10.20 Employment Agreement, effective as of the closing of this
offering, between Samuel A. Gradess and the Registrant
**10.21 Employment letter, dated February 22, 1999, between Neil
Vogel and the Registrant
**10.22 Non-Competition and Confidentiality Agreement, dated
November 24, 1998, between Matthew C. Diamond and the
Registrant
**10.23 Non-Competition and Confidentiality Agreement, dated
November 24, 1998, between James K. Johnson, Jr. and the
Registrant
**10.24 Non-Competition and Confidentiality Agreement, dated
November 24, 1998, between Samuel A. Gradess and the
Registrant
10.25 Non-Competition and Confidentiality Agreement, dated
February 22, 1999, between Neil Vogel and the Registrant
10.26 Master Equipment Lease Agreement between Ronald Demer and
the Registrant dated March 11, 1998
+10.27 Agreement, dated April 6, 1998, between Ladenburg Thalmann &
Co. Inc. and the Registrant
+10.28 Agreement, dated October 12, 1998, between Ladenburg
Thalmann & Co. Inc. and the Registrant
10.29 [Intentionally Blank]
**10.30 Non-Qualified Stock Option Agreement, dated August 14, 1998,
to purchase 250,000 shares of common stock of the
Registrant, between the Registrant and Robert E. Kerson
**10.31 Letter Agreement, dated August 14, 1998, between Robert E.
Kerson and the Registrant
*10.32 Form of Non-Qualified Stock Option Agreement to purchase
shares of common stock of Alloy Online, Inc.
*10.33 Form of Incentive Stock Option Agreement to purchase shares
of common stock of Alloy Online, Inc.
10.34 Form of 1997 Stock and Warrant Subscription Agreement
10.35 Form of May 1998 Subscription Agreement between the
Registrant and each of Peter Graham, Peter M. Graham
Purchase Money Plan, and Neil Vogel
10.36 Form of May 1998 Promissory Note issued by the Registrant to
Peter Graham, Peter M. Graham Purchase Money Plan, and Neil
Vogel
10.37 Form of Warrant, dated May 13, 1998, to purchase common
stock of the Registrant issued to Ladenburg Thalmann & Co.
Inc., Peter Graham, Peter M. Graham Purchase Money Plan, and
Neil Vogel
**10.38 Series A Convertible Preferred Stock Purchase Agreement,
dated November 24, 1998, between Brand Equity Ventures I,
L.P. and the Registrant
**10.39 Registration Rights Agreement, dated November 24, 1998, by
and among Brand Equity Ventures I, L.P. and Alloy Online,
Inc.
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ------------
<C> <S> <C>
10.40 Flexible Standardized 401(k) Profit Sharing Plan Adoption
Agreement
**23.1 Consent of Arthur Andersen LLP
**23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. (see Exhibit 5.1)
**24.1 Powers of Attorney (See Signature Page)
**27.1 Financial Data Schedule
</TABLE>
- ------------
* To be filed by amendment.
** Previously filed with the SEC.
+ Confidential treatment requested as to certain portions, which portions have
been omitted and filed separately with the SEC.
<PAGE> 1
EXHIBIT 10.1
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
AGREEMENT OF LEASE, made as of this 30TH day of NOVEMBER, 1998, between ONE
FIFTEEN WEST ASSOCIATES, L.P., located at 1235 BROADWAY, NEW YORK, N.Y. 10001
party of the first part, hereinafter referred to as OWNER, and ALLOY DESIGNS,
INC. party of the second part, hereinafter referred to as TENANT,
WITNESSETH: Owner hereby Leases to Tenant and Tenant hereby hires from Owner
ROOM 207 in the building known as 115 WEST 30TH STREET in the Borough of
MANHATTAN, City of New York, for the term of 3 years w/ option for 2 years more
as per paragraph #83 of the attached rider (or until such term shall sooner
cease and expire as hereinafter provided), to commence on the FIRST day of
JANUARY nineteen hundred and NINETY-NINE, and to end on the THIRTY-FIRST day of
DECEMBER TWO THOUSAND ONE, both dates inclusive, at an annual rental rate of
EIGHTY-SEVEN THOUSAND ($87,000.00) DOLLARS, payable in monthly installments of
SEVEN THOUSAND TWO HUNDRED FIFTY ($7,250.00) DOLLARS for the 1st year then 4%
increase compounded yearly as per para #60 of attached rider which Tenant agrees
to pay in lawful money of the United States which shall be legal tender in
payment of all debts and dues, public and private, at the time of payment, in
equal monthly installments in advance on the first day of each month during said
term, at the office of Owner or such other place as Owner may designate, without
any set off or deduction whatsoever, except that Tenant shall pay the first
monthly installment(s) on the execution hereof (unless this Lease be a renewal).
In the event that, at the commencement of the term of this Lease, or thereafter,
Tenant shall be in default in the payment of rent to Owner pursuant to the terms
of another Lease with Owner or with Owner's predecessor in interest, Owner may
at Owner's option and without notice to Tenant add the amount of such arrears to
any monthly installment of rent payable hereunder and the same shall be payable
to Owner as additional rent.
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
as follows:
RENT: 1. Tenant shall pay the rent as above and as hereinafter
provided.
OCCUPANCY: 2. Tenant shall use and occupy demised premises for DESIGN AND
GENERAL OFFICES, provided such use is in accordance with the
certificate of occupancy for the building, if any, and for
no other purpose.
ALTERATIONS:
3. Tenant shall make no changes in or to the demised premises of
any nature without Owner's prior written consent. Subject to the prior written
consent of Owner, and to the provisions of this article, Tenant, at Tenant's
expense, may make alterations, installations, additions or improvements which
are nonstructural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises using
contractors or
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mechanics first approved in each instance by Owner. Tenant shall, at its
expense, before making any alterations, additions, installations or improvements
obtain all permits, approval and certificates required by any governmental or
quasi-governmental bodies and (upon completion) certificates of final approval
thereof and shall deliver promptly duplicates of all such permits. approvals and
certificates to Owner. Tenant agrees to carry and will cause Tenant's
contractors and sub-contractors to carry such workman's compensation, general
liability, personal and property damage insurance as Owner may require. If any
mechanic's lien is filed against the demised premises, or the building of which
the same forms a part, for work claimed to have been done for, or materials
furnished to, Tenant, whether or not done pursuant to this article, the same
shall be discharged by Tenant within thirty days thereafter, at Tenant's
expense, by payment or filing the bond required by law or otherwise. All
fixtures and all paneling, partitions, railings and like installations,
installed in the premises at any time, either by Tenant or by Owner on Tenant's
behalf shall, upon installation, become the property of Owner and shall remain
upon and be surrendered with the demised premises. Nothing in this Article shall
be construed to give Owner title to or to prevent Tenant's removal of trade
fixtures, moveable office furniture and equipment, but upon removal of any such
from the premises or upon removal of other installations as may be required by
Owner, Tenant shall immediately and at its expense, repair and restore the
premises to the condition existing prior to installation and repair any damage
to the demised premises or the building due to such removal. All property
permitted or required to be removed by Tenant at the end of the term remaining
in the premises after Tenant's removal shall be deemed abandoned and may, at the
election of Owner, either be retained as Owner's property or removed from the
premises by Owner, at Tenant's expense.
REPAIRS:
4. Owner shall maintain and repair the exterior of and the public
portions of the building. Tenant shall, throughout the term of this Lease, take
good care of the demised premises including the bathrooms and lavatory
facilities (if the demised premises encompass the entire floor of the building)
and the windows and window frames and, the fixtures and appurtenances therein
and at Tenant's sole cost and expense promptly make all repairs thereto and to
the building, whether structural or non-structural in nature, caused by or
resulting from the carelessness, omission, neglect or improper conduct of
Tenant, Tenant's servants, employees, or licensees, and whether or not arising
from such Tenant conduct or omission, when required by other provisions of this
Lease, including Article 6. Tenant shall also repair all damage to the building
and the demised premises caused by the moving of Tenant's fixtures, furniture or
equipment. All the aforesaid repairs shall be of quality or class equal to the
original work or construction. If Tenant fails, after ten days notice, to
proceed with due diligence to make repairs required to be made by Tenant, the
same may be made by the Owner at the expense of Tenant, and the expenses thereof
incurred by Owner shall be collectible, as additional rent, after rendition of a
bill or statement therefor. If the demised premises be or become infested with
vermin, Tenant shall, at its expense, cause the same to be exterminated. Tenant
shall give owner prompt notice of any defective condition in any plumbing,
heating system or electrical lines located in the demised premises and following
such notice, Owner shall remedy the condition with due diligence, but at the
expense of Tenant, if repairs are necessitated by damage or injury attributable
to Tenant, Tenant's servants, agents, employees, or licensees as aforesaid.
Except as specifically provided in Article 9 or elsewhere in this Lease, there
shall be no allowance to the
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Tenant for a diminution of rental value and no liability on the part of Owner by
reason of inconvenience, annoyance or injury to business arising from Owner,
Tenant or others making or failing to make any repairs, alterations, additions
or improvements in or to any portion of the building or the demised premises or
in and to the fixtures, appurtenances or equipment thereof. It is specifically
agreed that Tenant shall not be entitled to any set off or reduction of rent by
reason of any failure of Owner to comply with the covenants of this or any other
article of this Lease. Tenant agrees that Tenant's sole remedy at law in such
instance will be by way of any action for damages for breach of contract. The
provisions of this Article 4 with respect to the making of repairs shall not
apply in the ease of fire or other casualty with regard to which Article 9
hereof shall apply.
WINDOW CLEANING:
5. Tenant will not clean nor require, permit, suffer or allow any
window in the demised premises to be cleaned from the outside in violation of
Section 202 of the New York State Labor Law or any other applicable law or of
the Rules of the Board of Standards and Appeals, or of any other Board or body
having or asserting jurisdiction.
REQUIREMENTS OF LAW, FIRE INSURANCE:
6. Prior to the commencement of the Lease term, if Tenant is then
in possession, and at all times thereafter Tenant shall, at Tenant's sole cost
and expense, promptly comply with all present and future laws, orders and
regulations of all state, federal, municipal and local governments, departments,
commissions and boards and any direction of any public officer pursuant to law,
and all orders, files and regulations of the New York Board of Fire
Underwriters, or the Insurance Services Office, or any similar body which shall
impose any violation, order or duty upon Owner or Tenant with respect to the
demised premises, arising out of Tenant's use or manner of use thereof, or, with
respect to the building, if arising out of Tenant's use or manner of use of the
demised premises of the building (including the use permitted under the Lease).
Except as provided in Article 30 hereof, nothing herein shall require Tenant to
make structural repairs or alterations unless Tenant has, by its manner of use
of the demised premises or method of operation therein, violated any such laws,
ordinances, orders, rules, regulations or requirements with respect thereto.
Tenant shall not do or permit any act or thing to be done in or to the demised
premises which is contrary to law, or which will invalidate or be in conflict
with public liability, fire or other policies of insurance at any time carried
by or for the benefit of Owner. Tenant shall not keep anything in the demised
premises except as now or hereafter permitted by the Fire Department, Board of
Fire Underwriters, Fire Insurance Rating Organization and other authority having
jurisdiction, and then only in such manner and such quantity so as not to
increase the rate for fire insurance applicable to the building, nor use the
premises in a manner which will increase the insurance rate for the building or
any property located therein over that in effect prior to the commencement of
Tenant's occupancy. If by reason of failure to comply with the foregoing the
fire insurance rate shall, at the beginning of this Lease or at any time
thereafter, be higher than it otherwise would be, then Tenant shall reimburse
Owner, as additional rent hereunder, fix that portion of all fire insurance
premiums thereafter paid by Owner which shall have been charged because of such
failure by Tenant. In any action or proceeding wherein Owner and Tenant are
parties, a schedule or "make-up" or rate for the building or demised premises
issued by a body making fire insurance rates applicable to
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<PAGE> 4
said premises shall be conclusive evidence of the facts therein stated and of
the several items and charges in the fire insurance rates then applicable to
said premises. Tenant shall not place a load upon any floor of the demised
premises exceeding the floor load per square foot area which it was designed to
carry and which is allowed by law. Owner reserves the right to prescribe the
weight and position of all safes, business machines and mechanical equipment.
Such installations shall be placed and maintained by Tenant, at Tenant's
expense, in settings sufficient, in Owner's judgement, to absorb and prevent
vibration, noise and annoyance.
SUBORDINATION:
7. This Lease is subject and subordinate to all ground or
underlying Leases and to all mortgages which may now or hereafter affect such
Leases or the real property of which demised premises are a part and to all
renewals, modifications, consolidations, replacements and extensions of any such
underlying Leases and mortgages. This clause shall be self-operative and no
further instrument or subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any Lease or the real property
of which the demised premises are a part. In confirmation of such subordination,
Tenant shall from time to time execute promptly any certificate that Owner may
request.
TENANT'S LIABILITY INSURANCE PROPERTY LOSS, DAMAGE, INDEMNITY:
8. Owner or its agents shall not be liable for any damage to
property of Tenant or of others entrusted to employees of the building, nor for
loss of or damage to any property of Tenant by theft or otherwise, nor for any
injury or damage to persons or property resulting from any cause of whatsoever
nature, unless caused by or due to the negligence of Owner, its agents, servants
or employees; Owner or its agents shall not be liable for any damage caused by
other Tenants or persons in, upon or about said building or caused by operations
in connection of any private, public or quasi public work. If at any time any
windows of the demised premises are temporarily closed, darkened or bricked up
(or permanently closed, darkened or bricked up, if required by law) for any
reason whatsoever including, but not limited to Owner's own acts, Owner shall
not be liable for any damage Tenant may sustain thereby and Tenant shall not be
entitled to any compensation therefor nor statement or diminution of rent nor
shall the same release Tenant from its obligations hereunder nor constitute an
eviction. Tenant shall indemnify and save harmless Owner against and from all
liabilities, obligations, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including reasonable
attorney's fees, paid, suffered or incurred as a result of any breach by Tenant,
Tenant's agents, contractors, employees, or licensees, of any covenant or
condition of this Lease, or the carelessness, negligence or improper conduct of
the Tenant, Tenant's agents, contractors, employees, or licensees. Tenant's
liability under this Lease extends to the acts and omissions of any sub-Tenant,
and any agent, contractor, employee, or licensee of any sub-Tenant. In case any
action or proceeding is brought against Owner by reason of any such claim,
Tenant, upon written notice from Owner, will, at Tenant's expense, resist or
defend such action or proceeding by counsel approved by Owner in writing, such
approval not to be unreasonably withheld.
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DESTRUCTION, FIRE AND OTHER CASUALTY:
9. (a) If the demised premises or any part thereof shall be
damaged by fire or other casualty, Tenant shall give immediate notice thereof to
Owner and this Lease shall continue in full force and effect except as
hereinafter set forth. (b) If the demised premises are partially damaged or
rendered partially unusable by fire or other casualty, the damages thereto shall
be repaired by and at the expense of Owner and the rent and other items of
additional rent, until such repair shall be substantially completed, shall be
apportioned from the day following the casualty according to the part of the
premises which is usable. (c) If the demised premises are totally damaged or
rendered wholly unusable by fire or other casualty, then the rent and other
items of additional rent as hereinafter expressly provided shall be
proportionately paid up to the time of the casualty and thenceforth shall cease
until the date when the premises shall have been repaired and restored by Owner
(or sooner reoccupied in part by Tenant then rent shall be apportioned as
provided in subsection (b) above), subject to Owner's right to elect not to
restore the same as hereinafter provided. (d) If the demised premises are
rendered wholly unusable or (whether or not the demised premises are damaged in
whole or in part) if the building shall be so damaged that Owner shall decide to
demolish it or to re-build it, then, in any of such events, Owner may elect to
terminate this Lease by written notice to Tenant, given within 90 days after
such fire or casualty, or 30 days after adjustment of the insurance claim for
such fire or casualty, whichever is sooner, specifying a date for the expiration
of the Lease, which date shall not be more than (60) days after the giving of
such notice, and upon the date specified in such notice the term of this Lease
shall expire as fully and completely as if such date were the date set forth
above for the termination of this Lease and Tenant shall forthwith quit,
surrender and vacate the premises without prejudice however, to Owner's rights
and remedies against Tenant under the Lease provisions in effect prior to such
termination, and any rent owing shall be paid up to such date and any payments
of rent made by Tenant which were on account of any period subsequent to such
date shall be returned to Tenant. Unless Owner shall serve a termination notice
as provided for herein, Owner shall make the repairs and restorations under the
conditions of (b) and (c) hereof with all reasonable expedition, subject to
delays due to adjustment of insurance claims, labor troubles and causes beyond
Owner's control. After any such casualty, Tenant shall cooperate with Owner's
restoration by removing from the premises as promptly as reasonably possible,
all of Tenant's salvageable inventory and movable equipment, furniture, and
other property. Tenant's liability for rent shall resume five (5) days after
written notice from Owner that the premises are substantially ready for Tenant's
occupancy. (e) Nothing contained herein above shall relieve Tenant from
liability that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, including Owners obligation to restore under
subparagraph (b) above, each party shall look first to any insurance in its
favor before making any claim against the other party for recovery for loss or
damage resulting from fire or other casualty, and to the extent that such
insurance is in force and collectible and to the extent permitted by law, Owner
and Tenant each, hereby releases and waives all right of recovery with, respect
to subparagraphs (b), (d) and (e) above, against the other or any one claiming
through or under each of them by way of subrogation or otherwise. The release
and waiver herein referred to shall be deemed to include any loss or damage to
the demised premises and/or to any personal property, equipment, trade fixtures,
goods and merchandise located therein. The foregoing release and waiver shall be
in force only if both releasers' insurance policies contain a clause providing
that such a release or waiver shall not invalidate the insurance, if and to the
extent, that
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such waiver can be obtained only by the payment of additional premium, then the
party benefiting from the waiver shall pay such premium within ten days after
written demand or shall be deemed to have agreed that the party obtaining
insurance coverage shall be free of any further obligation under the provisions
hereof with respect to waiver of subrogation. Tenant acknowledges that Owner
will not carry insurance on Tenant's furniture and/or furnishings or any
fixtures or equipment, improvements, or appurtenances removable by Tenant and
agrees that Owner will not be obligated to repair any damage thereto or replace
the same. (f) Tenant hereby waives the provisions of Section 227 of the Real
Property Law and agrees that the provisions of this article shall govern and
control in lieu thereof.
EMINENT DOMAIN
10. If the whole or any part of the demised premises shall be
acquired or condemned by Eminent Domain for any public or quasi public use or
purpose, then and in that event, the term of this Lease shall cease and
terminate from the date of title vesting in such proceeding and Tenant shall
have no claim for the value of any unexpired term of said Lease. Tenant shall
have the right to make an independent claim to the condemning authority for the
value of Tenant's moving expenses and personal property, trade fixtures and
equipment, provided Tenant is entitled pursuant to the terms of the Lease to
remove such property, trade fixtures and equipment at the end of the term and
provided further such claim does not reduce Owner's award.
ASSIGNMENT, MORTGAGE, ETC.:
11. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this agreement, nor
underlet, or suffer or permit the demised premises or any part thereof to be
used by others, without the prior written consent of Owner in each instance.
Transfer of the majority of the stock of a corporate Tenant or the majority
partnership interest of a partnership Tenant shall be deemed an assignment. If
this Lease be assigned, or if the demised premises or any part thereof be
underlet or occupied by anybody other than Tenant, Owner or occupant, and apply
the net amount collected to the rent herein reserved, but no such assignment,
underletting, occupancy or collection shall be deemed a waiver of this covenant,
or the acceptance of the assignee, under Tenant or occupant as Tenant, or a
release of Tenant from the further performance by Tenant of covenants on the
part of Tenant herein contained. The consent by Owner to an assignment or
underletting shall not in any way be construed to relieve Tenant from obtaining
the express consent in writing of Owner to any further assignment or
underletting.
ELECTRIC CURRENT:
12. Rates and conditions in respect to submetering or rent
inclusion, as the case may be, to be added in RIDER attached hereto. Tenant
covenants and agrees that at all times its use of electric current shall not
exceed the capacity of existing feeders to the building or the risers or wiring
installation and Tenant may not use any electrical equipment which, in Owner's
opinion, reasonably exercised, will overload such installations or interfere
with the use thereof by other Tenants of the building. The change at any time of
the character of electric
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service shall in no way make Owner liable or responsible to Tenant, for any
loss, damages or expenses which Tenant may sustain.
ACCESS TO PREMISES:
12. Owner or Owner's agents shall have the right (but shall not
be obligated) to enter the demised premises in any emergency at any time, and,
at other reasonable times, to examine the same and to make such repairs,
replacements and improvements as Owner may deem necessary and reasonably
desirable to any portion of the building or which Owner may elect to perform in
the premises after Tenant's failure to make repairs or perform any work which
Tenant is obligated to perform under this Lease, or for the purpose of complying
with laws, regulations and other directions of governmental authorities. Tenant
shall permit Owner to use and maintain and replace pipes and conduits in and
through the demised premises and to erect new pipes and conduits therein
provided, wherever possible, they are within walls or otherwise concealed. Owner
may, during the progress of any work in the demised premises, take all necessary
materials and equipment into said premises without the same constituting an
eviction nor shall the Tenant be entitled to any abatement of rent while such
work is in progress nor to any damages by reason of loss or interruption of
business or otherwise. Throughout the term hereof Owner shall have the right to
enter the demised premises at reasonable hours for the purpose of showing the
same to prospective purchasers or mortgagees of the building, and during the
last six months of the term for the purpose of showing the same to prospective
Tenants and may, during said six months period, place upon the demised premises
the usual notices "to Let" and "For Sale" which notices Tenant shall permit to
remain thereon without molestation. If Tenant is not present to open and permit
an entry into the demised premises, Owner or Owner's agents may enter the same
whenever such entry may be necessary or permissible by master key or forcibly
and provided reasonable care is exercised to safeguard Tenant's property, such
entry shall not render Owner or its agents liable therefor, nor in any event
shall the obligations of Tenant hereunder by affected. If during the last month
of the term Tenant shall have removed all or substantially all of Tenant's
property therefrom. Owner may immediately enter, alter, renovate or redecorate
the demised premises without limitation or abatement of rent, or incurring
liability to Tenant for any compensation and such act shall have no effect on
this Lease or Tenant's obligation hereunder.
VAULT, VAULT SPACE, AREA:
14. No Vaults, vault space or area, whether or not enclosed or
covered, not within the property line of the building is Leased hereunder
anything contained in or indicated on any sketch, blue print or plan, or
anything contained elsewhere in this least to the contrary notwithstanding.
Owner makes no representation as to the location of the property line of the
building. All vaults and vault space and all such areas not within the property
line of the building, which Tenant may be permitted to use and/or occupy, is to
be used and/or occupied under a revocable license, and if any such license by
revoked, or if the amount of such space or area be diminished or required by any
federal, state or municipal authority or public utility, Owner shall not be
subject to any liability nor shall Tenant be entitled to any compensation or
diminution or abatement of rent, nor shall such revocation, diminution or
requisition be deemed constructive or actual eviction. Any tax, fee or charge of
municipal authorities for such vault or area shall be paid by Tenant, if used by
Tenant, whether or not specifically Leased hereunder.
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OCCUPANCY:
15. Tenant will not at any time use or occupy the demised
premises in violation of the certificate of occupancy issued for the building of
which the demised premises are a part. Tenant has inspected the premises and
accepts them as is, subject to the riders annexed hereto with respect to Owner's
work, if any. In any event, Owner makes no representation as to the condition of
the premises and Tenant agrees to accept the same subject to violations, whether
or not of record. If any governmental license or permit shall be required for
the proper and lawful conduct of Tenant's business, Tenant shall be responsible
for and shall procure and maintain such license or permit.
BANKRUPTCY:
16. (a) Anything elsewhere in this Lease to the contrary
notwithstanding, this Lease may be canceled by Owner by sending of a written
notice to Tenant within a reasonable time after the happening of any one or more
of the following events: (1) the commencement of a case in bankruptcy or under
the laws of any state naming Tenant as the debtor; or (2) the making by Tenant
of an assignment or any other arrangement for the benefit of creditors under any
state statute. Neither Tenant nor any person claiming through or under Tenant,
or by reason of any statute or order of court, shall thereafter be entitled to
possession of the premises demised but shall forthwith quit and surrender the
premises. If this Lease shall be assigned in accordance with its terms, the
provisions of this Article 16 shall be applicable only to the party then owning
Tenant's interest in this Lease.
(b) it is stipulated and agreed that in the event of the
termination of this Lease pursuant to (a) hereof, Owner shall forthwith,
notwithstanding any other provisions of this Lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rental reserved hereunder for the unexpired portion of
the term demised and the fair and reasonable rental value of the demised
premises for the same period. In the computation of such damages the difference
between any installment of rent becoming due hereunder after the date of
termination and the fair and reasonable rental value of the demised premises for
the period for which such installment was payable shall be discounted to the
date of termination at the rate of four percent (4%) per annum. If such premises
or any part thereof be relet by the Owner for the unexpired term of said Lease,
or any part thereof, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount of rent reserved upon such
reletting shall be deemed to be the fair and reasonable rental value for the
part or the whole of the premises so re-let during the term of the re-letting.
Nothing herein contained shall limit or prejudice the right of the Owner to
prove for and obtain as liquidated damages by reason of such termination, an
amount equal to the maximum allowed by any statute or rule of law in effect at
the time when, and governing the proceedings in which, such damages are to be
proved, whether or not such amount be greater, equal to, or less than the amount
of the difference referred to above.
DEFAULT:
17. (1) If Tenant defaults in fulfilling any of the covenants of
this Lease other than the covenants for the payment of rent or additional rent;
or if the demised premises becomes "or if this Lease be rejected under ss.235 of
Title 11 of the U.S. Code (bankruptcy
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code);" or if any execution or attachment shall be issued against Tenant or any
of Tenant's property whereupon the demised premises shall be taken or occupied
by someone other than Tenant; or if Tenant shall make default with respect to
any other Lease between Owner and Tenant; or if Tenant shall have failed, after
five (5) days written notice, to redeposit with Owner any portion of the
security deposited hereunder which Owner has applied to the payment of any rent
and additional rent due and payable hereunder then in any one or more of such
events, upon Owner serving a written fifteen (15) days notice upon Tenant
specifying the nature of said default and upon the expiration of said fifteen
(15) days, if Tenant shall have failed to comply with or remedy such default, or
if the said default or omission complained of shall be of a nature that the same
cannot be completely cured or remedied within said fifteen (15) day period, and
if Tenant shall not have diligently commenced during such default within such
fifteen (15) day period, and shall not thereafter with reasonable diligence and
in good faith, proceed to remedy or cure such default, then Owner may serve a
written five (5) days' notice of cancellation of this Lease upon Tenant, and
upon the expiration of said five (5) days this Lease and the term thereunder
shall end and expire as fully and completely as if the expiration of such five
(5) day period were the day herein definitely fixed for the end and expiration
of this Lease and the term thereunder shall end and expire as fully and
completely as if the expiration of such five (5) day period were the day herein
definitely fixed for the end and expiration of this Lease and the term thereof
and Tenant shall then quit and surrender the demised premises to Owner but
Tenant shall remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been
given, and the term shall expire as aforesaid; or if Tenant shall make default
in the payment of the rent reserved herein or any item of additional rent herein
mentioned or any part of either or in making any other payment herein required;
then and in any of such events Owner may without notice, re-enter the demised
premises either by force or otherwise, and dispossess Tenant by summary
proceedings or other wise, and the legal representative of Tenant or other
occupant of demised premises and remove their effects and hold the premises as
if this Lease had not been made, and Tenant hereby waives the service of notice
of intention to re-enter or to institute legal proceedings to that end. If
Tenant shall make default hereunder prior to the date fixed as the commencement
of any renewal or extension of this Lease. Owner may cancel and terminate such
renewal or extension agreement by written notice.
REMEDIES OF OWNER AND WAIVER OF REDEMPTION:
18. In case of any such default, re-entry; expiration and/or
dispossess by summary proceedings or otherwise, (a) the rent, and additional
rent, shall become due thereupon and be paid up to the time of such re-entry,
dispossess and/or expiration, (b) Owner may re-let the premises or any part or
parts thereof, either in the name of Owner or otherwise, for a term or terms,
which may at Owner's option be less than or exceed the period which would
otherwise have constituted the balance of the term of this Lease and may grant
concessions or free rent or charge a higher rental than that in this Lease, (c)
Tenant or the legal representatives of Tenant shall also pay Owner as liquidated
damages for the failure of Tenant to observe and perform said Tenant's covenants
herein contained, any deficiency between the rent hereby reserved and or
covenanted to be paid and the net amount, if any, of the rents collected on
account of the subsequent Lease or Leases of the demised premises for each month
of the period which would otherwise have constituted the balance of the term of
this Lease. The failure of Owner to re-let
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the premises or any part or parts thereof shall not release or affect Tenant's
liability for damages. In computing such liquidated damages there shall be added
to the said deficiency such expenses as Owner may incur in connection with
re-letting, such as legal expenses, reasonable attorneys' fees, brokerage,
advertising and for keeping the demised premises in good order or for preparing
the same for re-letting. Any such liquidated damages shall be paid in monthly
installments by Tenant on the rent day specified in this Lease and any suit
brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Owner to collect the deficiency for any
subsequent month by a similar proceeding. Owner, in putting the demised premises
in good order or preparing the same for re-rental may, at Owner's option, make
such alterations, repairs, replacements, and/or decorations in the demised
premises as Owner, in Owner's sole judgment, considers advisable and necessary
for the purpose of re-letting the demised premises, and the making of such
alterations, repairs, replacements, and/or decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Owner shall
in no event be liable in any way whatsoever for failure to re-let the demised
premises, or in the event that the demised premises are re-let, for failure to
collect the rent thereof under such re-letting, and in no event shall Tenant be
entitled to receive any excess, if any, of such net rents collected over the
sums payable by Tenant to Owner hereunder. In the event of a breach or
threatened breach by Tenant of any of the covenants or provisions hereof, Owner
shall have the right of injunction and the right to invoke any remedy allowed at
law or in equity as injunction and the right to invoke any remedy allowed at law
or in equity as if re-entry, summary proceedings and other remedies were not
herein provided for. Mention in this Lease of any particular remedy, shall not
preclude Owner from any other remedy, in law or in equity. Tenant hereby
expressly waives any and all rights of redemption granted by or under any
present or future laws.
FEES AND EXPENSES:
19. If Tenant shall default in the observance or performance of
any term or covenant on Tenant's part to be observed or performed under or by
virtue of any of the terms or provisions in any article of this Lease, after
notice if required and upon expiration of any applicable grace period if any,
(except in an emergency), then, unless otherwise provided elsewhere in this
Lease, Owner may immediately or at any time there after and without notice
perform the obligation of Tenant thereunder. If Owner, in connection with the
foregoing or in connection with any default by Tenant in the covenant to pay
rent hereunder, makes any expenditures or incurs any obligations for the payment
of money, including but not limited to reasonable attorney's fees, in
instituting, prosecuting or defending any action or proceedings, and prevails in
any such action or proceeding, then Tenant will reimburse Owner for such sums so
paid or obligations incurred with interest and costs. The foregoing expenses
incurred by reason of Tenant's default shall be deemed to be additional rent
hereunder and shall be paid by Tenant to Owner within ten (10) days of rendition
of any bill or statement to Tenant therefor. If Tenant's Lease term shall have
expired at the time of making of such expenditures or incurring of such
obligations, such sums shall be recoverable by Owner as damages.
BUILDING ALTERATIONS AND MANAGEMENT:
20. Owner shall have the right at any time without the same
constituting an eviction and without incurring liability to Tenant therefor to
change the arrangement and or
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location of public entrances, passageways, doors, doorways, corridors,
elevators, stairs, toilets or other public parts of the building and to change
the mane, number or designation by which the building may be known. There shall
be no allowance to Tenant for diminution of rental value and no liability on the
part of Owner by reason of inconvenience, annoyance or injury to business
arising from Owner or other Tenant making any repairs in the building or any
such alterations, additions and improvements. Furthermore, Tenant shall not have
any claim against Owner by reason of Owner's imposition of any controls of the
manner of access to the building by Tenant's social or business visitors as the
Owner may deem necessary for the security of the building and its occupants.
NO REPRESENTATIONS BY OWNER:
21. Neither Owner nor Owner's agents have made any
representations or promises with respect to the physical condition of the
building, the land upon which it is erected or the demised premises, the rents,
Leases, expenses of operation or any other matter or thing affecting or related
to the demised premises or the building except as herein expressly set forth and
no rights, easements or licenses are acquired by Tenant by implication or
otherwise except as expressly set forth in the provisions of this Lease. Tenant
has inspected the building and the demised premises and is thoroughly acquainted
with their condition and agrees to take the same "as is" on the date possession
is tendered and acknowledges that the taking of possession of the demised
premises by Tenant shall be conclusive evidence that the said premises and the
building of which the same form a part were in good and satisfactory condition
at the time such possession was so taken, except as to latent defects. All
understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of it
in whole or in part, unless such executory agreement is in writing and signed by
the party against whom enforcement of the change, modification, discharge or
abandonment is sought.
END OF TERM:
22. Upon the expiration or other termination of the term of this
Lease, Tenant shall quit and surrender to order and condition, ordinary wear and
damages which Tenant is not required to repair as provided elsewhere in this
Lease excepted, and Tenant shall remove all its property from the demised
premises. Tenant's obligation to observe or perform this covenant shall survive
the expiration or other termination of this Lease. If the last day of the term
of this Lease or any renewal thereof, falls on Sunday, this Lease shall expire
at noon on the proceeding Saturday unless it be a legal holiday in which case it
shall expire at noon on the preceding business day.
QUIET ENJOYMENT:
23. Owner covenants and agrees with Tenant that upon Tenant
paying the rent and additional rent and observing and performing all the terms,
covenants and conditions on Tenant's part to be observed and performed, Tenant
may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this Lease including, but not
limited to, Article 34 hereof and to the ground Leases, underlying Leases and
mortgages hereinbefore mentioned.
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FAILURE TO GIVE POSSESSION:
24. If Owner is unable to give possession of the demised premises
on the date of the commencement of the term hereof, because of the holding-over
or retention of possession of any Tenant, under Tenant or occupants or if the
demised premises are located in a building being constructed, because such
building has not been sufficiently completed to make the premises ready for
occupancy or because of the fact that a certificate of occupancy has not been
procured or if Owner has not completed any work required to be performed by
Owner, or for any other reason, Owner shall not be subject to any liability for
failure to give possession on said date and the validity of the Lease shall not
be impaired under such circumstances, nor shall the same be construed in any way
to extend the term of this Lease, but the rent payable hereunder shall be abated
(provided Tenant is not responsible for Owner's inability to obtain possession
or complete any work required) until after Owner shall have given Tenant notice
that Owner is able to deliver possession in the condition required by this
Lease. If permission is given to Tenant to enter into the demised premises prior
to the date specified as the commencement of the term of this Lease, Tenant
covenants and agrees that such possession and/or occupancy shall be deemed to be
under all the terms, covenants, conditions and provisions of this Lease, except
the obligation to pay the fixed annual rent set forth in page one of this Lease.
The provisions of this article are intended to constitute "an express provision
to the contrary" within the meaning of Section 223-a of the New York Real
Property Law.
NO WAIVER:
25. The failure of Owner to seek redress for violation of, or to
insist upon the strict performance of any covenant or condition of this Lease or
of any of the Rules or Regulations, set forth or hereafter adopted by Owner,
shall not prevent a subsequent act which would have originally constituted a
violation from having all the force and effect of an original violation. The
receipt by Owner of rent with knowledge of the breach of any covenant of this
Lease shall not be deemed a waiver of such breach and no provision of this Lease
shall he deemed to have been waived by Owner unless such waiver be in writing
signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount
than the monthly rent herein stipulated shall be deemed to be other than on
account of the earliest stipulated rent, nor shall any endorsement or statement
of any check or any letter accompanying any check or payment as rent be deemed
an accord and satisfaction, and Owner may accept such cheek or payment without
prejudice to Owner's right to recover the balance of such rent or pursue any
other remedy in this Lease provided. All checks tendered to Owner as and for the
rent of the demised premises shall be deemed payments for the account of Tenant.
Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to
operate as an attornment to Owner by the payor of such rent or as a consent by
Owner to an assignment or subletting by Tenant of time demised premises to such
payor, or as a modification of the provisions of this Lease. No act or thing
done by Owner or Owner's agents during the term hereby demised shall be deemed
an acceptance of a surrender of said premises and no agreement to accept such
surrender shall be valid unless in writing signed by Owner. No employee of Owner
or Owner's agent shall have any power to accept the keys of said premises prior
to the termination of the Lease and the delivery of keys to any such agent or
employee shall not operate as a termination of the Lease or a surrender of the
premises.
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WAIVER OF TRIAL BY JURY:
26. It is mutually agreed by and between Owner and Tenant that
the respective parties hereto shall and they hereby do waive trial by jury in
any action proceeding or counterclaim brought by either of the parties hereto
against the other (except for personal injury property damage) on any matters
whatsoever arising out of or in any way connected with this Lease, the
relationship of Owner and Tenant, Tenant's use of or occupancy of said premises,
and any emergency statutory or any other statutory remedy. It is further
mutually agreed that in the vent Owner commences any proceeding or action for
possession including a summary proceeding for possession of the premises, Tenant
will not interpose any counterclaim of whatever nature or description in any
such proceeding including a counterclaim under Article 4 except for statutory
mandatory counterclaims.
INABILITY TO PERFORM:
27. This Lease and the obligation of Tenant to pay rent hereunder
and perform all of the other covenants and agreements hereunder on part of
Tenant to be performed shall in no way be affected, impaired or excused because
Owner is unable to fulfill any of its obligations under this Lease or to supply
or is delayed in supplying any service expressly or impliedly to be supplied or
is unable to make, or is delayed in making any repair, additions, alternations
or decorations or is unable to supply or is delayed in supplying any equipment,
fixtures or other materials if Owner is prevented or delayed from doing so by
reason of strike or labor troubles or any cause whatsoever beyond Owner's sole
control including, but not limited to, government preemption or restrictions or
by reason of any rule, order or regulation of any department or subdivision
thereof of any government agency or by reason of the conditions which have been
or are affected, either directly or indirectly, by war or other emergency.
BILLS AND NOTICES:
28. Except as otherwise in this Lease provided, a bill statement,
notice or communication which Owner may desire or be required to give to Tenant,
shall be deemed sufficiently given or rendered if, in writing, delivered to
Tenant personally or sent by registered or certified mail addressed to Tenant at
the building of which the demised premises form a part or at the last known
residence address or business address of Tenant or left at any of the aforesaid
premises addressed to Tenant, and the time of the rendition of such bill or
statement and of the giving of such notice or communication shall be deemed to
be the time when the same is delivered to Tenant, mailed, or left at the
premises as herein provided. Any notice by Tenant to Owner must be served by
registered or certified mail addressed to Owner at the address first hereinabove
given or at such other address as Owner shall designate by written notice.
WATER CHARGES:
29. If Tenant requires, uses or consumes water for any purpose in
addition to ordinary lavatory purposes (of which fact Tenant constitutes Owner
to be the sole judge) Owner may install a water meter and thereby measure
Tenant's water consumption for all purposes. Tenant shall pay Owner for the cost
of the meter and the cost of the installation, thereof and throughout the
duration of Tenant's occupancy Tenant shall keep said meter and installation
equipment in good working order and repair at Tenant's own cost and expense in
default of which Owner may cause such meter and equipment to be replaced or
repaired and collect the cost
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thereof from Tenant, as additional rent. Tenant agrees to pay such charges and
collect the same from Tenant, as additional rent. Tenant covenants and agrees to
pay, as additional rent, the sewer rent, charge or any other tax, rent, levy or
charge which now or hereafter is assessed, imposed or a lien upon the demised
premises or the realty of which they are part pursuant to law, order or
regulation made or issued in connection with the use, consumption, maintenance
or supply of water, water system or sewage or sewage connection or system. If
the building or the demised premises or any part thereof is supplied with water
through a meter through which water is also supplied to other premises Tenant
shall pay to Owner, as addition rent, on the first day of each month, % ($10.00)
of the total meter charges as Tenant's portion. Independently of and in addition
to any of the remedies reserved to Owner hereinabove or elsewhere in this Lease,
Owner may sue for and collect any monies to be paid by Tenant or paid by Owner
for any of the reasons or purposes hereinabove set forth.
SPRINKLERS:
30. Anything elsewhere in this Lease to the contrary
notwithstanding, if the New York Board of Fire Underwriters or the New York Fire
Insurance Exchange or any bureau, department or official of the federal, state
or city government recommend or require the installation of a sprinkler system
or that any changes, modifications, alterations, or additional sprinkler heads
or other equipment be made or supplied in an existing sprinkler system by reason
of Tenant's business, or the location of partitions, trade fixtures, or other
contents of the demised premises, or for any other reason, of if any such
sprinkler system installations, modifications, alterations, additional sprinkler
heads or other such equipment, become necessary to prevent the imposition of a
penalty or charge against the full allowance for a sprinkler system in the fire
insurance rate set by any said Exchange or by any fire insurance company, Tenant
shall, at Tenant's expense, promptly make such sprinkler system installations,
changes, modifications, alterations, and supply additional sprinkler heads or
other equipment as required whether the work involved shall be structural or
non-structural in nature. Tenant shall pay to Owner as additional rent the sum
of $10.00, on the first day of each month during the term of this Lease, as
Tenant's portion of the contract price for sprinkler supervisory service.
ELEVATORS, HEAT, CLEANING:
31. As long as Tenant is not in default under any the covenants
of this Lease beyond the applicable grace period provided in this Lease for the
curing of such defaults, Owner shall: (a) provide necessary passenger elevator
facilities on business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m.
to 1 p.m.; (b) if freight elevator service is provided, same shall be provided
only on regular business days Monday through Friday inclusive, and on those days
only between the hours of 9 a.m. and 12 noon and between 1 p.m. and 5 p.m.; (c)
furnish heat, water and other services supplied by Owner to the demised
premises, when and as required by law, on business days from 8 a.m. to 6 p.m.
and on Saturdays from 8 a.m. to 1 p.m.; (d) clean the public halls and public
portions of the building which are used in common by all Tenants. Tenant shall,
at Tenant's expense, keep the demised premises, including the windows, clean and
in order, to the reasonable satisfaction of Owner, and for the purpose shall
employ the person or person, or corporation approved by Owner. Tenant shall pay
to Owner the cost of removal of any of Tenant's refuse and rubbish from the
building. Bills for the same shall be rendered by Owner to Tenant at such time
as Owner may elect and shall be due and payable hereunder, and the amount
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<PAGE> 15
of such bills shall be deemed to be, and be paid as, additional rent. Tenant
shall, however, have the option of independently contracting for the removal of
such rubbish and refuse in the event that Tenant does not wish to have same done
by employees of Owner. Under such circumstances, however, the removal of such
refuse and rubbish by others shall be subject to such rules and regulations as,
in the judgment of Owner, are necessary for the proper operation of the
building. Owner reserves the right to stop service of the heating, elevator,
plumbing and electric systems, when necessary, by reason of accident, or
emergency, or for repairs, alterations, replacements or improvements, in the
judgment of Owner desirable or necessary to be made, until said repairs,
alterations, replacements or improvements shall have been completed. If the
building of which the demised premises are a part supplies manually operated
elevator service, Owner may proceed diligently with alterations necessary to
substitute automatic control elevator service without in any way affecting the
obligations of Tenant hereunder.
SECURITY:
32. Tenant has deposited with Owner the sum of $14,500.00* as
security for the faithful performance and observance by Tenant of the terms,
provisions and conditions of this Lease; it is agreed that in the event Tenant
defaults in respect of any of the terms, provisions and conditions of this
Lease, including, but not limited to, the payment of rent and additional rent,
Owner may use, apply or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and additional rent
or any other sum as to which Tenant is in default or for any sum which Owner may
expend or may be required to expend by reason of Tenant's default in respect of
any of the terms, covenants and conditions of this Lease, including but not
limited to, any damages or deficiency in the reletting of the premises, whether
such damages or deficiency accrued before or after summary proceedings or other
re-entry by Owner. In the event that Tenant shall fully and faithfully comply
with all of the terms, provisions, covenants and conditions of this Lease, the
security shall be returned to Tenant after the date fixed as the end of the
Lease and after delivery of entire possession of the demised premises to Owner.
In the event of a sale of the land and building or leasing of the building, of
which the demised premises form a part, Owner shall have the right to transfer
the security to the vendee or lessee and Owner shall thereupon be released by
Tenant from all liability for the return of such security; and Tenant agrees to
look to the new Owner solely for the return of said security; and it is agreed
that the provisions hereof shall apply to every transfer or assignment made of
the security to a new Owner. Tenant further covenants that it will not assign or
encumber or attempt to assign or encumber the monies deposited herein as
security and that neither Owner nor its successors or assigns shall be bound by
any such assignment, encumbrance, attempted assignment or attempted encumbrance.
CAPTIONS:
33. The Captions are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope of this Lease
nor the intent of any provision.
DEFINITIONS:
* NON INTEREST BEARING ACCOUNT
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34. The term "Owner" as used in this Lease means only the owner
of the fee or of the Leasehold of the building, or the mortgagee in possession,
for the time being of the land and building (or the owner of a Lease of the
building or of the land and building) of which the demised premises form a part,
so that in the event of any sale or sales of said land and building or of said
Lease, or in the event of a Lease of said building, or of the land and building,
the said Owner shall be and hereby is entirely freed and relieved of all
covenants and obligations of Owner hereunder, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest, or between the parties and the purchaser, at any such sale, or the
said lessee of the building, or of the land and building, that the purchaser or
the lessee of the building has assumed and agreed to carry out any and all
covenants and obligations of Owner hereunder. The words "re-enter" and
"re-entry" as used in this Lease are not restricted to their technical legal
meaning. The term "rent" includes the annual rental rate whether so expressed or
expressed in monthly installments, and "additional rent." "Additional rent"
means all sums which shall be due to Owner from Tenant under this Lease, in
addition to the annual rental rate. The term "business days" as used in this
Lease, shall exclude Saturdays, Sundays and all days observed by the State or
Federal Government as legal holidays by the applicable building service union
employees service contract or by the applicable Operating Engineers contract
with respect to HVAC service. Wherever it is expressly provided in this Lease
that consent shall not be unreasonably withheld, such consent shall not be
unreasonably delayed.
ADJACENT EXCAVATION-SHORING:
35. If an excavation shall be made upon land adjacent to the
demised premises, or shall be authorized to be made, Tenant shall afford to the
person causing or authorized to cause such excavation, license to enter upon the
demised premises for the purpose of doing such work as said person shall deem
necessary to preserve the wall or the building of which demised premises form a
part from injury or damage and to support the same by proper foundations,
without any claim for damages or indemnity against Owner, or diminution or
abatement of rent.
RULE AND REGULATIONS:
36. Tenant and Tenant's servants, employees, agents, visitors,
and licensees shall observe faith fully, and comply strictly with, the Rules and
Regulations annexed hereto and such other and further reasonable Rules and
Regulations as Owner or Owner's agents may from time to time adopt. Notice of
any additional rules or regulations shall be given in such manner as Owner may
elect. In case Tenant disputes the reasonableness of any additional Rule or
Regulations hereafter made or adopted by Owner or Owner's agents, the parties
hereto agree to submit the question of the reasonableness of such Rule or
Regulation for decision to the New York office of the American Arbitration
Association, whose determination shall be final and conclusive upon the parties
hereto. The right to dispute the reasonableness of any additional Rule or
Regulation upon Tenant's part shall be deemed waived unless the same shall be
asserted by service of a notice, in writing upon Owner within fifteen (15) days
after the giving of notice thereof. Nothing in this Lease contained shall be
construed to impose upon Owner any duty or obligation to enforce the Rules and
Regulations or terms, covenants or conditions in any other Lease, as against any
other Tenant and Owner shall not be liable to Tenant for violation of the same
by any other Tenant, its servants, employees, agents, visitors or licensees.
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GLASS:
37. Owner shall replace, at the expense of the Tenant, any and
all plate and other glass damaged or broken from any cause whatsoever in and
about the demised premises. Owner may insure, and keep insured, at Tenant's
expense, all plate and other glass in the demised premises for and in the name
of Owner. Bills for the premiums therefor shall be rendered by Owner to Tenant
at such times as Owner may elect, and shall be due from, and payable by, Tenant
when rendered, and the amount thereof shall be deemed to be, and be paid, as
additional rent.
ESTOPPEL CERTIFICATE:
38. Tenant, at any time, and from time to time, upon at least 10
days' prior notice by Owner, shall execute, acknowledge and deliver to Owner,
and/or to any other person, firm or corporation specified by Owner, a statement
certifying that this Lease is unmodified in full force and effect (or, if there
have been modifications, that the same is in full force and effect as modified
and stating the modifications), stating the dates to which the rent and
additional rent have been paid, and stating whether or not there exists any
default by Owner under this Lease, and, if so, specifying each such default.
DIRECTORY BOARD LISTING:
39. If, at the request of and as accommodation to Tenant, Owner
shall place upon the directory board in the lobby of the building, one or more
names of persons other than Tenant, such directory board listing shall not be
construed as the consent by Owner to an assignment or subletting by Tenant to
such person or person.
SUCCESSORS AND ASSIGNS:
40. The covenants, conditions and agreements contained in this
Lease shall bind and inure to the benefit of Owner and Tenant and their
respective heirs, distributees, executors, administrators, successors, and
except as otherwise provided in this Lease, their assigns. Tenant shall look
only to Owner's estate and interest in the land and building for the
satisfaction of Tenant's remedies for the collection of a judgement (or other
judicial process) against Owner in the event of any default by Owner hereunder,
and no other property or assets of such Owner (or any partner, member, officer
or director thereof, disclosed or undisclosed), shall be subject to levy,
execution or other enforcement procedure for the satisfaction of Tenant's
remedies under or with respect to this Lease, the relationship of Owner and
Tenant hereunder, or Tenant's use and occupancy of the demised premises.
IN WITNESS WHEREOF, Owner and Tenant have respectively signed and
sealed this Lease as of the day and year first above written.
Witness for Owner:
-----------------------------
ONE FIFTEEN WEST ASSOC., L.P.
[L.S]
- ------------------------------------ -----------------------------
BY:
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Witness for Tenant
-----------------------------
ALLOY DESIGNS, INC.
[L.S]
- ------------------------------------ -----------------------------
BY:
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ACKNOWLEDGEMENTS
CORPORATE TENANT
STATE OF NEW YORK, SS:
COUNTY OF
On this day of , 19 , before me personally came
to me known, who being by me duly sworn, did depose and say that he resides in
that he is the of the corporation described in
and which executed the foregoing instrument, as TENANT; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the Board of Directors of said
corporation, and that he signed his name thereto by like order.
INDIVIDUAL TENANT
STATE OF NEW YORK, SS:
COUNTY OF
On this day of , 19 , before me personally came
to me known and known to me to be the individual described in and who, as
TENANT, executed the foregoing instrument and acknowledged to me that
he executed the same.
IMPORTANT - PLEASE READ
RULES AND REGULATIONS ATTACHED TO AND MADE A PART
OF THIS LEASE IN ACCORDANCE WITH ARTICLE 36.
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any Tenant or used for any purpose other than for ingress or egress from the
demised premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Owner. There shall not be used in any space, or in the public hall of the
building, either by any Tenant or by jobbers or others in the delivery or
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and sideguards. If said premises are situated on the ground floor of the
building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk
and curb in front of said premises clean and free from ice, snow, dirt and
rubbish.
2. The water and wash closets and plumbing fixtures shall not be used for
any purposes other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Tenant who, or whose clerks,
agents, employees or visitors, shall have caused it.
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3. No carpet, rug or other article shall be hung or shaken out of any
window of the building; and no Tenant shall sweep or throw or permit to be swept
or thrown from the demised premises any dirt or other substances into any of the
corridors of halls, elevators, or out of the doors or windows or stairways of
the building and Tenant shall not use, keep or permit to be used or kept any
fool or noxious gas or substance in the demised premises, or permit or suffer
the demised premises to be occupied or used in a manner offensive or
objectionable to Owner or other occupants of the buildings by reason of noise,
odors, and or vibrations, or interfere in any way, with other Tenants or those
having business therein, nor shall any bicycles, vehicles, animals, fish, or
birds be keep in or about the building. Smoking or carrying lighted cigars or
cigarettes in the elevators of the building is prohibited.
4. No awnings or other projections shall be attached to the outside walls
of the building without the prior written consent of Owner.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the outside of the
demised premises or the building or on the inside of the demised premises if the
same is visible from the outside of the premises without the prior written
consent of Owner, except that the name of Tenant may appear on the entrance door
of the premises. In the event of the violation of the foregoing by any Tenant,
Owner may remove same without any liability and may charge the expense incurred
by such removal to Tenant or Tenants violating this rule. Interior signs on
doors and directory tablet shall be inscribed, painted or affixed for each
Tenant by Owner at the expense of such Tenant, and shall be of a size, color and
style acceptable of Owner.
6. No Tenant shall mark, paint, drill into, or in any way deface any part
of the demised premises or the building of which they form a part. No boring,
cutting or stringing of wires shall be permitted, except with the prior written
consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or
other similar floor covering, so that the same shall come in direct contact with
the floor of the demised premises, and, if linoleum or other similar floor
covering is desired to be used an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. No additional locks or bolts of any kind shall be placed upon any of the
doors and windows by any Tenant, nor shall any changes be made in existing locks
or mechanism thereof. Each Tenant must, upon the termination of his Tenancy,
restore to Owner all keys of stores, offices and toilet rooms, either furnished
to, or otherwise procured by, such Tenant, and in the event of the loss of any
keys, so furnished, such Tenant shall pay to Owner the cost thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of
any description shall be delivered to and removed from the premises only on the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by Owner. Owner reserves the right to
inspect all freight to be brought into the building and to
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exclude from the building all freight which violates any of these Rules and
Regulations of the Lease of which these Rules and Regulations are a part.
9. No Tenant shall obtain for use upon the demised premises ice, drinking
water, towel and other similar services, or accept barbering or bootblacking
services in the demised premises, except from persons authorized by Owner, and
at hours and under regulations fixed by Owner. Canvassing, soliciting and
peddling in the building is prohibited and each Tenant shall cooperate to
prevent the same.
10. Owner reserves the right to exclude from the building all persons who
do not present a pass to the building signed by Owner. Owner will furnish passes
to persons for whom any Tenant requests same in writing. Each Tenant shall be
responsible for all persons for whom he requests such pass and shall be
responsible for all persons for whom he requests such pass and shall be liable
to Owner for all acts of such persons. Tenant shall not have a claim against
Owner by reason of Owner excluding from the building any person who does not
present such pass.
11. Owner shall have the right to prohibit any advertising by any Tenant
which in Owner's opinion, tends to impair the reputation of the building or its
desirability as a loft building, and upon written notice from Owner, Tenant
shall refrain from or discontinue such advertising.
12. Tenant shall not bring or permit to be brought or kept in or on the
demised premises, any inflammable, combustible, or explosive, or hazardous
fluid, material, chemical or substance, or cause or permit any odors of cooking
or other processes, or any unusual or other objectionable odors to permeate in
or emanate from the demised premises.
13. Tenant shall not use the demised premises in a manner which disturbs or
interferes with other Tenants in the beneficial use of their premises.
Address 115 West 30th Street
Premises Room 207
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TO ONE FIFTEEN WEST ASSOC., L.P.
ALLOY DESIGNS, INC.
STANDARD FORM OF
LOFT
LEASE
THE REAL ESTATE BOARD OF NEW YORK, INC.
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(C) Copyright 1994. All rights Reserved.
Reproduction in whole or in part prohibited
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Dated November 30, 1998
Rent Per Year $87,000.00*
*for the 1st year and then 4% increase per year as per paragraph #60 of the
attached Rider.
Rent Per Month $7,250.00
10.00 water
10.00 sprinkler
Term: 3 years w/option for 2 years more as per paragraph #83 of attached
rider
From: 1/1/99
To: 12/31/2001
Drawn by HJ Additional articles #41-94 are included with this Lease
Checked by
Entered by
Approved by
RIDER ATTACHED TO AND FORMING A PART OF LEASE DATED November 30, 1998 BY AND
BETWEEN ONE FIFTEEN WEST ASSOCIATES, L.P. LANDLORD, AND ALLOY DESIGNS, INC.,
TENANT.
ADDITIONAL RENT
41. (a) Tenant shall pay to Landlord, as additional rent hereunder, in advance,
on the first day of each and every month during the term hereof, all sums
expended Landlord and/or which become due to Landlord under this Lease and under
any collateral agreements with Tenant relating to the premises, Tenant's use and
occupancy thereof, the supplying by Landlord to Tenant of any services in
connection therewith, together with any fines or penalties imposed or assessed
by any governmental authority by reason of Tenant's failure to comply with its
requirements.
(b) If Tenant shall default in the observance or performance of any term or
covenant on Tenant's part to be observed or performed under or by virtue of any
of the terms or provisions in any paragraph of this Lease, Landlord may
immediately or at any time thereafter and without
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notice perform the same for the account of the Tenant and if Landlord makes any
expenditures or incurs any obligations for the payment of money in connection
therewith including, but not limited to, attorneys' fees instituting,
prosecuting or defending any action or proceeding, such sums paid or obligations
incurred with interest and costs shall be deemed to be additional rent
hereunder.
(c) The receipt by Landlord at any time of installment of the regular
stipulated rent hereunder or of any additional rent shall not be deemed to be a
waiver of any other additional rent then due. For the non-payment of any
additional rent, Landlord shall have the rights and remedies which it would have
in the case of a default in the payment of the regular stipulated rent hereunder
or any installment thereof.
RENT DUE UNDER OTHER LEASE AS ADDITIONAL RENT
42. In the event that, at the commencement of the term of this Lease, or
thereafter, Tenant shall be in default in the payment of rent or additional rent
by Tenant, Tenant's predecessor in interest or any entity in which the
principals of Tenant have a fifty percent (50%) or greater interest, pursuant to
the terms of another Lease with Landlord or with Landlords predecessor in
interest, Landlord may, at Landlord's option, without notice to Tenant and
without waiving any rights at law or in equity it might have with respect to
said default under another Lease, add the amount of sub arrearages to any
monthly installment of rent payable hereunder, and the same shall be payable to
Landlord as additional rent.
OCCUPANCY AND USE BY TENANT (If Tenant is in default of Lease)
43. (a) Tenant acknowledges that its continued occupancy of the demised
premise, and the regular conduct of its business therein, are of utmost
importance to the Landlord in the renewal of other Leases in the building, in
the renting of vacant space in the building, in the providing of electricity,
air conditioning, steam and other services to the Tenants in the building, and
in the maintenance of the character and quality of the Tenants in the building.
Tenant therefore covenants and agrees that it will occupy the entire demised
premises and will conduct its business therein in the regular and usual manner,
throughout the term of this Lease. Tenant acknowledges that Landlord is
executing this Lease in reliance upon these covenants and that these covenants
are a material element of consideration including the Landlord to execute this
Lease. Tenant further agrees that if it vacates the demised premises or fails to
so conduct its business therein, at any time during the term of this Lease,
without the prior written consent of the Landlord, then all rent and additional
rent reserved in this Lease from the date of such breach to the expiration date
of this Lease shall become immediately due and payable to Landlord.
(b) The parties recognize and agree that the damage to Landlord resulting
from any breach of the covenants in subdivision (a) hereof will be extremely
substantial, will be far greater than the rent payable for the balance of the
term of this Lease, and will be impossible of accurate measurement. The parties
therefore agree that in the event of a breach or threatened breach of the said
covenants, in addition to all of Landlord's other rights and remedies, at law or
in equity or otherwise, Landlord shall have the right of injunction to preserve
Tenant's occupancy and use.
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The words "become vacant or deserted" as used elsewhere in this Lease shall
include Tenant's failure to occupy or use as by this Article required.
(c) If Tenant breaches either of the covenants in subdivision (a) above,
and this Lease be terminated because of such default, then, in addition to
Landlord's rights of re-entry, restoration, preparation for and rerental, and
anything elsewhere in this Lease to the contrary notwithstanding, Landlord shall
retain its right to judgment on and collection of Tenant's aforesaid obligation
to make a single payment to Landlord of a sum equal to the total of all rent and
additional rent reserved for the remainder of the original term of this Lease,
subject to future credit or repayment to Tenant in the event of any rerenting of
the premises by Landlord, after first deducting from rerental income all
expenses incurred by Landlord in reducing to judgment Otherwise collecting
Tenant's aforesaid obligation, and in obtaining possession of, restoring,
preparing for and re-letting the premises. Tenant shall be entitled to a credit
or repayment for rerental income which exceeds the sums payable by Tenant
hereunder or which covers a period after the original term of this Lease.
(d) If any provision of this Article of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Article, or the application of such
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each provision of
this Article and of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
CERTIFICATE OF OCCUPANCY
44. In the event that any department of the City or State of New York shall
hereafter at any time contend and/or declare by notice, violation, order or in
any other manner whatsoever that the premises hereby demised are used for a
purpose which is a violation of such certificate of occupancy, Tenant shall,
upon five (5) days' written notice from Landlord, immediately discontinue use of
said premises. Failure by Tenant to discontinue such use after such notice shall
be considered a default in the fulfillment of a covenant of this Lease, and
Landlord shall have the right to terminate this Lease immediately, and in
addition thereto shall have the right to exercise any and all rights and
privileges and remedies given to Landlord by and pursuant to the provisions of
Paragraph 17 hereof. The statement in this Lease of the nature of the business
to be conducted by Tenant in demised premises shall not be deemed or construed
to constitute a representation or guaranty by Landlord that such business may
continue to be conducted in the premises for the entire period of the Lease or
is lawful or permissible under the certificate of occupancy in effect for the
building of which the demised premises form a part, or otherwise permitted by
law. If alterations or additions, including but not limited to a sprinkler
system, are needed to permit lawful conduct of Tenant's business or to company
with the certificate of occupancy, the same shall be made by and at the sole
expense of Tenant.
TENANT TO KEEP INSURANCE RATE LOW
45. Tenant will conduct its business in such a manner as to enable Landlord or
other Tenants in the building to obtain the lowest possible insurance rate upon
the entire building in which the
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demised premises are located, and will, at its sole expense, comply with all
rules, orders, regulation or requirements of all public liability, fire and
insurance policies in force at any time with respect to the demised premises, as
well as all rules, orders, regulations or requirements of the New York Board of
Fire Underwriters or any other similar body, and shall not do or permit anything
to be done in or upon said premises or bring or keep anything therein, except as
now or hereafter permitted by the Fire Department, Board of Fire Underwriters,
Fire Insurance Rating Organization, or other authority having jurisdiction and
then only in such quantity and manner of storage as not to increase the rate for
fire insurance applicable to the building, or use the premises in a manner which
shall increase the rate of fire insurance on the building of which demised
premises form a part, or on property located therein, over that in effect prior
to this Lease, if by reason of failure of Tenant to comply with the provisions
of this paragraph including, but not limited to, the mere use to which Tenant
puts the premises, the fire insurance rate shall at the beginning of this Lease
or at any time thereafter be higher than it otherwise would be Tenant shall
reimburse Landlord, as additional rent hereunder, for that part of all fire
insurance premiums thereafter paid by Landlord, which shall have been charged
because of such failure or use by Tenant, and shall make such reimbursement upon
the first day of the month following such outlay by Landlord. In any action or
proceeding wherein Landlord and Tenant are parties. a schedule or "make up" of
rate for the building or demised premises issued by the New York Fire Insurance
Exchange, or other body making tire insurance rates for said premises, shall be
conclusive evidence of the facts therein stated and of the several items and
charges in the fire insurance rate then applicable to said premises. Tenant
shall not bring or permit to be brought or kept in or on the demised premises,
any inflammable, combustible or explosive fluid, chemical, substance or material
other than silk or other textiles, or cause or permit any odors of cooking or
other processes, or any unusual or other objectionable. odors to permeate from
the demised premises. That the premises are being used for the purpose set forth
herein shall not relieve Tenant from the foregoing duties, obligation and
expenses.
ASSIGNMENT, MORTGAGE AND SUB-LEASING
46. (a) Tenant shall not assign, mortgage or encumber this agreement nor
underlet the demised premises or any part thereof or permit the demised premises
or any part thereof to be occupied by anybody other than Tenant, without the
prior written consent of Landlord not to be unreasonably withheld in each
instance. The transfer of a majority of the issued and outstanding capital stock
of any corporate lessee of this Lease or a majority of the total interest in any
partnership lessee, however accomplished, and whether in a single transaction or
in a series of related or unrelated transactions, shall be deemed an assignment
of this Lease. If this Lease be assigned, or if the demised premises or any part
thereof be underlet or occupied by anybody other than Tenant, Landlord, can,
after default by Tenant, collect rent from the assignee, under-Tenant or
occupant, and apply the net amount collected to the rent herein reserved, but no
such assignment, underletting, occupancy or collection shall be deemed a waiver
of this covenant, or the acceptance of the assignee, under-Tenant or occupant as
Tenant, or a release of Tenant from the further performance by Tenant of
covenants on the part of Tenant herein contained. The consent by Landlord to an
assignment or underletting shall not in any wise be construed to relieve Tenant
from obtaining the express consent in writing of Landlord to any further
assignment or underletting.
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(b) If the demised premises shall be underlet in whole or in part by Tenant
or its heirs, executors, administrators, legal representatives, successors or
assigns, such party shall, within three (3) days of such underletting, furnish
Landlord with a duplicate original of such underLease and shall, on demand of
Landlord, supply Landlord within three (3) days of such demand, a written list
of all such under-Tenants, the terms, including expiration dates of their
under-tenancies. The rents payable thereunder, and any additional information
requested by Landlord. This provision or compliance therewith, however, shall in
no event be construed to be a consent to any underletting or a waiver of the
covenant against underletting contained herein. Non-compliance by Tenant with
the provisions of this paragraph shall be deemed to be a breach of this Lease.
(c) Tenant assumes and shall be responsible for and liable to Landlord, for
all acts and omissions on the part of any present or future under-Tenant, their
agents, employees, servants or licensees, and any breach or violation of any of
the terms, covenants, agreements, provisions, conditions and limitations of this
Lease, whether by act or omission, by any under-Tenant shall constitute a breach
or violation of this Lease by Tenant.
(d) Landlord reserves the option to charge $150.00 for any paperwork or
documents prepared in conjunction with assignment of Lease, Sub-Lease or
creation of a new corporation to be ascribed to new Lease.
(e) Landlord has the right to ask for and receive an additional month's
security deposit as consideration for an assignment of a Lease.
WASTE
47. (a) Throughout the term of this Lease, Tenant will take good care of the
demised premises and appurtenances and suffer no waste, damage, disfigurement or
injury thereto or any part thereof.
(b) Tenant hereby acknowledges that the Landlord has entered into a
contract with a reputable contractor for the removal of refuse and rubbish from
the building (hereinafter "the Refuse Removal Company"). Upon taking occupancy,
Tenant agrees to forthwith contact the Refuse Removal Company and to arrange for
said company to remove Tenant's refuse and rubbish from the building at Tenant's
sole cost and expense. Tenant agrees to cooperate with the Landlord, other
Tenants in the building, and the Refuse Removal Company with respect to the
disposal of its refuse and rubbish.
LANDLORD'S LIABILITY, ALTERATIONS OR REPAIRS
48. (a) Except where otherwise provided in this Lease, there shall be no
allowance to Tenant for a diminution of rental value and no liability on the
part of Landlord by reason of inconvenience, annoyance or injury to business
arising from Landlord, Tenant or others making any repairs, alterations,
additions or Improvements in or to any portion of the building or
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demised premises, or in or to fixtures, appurtenances, or equipment thereof, and
no liability upon Landlord for failure of others to make any repairs,
alterations, additions or improvements in or to any portion of the building or
of demised premises, or in or to the fixtures, appurtenances or equipment
thereof.
(b) Landlord reserves the right to stop service of the electric, water,
sprinkler, steam, air conditioning, elevator, heating and plumbing systems, when
necessary, by reason of accident, or emergency, or for repairs, alterations,
replacements or improvements, in the judgment of Landlord desirable or necessary
to be made, until said repairs, alterations, replacements or improvements shall
have been completed.
EMPLOYMENT OF UNION LABOR TO MAKE REPAIRS
49. Tenant agrees that whenever any alterations, additions, improvements,
changes or repairs to the said premises are consented to by Landlord, or in the
moving of merchandise, fixtures or equipment into the said building, or moving
the same therefrom, only such labor under agreement with the Building Trades
Employers' Association of New York City, or which shall not cause strikes or
concerted labor action by other employees of the building, and which have the
same or similar labor union affiliations as those employed by Landlord s
contractors, shall be employed.
SIGNS
50. Tenant will not, without Landlord's written consent, place, affix or paint
any signs, awnings, projections or advertising material of any kind upon the
exterior of the premises or of the building, upon the windows, or in any
location that may be visible from any of the lobbies or passageways. If Tenant
shall cause or permit any sign or other object, similar or dissimilar to be
placed on or affixed to any part of the building not inside the space
specifically demised hereunder, Landlord shall have the right, without notice or
liability to Tenant, to remove and dispose of the same and to make any repairs
necessitated by such removal, all at Tenant's sole expense and risk. Landlord's
expenses in so doing shall be deemed additional rent hereunder and collectible
as such.
OTHER PROHIBITED ACTIONS OF TENANT
51. (a) Tenant will not cause or permit any connection to be made to the wiring
on the electrical panel boards of the building without the prior written consent
and supervision of Landlord which shall not be unreasonably withheld or delayed.
(b) Tenant agrees that it will not drive nails in, drill in, disfigure or
deface any part of the building nor suffer the same to be done, nor cause or
permit the floors, walls, doors or ceilings of the demised premises to be
drilled, hammered, pounded otherwise dealt with in a noisy or disturbing manner
at any time during customary business (i.e., between 9:00 A.M. and
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5:00 P.M.) whether or not such activities are incidental to or part of work to
which Landlord has consented. *
(c) Tenant shall not install any pressing equipment, whether connected to
Tenant's gas-fired boiler or to the building steam system without first having
plans and specification approved by Landlord. The vacuum used by pressing
machines for the drying of garments shall be created by an electrically driven
vacuum pump. Tenant shall not use any vacuum created by the use of steam from a
gas-fired boiler or from the building steam system.
(d) Tenant shall not permit any connection to be made at the demised
premises with any high pressure steam lines, electric current lines without
Landlord's prior written consent *
(e) Tenant shall not make any electrical or plumbing installation without
Landlord's prior written consent.* All water lines must be installed in red
brass, if Tenant uses water in space, Tenant agrees to have installed a floor
drain at his sole cost and expense by a licensed plumber.
(f) Window air-conditioning units shall in no event be installed without
Landlord's prior written approval* or be mounted so as to extend outward beyond
the line of the window frame.
(g) Tenant shall install no linoleum, rubber, mastic or vinyl tile floor
covering, unless it is laid over a layer of felt, double cemented in the manner
approved by Landlord.
(h) Tenant shall not place a load upon any floor of the demised premises
exceeding the floor load per square foot area which such floor was designed to
carry and which is allowed by law. Landlord reserves the right to prescribe the
weight and position of all safes which must be placed so as to distribute the
weight. Business machines and mechanical equipment shall be placed and
maintained by Tenant's expense in settings sufficient in Landlord's judgment to
absorb and prevent vibration, noise and annoyance. Tenant agrees that upon the
written request of Landlord, Tenant will, within fifteen (15) days of the
mailing of such request, provide rubber or other approved settings for
absorbing, preventing and decreasing noise and/or vibration from any or all
machines or machinery. Such insulation or other devices for the prevention,
decrease or elimination of noise satisfactory to Landlord shall be made in such
manner and of such material as Landlord may direct. In the event that Tenant
fails to comply with the aforesaid request within the fifteen (15) days
aforementioned, Landlord may, at its option, by notice in writing to Tenant,
cause the term of this Lease to expire. Landlord in such event shall have the
right to re-enter the premises by summary proceedings or otherwise without
liability. Landlord shall give not less than thirty (30) days' notice of its
election to terminate the Lease as above provided. Landlord shall have the right
to enter the demised premises with workmen and materials and to insulate the
machinery as above provided, collecting from Tenant the cost of such work as
additional rent in the event that Tenant fails to comply with the written
request aforementioned after the expiration of fifteen (15) days from the
receipt thereof.
* which shall not be unreasonably withheld or delayed
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(i) Tenant shall not move any safe, heavy machinery, heavy equipment,
freight bulky matter, or fixtures into or out of the building without Landlord's
prior written consent and the filing with Landlord of a Rigger's Liability
Insurance Certificate satisfactory to Landlord. If such safe, machinery,
equipment, freight, bulky matter or fixtures require special handling, Tenant
agrees to employ only persons holding a Master Riggers License to do said work
and that all work in connection therewith shall comply with the Administrative
Code of the City of New York.
(j) If the demised premises be or become infested with vermin, Tenant
shall, at Tenant's expense, cause the same to be exterminated from time to time
to the satisfaction of Landlord, and shall employ such exterminators and such
exterminating company or companies as shall be approved by Landlord.
(k) The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were designed or
constructed, and no sweepings, rubbish, rags, acids or other substances shall be
deposited therein.
(l) Tenant agrees to provide proper receptacles as called for by the Fire
Department, Board of Fire Underwriters, Fire Insurance Rating Organization or of
the authority having jurisdiction. Tenant hereby agrees to cause its rubbish or
waste to be disposed of at its own cost and expense, subject to all the rules
and regulations that from time to time may be made in connection therewith by
Landlord, including a regulations that Tenant shall use a single rubbish or
waste remover designated by Landlord for the removal of the rubbish or waste of
the Tenants in the building. Tenant further agrees that it shall not at any time
store any of its rubbish or waste in the lobbies, foyers, passageways or other
spaces adjacent to the premises herein demised, nor shall Tenant place their
rubbish (which is to be taken by the waste remover) in the said areas prior to
5:00 P.M.
(m) If Tenant is a lessee of any store in the building, the said Tenant
hereby agrees to keep the sidewalk, entrance and passageways unencumbered and
unobstructed, and agrees, to remove all ice and snow from the sidewalks
immediately in front of the demised premises.
(n) Tenant will not suffer, permit or allow unusual or objectionable odors
to be produced upon or permeate from the demised premises.
(o) Cooking and Objectionable Odors. Tenant acknowledges and agrees that
cooking of foods in the demised premises constitutes a fire hazard and produces
objectionable odors. The Tenant agrees not to engage in or permit the cooking of
foods in or about the demised premises. The Tenant further agrees not to permit
objectionable odors to permeate in or emanate from the demised premises
irrespective of the cause of such odors. The Tenant acknowledges and agrees that
a violation of the foregoing constitutes a breach of a substantial obligation of
the tenancy which shall entitle Landlord, in addition to and without waiving any
other remedies provide by law or this ease to seek injunctive relief to prevent
any such prohibited activity or to terminate the tenancy.
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ELECTRICITY
52. Tenant agrees that Landlord may furnish electricity to Tenant on a
"submetering" basis.
If average consumption of electricity for the entire building for said prior
twelve (12) months cannot reasonably be applied and used with respect to changed
methods of rules billing, then the percentage increase shall be computed by the
use of the average consumption (energy and demand) for the entire building for
the first three (3) months after such change, projected to a full twelve (12)
months; and that same consumption, so projected, shall be applied to the service
classification in effect on January 1, 1970. If either of the above-stated
methods for computing electricity charges to Tenant become impractical or
infeasible to calculate, then Landlord, at its sole discretion and without prior
notice to Tenant, may charge Tenant for electricity consumption at a rate equal
to thirty five percent over the service classification then in effect for the
building. Where more than one meter measures the service of Tenant in the
building, the service rendered through each meter may be computed and billed
separately in accordance with the rates herein. Bills therefore shall be
rendered at such times as Landlord may elect and the amount, as computed from a
meter, shall be deemed to be, and be paid as, additional rent. In the event that
such bills are not paid within five (5) days after the same are rendered,
Landlord may, without notice, discontinue the service of electric current to the
demised premises without releasing Tenant from any liability under this Lease
and without Landlord or Landlord's agent incurring any liability for any damage
or loss sustained by Tenant by such discontinuance of service. Tenant agrees to
pay 35% over cost of electric for said space.
(b) Tenant shall be solely responsible for obtaining the initial electric
turn-on from the appropriate public utility corporation to the premises. All
connections, wiring, and any other alterations or requirements to be made
regarding electric service shall be paid by the Tenant.
If Landlord deems that additional electricity is needed at Landlords sole
discretion and Tenants sole expense, Landlord may bring up additional electric
service through new or existing lines which will be installed by Landlords
electricians whose cost will, be billed to Tenant as additional rent to be paid
immediately within three (3) business days.
AIR CONDITIONING
53. a) Tenant shall have the privilege of using the air conditioning system
which affects the whole or a portion of the demised premises, and shall, at its
own cost and expense, maintain and operate said system in compliance with all
present and future laws and governmental requirements, and shall obtain all
governmental licenses and permits now or hereafter required. Tenant shall pay
for all electric current, water and refrigerants used in connection with said
system. Tenant, at its own cost and expense, shall make or cause to be made, all
repairs, alterations, changes, additions and improvements in and to said system
which may be necessary or which may be required or recommended by Landlord or by
any governmental authority, and shall furnish all parts and supplies necessary
or desirable in connection therewith, but no alterations, changes, additions or
improvements shall be made by Tenant without the advance
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written consent of Landlord. Landlord's charges for electric current, water and
refrigerants and for such parts, supplies, repairs, alterations changes,
additions or improvements as are caused to be furnished or made by Landlord
shall be payable by Tenant as additional rent upon presentation of Landlord's
bill for same. If Tenant shall default in paying any such bill for five (5)
days, Landlord shall have the right, in addition to any other rights under this
Lease to terminate the operation of said air conditioning system without notice
to Tenant, and if such default shall continue for sixty (60) days, Landlord
shall have the right to remove the whole or any part of said system from the
demised premises without notice to Tenant. The non-functioning of said air
conditioning system, or Tenants inability to operate or maintain the same in
compliance with lawful requirements, or Landlord's removal thereof or
termination of the operation thereof as provided in this paragraph, or any
delay, discomfort or inconvenience suffered by Tenant in connection therewith,
or, without limitation of or by the foregoing, any other matter or thing related
to such system, shall not give rise to any obligation or liability on the part
of Landlord and shall not affect this Lease or be deemed to release or discharge
Tenant of any of Tenant's obligations or liabilities under this Lease or
otherwise. Title to said system and present and future parts thereof is and
shall be vested in Landlord.
b) Anything contained herein to the contrary notwithstanding, it is
expressly agreed that Tenant shall pay the cost of any and all permits required
by any branch or department of the borough, county, city, state or federal
government in connection with any air conditioning presently or hereinafter
installed in the demised premises by either Landlord or Tenant.
INDEMNIFICATION OF LANDLORD
54. Tenant shall indemnify and hold Landlord and Landlord's agents harmless
against and from (i) any and all claims against Landlord or such agents of
whatever nature arising from any act, omission or negligence of Tenant, its
contractors, licensees, agents, servants, employees (ii) all claims against
Landlord or such agents arising from any accident, injury or damage whatsoever
caused to any person or to the property of any person and occurring during the
term of this Lease in or about the Demised Premises, or occurring outside of the
Demised Premises but anywhere within or about the Land or the Building, where
such accident, injury or damage results or is claimed to have resulted from any
act, omission or negligence of Tenant or Tenant's agents, employees, invites or
visitors; (iii) any breach, violation or non-performance or any covenant,
condition or agreement in this Lease set forth and covenanted on the part of
Tenant to be fulfilled, kept, observed and performed; and (iv) any cost,
liability or responsibility for the payment of any sales tax with respect to any
installations, furniture, furnishings, fixtures or other improvements located,
installed or constructed in the Demised Premises, or the filing of any tax
return in connection therewith (although Landlord agrees to execute any such
return if required by law) regardless of whether such tax is imposed upon
Landlord or Tenant. This indemnity and hold-harmless agreement shall include
indemnity from and against any and all liability, fines, suits, demand, costs
and expenses of any kind or nature incurred in or in connection with any such
claims or proceeding brought thereon, and the defense thereof.
LIABILITY OF LANDLORD, SERVICE INTERRUPTION, ACTS BEYOND CONTROL
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55. Neither this Lease nor any obligation hereunder on Tenant's part to be
performed (including, but not limited to, Tenant's obligation to pay the rents
provided for hereunder) shall in any way be released, discharged, impaired,
excused, or otherwise affected because of Landlord's inability to supply,
furnish or make such services, fixtures, equipment, repairs, additions,
improvements, alterations, and/or decorations, if any, as Landlord may be
required to supply, furnish, or make hereunder or in connection herewith, or
because of any delay in supplying, furnishing or making any of the foregoing, if
such inability or delay directly or indirectly results from or is caused by or
attributable to any cause or thing whatsoever beyond Landlord's control,
including, but not limited to, any law or ordinance or any governmental order,
rule, regulation or requirement, or any shortages in supplies, materials or
labor, or any acts of God, or any labor difficulties, disasters or acts of
public enemies, and in any such event Landlord shall be relieved of any
liability to Tenant which it might otherwise have had by reason of any such
requirements.
COURT ORDER
56. (a) Notwithstanding anything elsewhere contained in this Lease, if by
reason of any present or future cause or thing whatsoever (including, without
limitation, by reason of any statute, decree, court order or governmental rule
or regulation), Tenant will not or shall not be required to pay to Landlord the
full amount of rent and additional rent reserved hereunder, then Landlord, at
its unrestricted option, may give Tenant not less than five (5) day's notice of
intention to end this Lease and the term hereof, and thereupon, on the date
specified in said notice, this Lease and the term hereof shall expire as fully
and completely as if that date were the date herein originally fixed for the
expiration of this Lease and the term hereof.
(b) No act or thing done by Landlord or Landlord's agents during the term
hereby demised shall constitute an actual constructive eviction by Landlord, nor
shall be deemed an acceptance of a surrender of said premises and no agreement
to accept such surrender shall be valid unless in writing signed by Landlord. No
employee of Landlord or of Landlord's agents shall have any power to accept the
keys of said premises prior to the termination of the Lease. The delivery of
keys to any employee of Landlord or Landlord's agents shall not operate as a
termination of the Lease or surrender of the premises. In the event Tenant at
anytime desires to have Landlord sublet the premises for Tenant's account,
Landlord or Landlord's agents are authorized to receive said keys for such
purposes without releasing Tenant from any obligations under this Lease, and
Tenant hereby relieves Landlord of any liability for loss of or damage to any of
Tenant's effect in connection with such subletting.
(c) The failure of Landlord to seek redress for violation of, or to insist
upon the strict performance of, any covenant or condition of this Lease, or any
of the Rules and Regulation set forth or hereafter adopted by Landlord, shall
not prevent a subsequent act, which would have originally constituted a
violation, from having all the force and effect of an original violation. The
receipt by Landlord of rent with knowledge of the breach of any covenant of this
Lease shall not be deemed a waiver of such breach.
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(d) No payment by Tenant or receipt by Landlord of a lesser amount than the
monthly rent herein stipulated shall be deemed to be other than on account of
the earliest stipulated rent, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such rent or pursue any
other remedy in this Lease provided.
QUIT AND SURRENDER
57. Upon the expiration or other termination of the term of this Lease, Tenant
shall quit and surrender to Landlord the demised premises, broom clean, in good
order and condition, ordinary wear expected. Tenant acknowledges that Tenant was
given possession of the demised premises, broom clean, in good order and
condition, ordinary wear excepted. Tenant agrees it shall indemnify and save
Landlord harmless against cost, claims, loss or liability resulting from delay
by Tenant in so surrendering the demised premises, including, without
limitation, any claims made by any succeeding Tenant, founded on such delay. The
parties recognized and agree that the damages to Landlord resulting from any
failure by Tenant timely to surrender possession of the demised premises as
aforesaid will be extremely substantial, will exceed the amount of monthly rent
therefore payable hereunder, and will be impossible of accurate measurement.
Tenant therefore agrees that if possession of the demised premises is not
surrendered to Landlord within seven (7) days after the date of the expiration
or termination or the term of this Lease, than Tenant agrees to pay Landlord as
liquidated damages for each month and for each portion of any month during which
Tenant holds over in the premises after expiration or termination of the term of
this Lease, a sum equal to two times the average rent and additional rent which
was payable per month under this Lease during the last six month of the term
thereof. The aforesaid provisions of this article shall survive the expiration
or sooner termination of the term of this Lease. If the last day of the term of
this Lease or any renewal thereof falls on Sunday, this Lease shall expire on
the business day immediately preceding.
RENT CONTROL
58. In the event the fixed annual rent or additional rent or any part thereof
provided to be paid by Tenant under the provisions of this Lease during the
demised term shall become uncollectible or shall be reduced or required to be
reduced or refunded by virtue of any Federal, State, County or City law, order
or regulation, or by any direction of a public officer or body pursuant to law,
or the orders, rules, code, or regulations of any organization or entity formed
pursuant to law, whether such organization entity be public or private, then
Landlord, at its option, may at any time thereafter terminate this Lease, by not
less than thirty (30) days' written notice to Tenant, on a date set forth in
said notice, in which event this Lease and the term hereof shall terminate and
come to an end on the date fixed in said notice as if the said date were the
date originally fixed herein for the termination of the demised term. Landlord
shall not have the right so to terminate this Lease if Tenant within such period
of thirty (30) days shall in writing lawfully agree that the rentals herein
reserved are reasonable rentals and agree to continue to pay said rentals and if
such agreement by Tenant shall be legally enforceable by Landlord.
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RENT ESCALATION - TAX INCREASES
59. (a) The Tenant agrees to pay as additional rent during the term of this
Lease 4.75 per cent of any increase in the Real Estate Taxes (as such term is
hereinafter defined) above those for the fiscal 1998-1999. Such additional rent
shall be collectible as additional rent. For the final year of the Lease term,
the Tenant shall be obligated to pay only a pro rata share of such percentage of
any such increase in taxes. Tax bills (except as hereinafter provided) shall be
conclusive evidence of the amount of such taxes and shall be used for the
calculation of the amounts to be paid by the Tenant.
(b) The term "Real Estate Taxes" shall mean all the real estate taxes and
assessments, special or otherwise, levied, assessed or imposed by Federal, State
or Local Government against or upon the entire tax lot of which the demised
premises form a part. If due to a future change in the method of taxation, any
franchise, income, profit or other tax or other payment, shall be levied against
Landlord in whole or in part in substitution for or in lieu of any tax which
would otherwise constitute a Real Estate Tax, such franchise, income, profit or
other tax or payment shall be deemed to be a Real Estate tax for the purposes
hereof. If Landlord should incur expense in connection with Landlord's endeavor
to reduce or prevent increase in assessed valuation, Tenant shall be obligated
to pay as additional rent the amount computed by multiplying the percent set
forth herein times such expense of Landlord and such amount shall be due and
payable upon demand by Landlord and collectible in the same manner as annual
rent. The obligation to make any payments of additional rent pursuant to this
Article shall survive the expiration at other termination of this Lease.
RENT ESCALATION - PERCENTAGE INCREASES
60. Notwithstanding any provision of the Lease and this rider to the contrary,
the base annual rent set forth in the preamble of this Lease shall be subject to
an additional increase of four percent per annum during each year of the term of
the Lease. The foregoing increase shall become effective on each anniversary
date of the Lease, except where the Lease begins on a day other than the first
day of the month, in which event the increase shall become effective on the
first day of the thirteenth calendar month of the Lease. The foregoing increase
shall be calculated by taking the monthly installment of the base annual rent in
effect for the month preceding the effective date of the increase and increasing
said monthly installment of the base annual rent by the applicable percentage
set forth in this paragraph. The foregoing increase shall be in addition to any
other increase(s) set forth in the preamble or any other portion of the Lease
and this rider. in the event the owner has waived or agreed to any reduction of
the base annual rent, in whole or in part, for the month utilized to calculate
the increase herein, the foregoing increase shall be calculated without regard
to any such waiver or reduction.
EXECUTION OF LEASE
61. This Lease is offered to Tenant for signature with the understanding that
it shall not be binding upon Landlord unless and until Landlord shall have
executed and unconditionally delivered to Tenant a fully executed copy of this
Lease.
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TENANT'S INSURANCE
62. (a) General. At all times during the term of this Lease, Tenant will carry
and maintain, at Tenant's expense, the following insurance, in the amounts
specified below or such other amounts as Landlord may from time to time
reasonable request, with insurance companies and on forms satisfactory to
Landlord:
(b) Public liability and property damage liability insurance with a
combined single occurrence limit of not less than $1,000,000 for injury or death
and damages to any one person, or $2,000,000 for injury or death arising out of
any one occurrence, and $1,000,000 for damages to property. All such insurance
will specifically include, without limitation, contractual liability coverage
for the performance by Tenant of the indemnity agreements set forth in this
Lease.
(c) Insurance covering all Tenant's equipment, trade fixtures, appliances,
furniture, furnishings and personal property in, on, or upon the Premises during
the term of this Lease, in an amount not less than full replacement cost without
deduction for depreciation, providing protection against all perils included
within the classification of fire, extended coverage, vandalism, malicious
mischief, special extended peril (all risk), boiler, flood, glass breakage and
sprinkler leakage. All policy proceeds will be used for the repair or
replacement of the property damage or destroyed; however, if this Lease ceases,
Tenant will be entitled to any proceeds resulting from damage to Tenant's
equipment, trade fixtures, appliances, furniture and personal property, and
Landlord will be entitled to all other proceeds.
(d) Workmen's compensation insurance insuring against and Tenant's
obligation and liabilities under the workmen's compensation laws of the state in
which the Premises are located.
(e) Forms of the Policies. All policies of liability insurance which Tenant
is obligated to maintain according to this Lease (other than any policy of
workmen's compensation insurance) will name Landlord and such other persons or
firms as Landlord specifies from time to time as additional insureds.
Certificates (together with copies of the endorsements naming Landlord and any
others specified by Landlord as insureds) and evidence of the payment of such
policies will be delivered to Landlord prior to Tenant's occupancy of the
Premises and the form time to time as least thirty (30) days prior to the
expiration of the term of each such policy. All public liability and property
damage liability policies maintained by Tenant will contain a provision that
Landlord and any other insureds will be entitled to recover under such policies
for any loss sustained by him, Landlord and other additional insureds, its
agents and employees as a result of the acts or commissions of Tenant. All such
policies maintained by Tenant will provide that they may not be terminated or
amended except after thirty (30) days prior written notice to Landlord. All
public liability, property damage liability and casualty policies maintained by
Tenant will be written as primary policies, not contributing with and not
supplemental to the coverage that Landlord carry insurance required to be
maintained by Tenant.
(f) Waiver of the Subrogation. Tenant waives any and all rights to recover
against the Landlord or against any other Tenant or occupant of the Building, or
against the officers,
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directors, shareholders, partners, joint venturers, employees, agents,
customers, invitee or business visitors of such other party or of such other
Tenant or occupant of the Building, for any loss or damage to such waiving party
arising from any cause covered by any insurance required to be carried by such
party pursuant to this Article or any other insurance actually carried by such
party. Landlord and Tenant, from time to time, will cause their respective
insurers to issue appropriate waiver of subrogation rights endorsements to all
policies of insurance carried in connection with the Premises or the contents of
the Premises. Tenant agrees to cause all other occupants of the Premises
claiming by, under or through Tenant to execute and deliver to Landlord such a
waiver of claims and to obtain such waiver of subrogation rights endorsements.
(g) Adequacy of Coverage. Landlord, its agents and employees make no
representation that the limits of liability specified to be carried by Tenant
pursuant to this Article are adequate to protect Tenant. If Tenant believes that
any of such insurance coverage is inadequate, Tenant will obtain, at Tenant's
sole expense, such additional insurance coverage as Tenant deems adequate.
WINDOW GLASS
63. Tenant agrees to obtain and all times maintain a policy of insurance
covering all window glass in the demised premises; such policy shall cover the
Landlord as an insured. If the Tenant shall fail to procure such policy and
deliver the original thereof to the Landlord, Landlord may procure such policy
and the premium thereon when paid by the Landlord shall be deemed additional
rent hereunder.
LATE CHARGE
64. If any payment of rent shall be more than eight (8) days late, Tenant
shall, without relieving it of its obligation to pay rent in advance on or
before the first of each month, pay to Landlord, concurrently with such late
payment of rent, a late charge of Five ($.05) Cents for each dollars ($1.00)
that is more than eight (8) days late which charge Tenant hereby agrees to be
reasonable. The Landlord's right to collect a late charge hereunder shall be in
addition to, and not in limitation of, all of Landlords other rights and
remedies herein including the right to institute an action or proceeding for
non-payment of rent.
FAILURE TO PAY RENT
65. In the event Tenant shall fail to pay the rent and/or additional rent
reserved herein in a timely fashion, each and every month during the term of
this Lease and the Landlord, due to the Tenant's failure to pay and the rent
and/or additional rent, shall commence two or more legal proceedings in any
twelve (12) month period for Tenant's failure to pay rent and/or additional
rent, whether or not said legal proceedings result in a final judgement,
stipulation withdrawal or dismissal, then and in such event to the Landlord
shall have the right to terminate this Lease agreement and the Tenant's tenancy
upon three (3) days written notice to Tenant, and the term of this Lease shall
terminate at the end of such three (3) day period and the Landlord shall be
entitled to commence a summary holdover proceeding or any other type of
proceeding against to
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the Tenant to remove the Tenant from the premises and regain possession of the
premises. The Tenant shall not be entitled to any notice other than the said
three (3) day notice of termination and shall not have the right to cure said
default.
COUNTERCLAIMS
66. The Tenant hereby agrees not to interpose any counterclaims or set-off
whatever nature or description except those which are mandatory or compulsory.
In any action or summary proceeding by the Landlord against the Tenant for
non-payment of rent, damages or deficiency whether such action or summary
proceeding be brought under this Lease or any renewal extension, holdover or
modification thereof. Nothing herein contained, however, shall be construed as a
waiver of the Tenant's right to commence separate action on a bona fide claim
against the Landlord.
LIMITATION ON USE OF PREMISES
67. Notwithstanding any other provision contained herein to the contrary,
Tenant has expressly represented to the Landlord that the premises herein are to
be used solely and exclusively for the purposes set forth in paragraph 2 herein
above. Tenant has further represented that the premises will not, at any time
and under any circumstances, be used for living purposes, either by Tenant or by
any other person that may come onto the premises. In the event that Tenant is in
violation of this provision, and such violation is not cured within five (5)
days after written notice from Landlord, then Landlord shall have the right to
terminate this Lease in accordance with paragraph 17 herein above in the event
that Tenant fails to vacate pursuant to such termination, it (he or she) shall
be liable to the Landlord for all costs and expenses incurred in any action or
proceeding commenced to recover said premises, including but not limited to
reasonable attorney's fees.
CONDITION AND PREMISES
68. It is understood that the Tenant has examined the premises and accepts the
same "AS IS" without any representation on the part of the Landlord to do or
make any alterations or improvements therein except as set forth herein. Tenant
acknowledges that Tenant has inspected the demised premises is familiar with its
physical condition and accepts the same "AS IS".
LIMITATION OF LIABILITY
69. Aside from any applicable insurance which Landlord may have in effect,
Tenant or any successor in interest or one deriving an interest through or under
the Tenant or successor in interest shall look solely to the equity of the then
Landlord in the real property of which the demised premises form a part for the
satisfaction of the remedies of the Tenant in the event of a breach by the
Landlord of any of the covenant or conditions of this Lease, and the rights of
such Tenant or successor in interest or one deriving an interest through or
under the Tenant or such successor in interest for the purpose of collecting or
using the assets of the Landlord to satisfy any legal claim against the Landlord
in said real property as if such interest were the sole asset of
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the Landlord and the liability of the Landlord to any party arising out of,
under or in any way in connection with the terms or provisions of this Lease are
specifically limited to the value of said interest in real property.
PARTIAL PAYMENTS
70. If Landlord receives from Tenant any payment less than the sum of the fixed
annual rent, additional rent and other charges then due and owning pursuant to
the terms of this Lease, Landlord may, at its sole discretion, allocate such
partial payment in whole or in part, to any fixed annual rent, additional rent,
or other charges in any combination thereof. In the event an action or
proceeding is commenced against Tenant for any reason whatsoever, including, but
not limited to, non-payment of rent, Tenant agrees that any monies received by
Landlord or its agent after the service of any preliminary notice or demand,
including a rent demand, may first be applied by Landlord to satisfy Tenant's
arrears which have accrued on or after the date of said notice or demand, and
same may be accepted without prejudice to the maintenance of such action
proceeding as well as the granting of any judgment of possession or the issuance
or execution of any Warrant of Eviction in connection therewith.
BROKERS
71. Tenant represents and warrants that Tenant has not dealt with any broker in
connection with this Agreement, and that insofar as Tenant knows, no other
broker negotiated this Lease or is entitled to any commission in connection
therewith, and the execution and delivery of this Lease by Landlord shall be
conclusive evidence that Landlord has relied upon the foregoing representation
and warranty. In the event of any brokerage claim relating to this Agreement,
Tenant shall indemnify and hold Landlord harmless from any from any and all
liability and expense incurred by Landlord in connection therein.
BASEMENT
72. In the event a portion of the basement is specifically demised to Tenant in
the preamble to the Lease, such use shall be subject to the Landlord's right of
entry for the purpose of maintaining the building the building or installing and
maintaining any building service. Landlord makes no representation as to the
fitness for use and occupancy of the said basement Tenant shall provide access
to meter readers and inspectors from the State or City, without delay as and
when requested by said persons.
STORAGE
73. Tenant shall, in connection with the storage of any items in the demised
premises, cause same to be placed upon wooden palettes, skids or like platforms
so that said items are at least four (4) inches above the level of the floor.
Tenant shall not make any claims for any damage, to its goods or property,
regardless of the cause of such damage in the event said items are not stored
and maintained in accordance with the requirement of this paragraph. In
addition, Tenant agrees that it will not store any items less that eighteen (18)
inches from any sprinkler head.
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HALLWAYS, COMMON AREAS OR SIDEWALKS
74. Tenant acknowledges that the Landlord deems it of utmost importance to the
safety and general welfare of its Tenants and the building that the common
areas, including the hallways and the sidewalks appurtenant thereto, shall be
kept free from and unencumbered by any of Tenant's equipment, Tenant's
employees' equipment or Tenant's employees. Tenant shall not permit his
employees to loiter, congregate or assemble in said areas or to keep, maintain
or store property belonging to Tenant or Tenants employees therein or
thereabout. Tenant's property and Tenant employees' property shall include, but
not be limited to, merchandise, equipment, bicycles, motor cycles, motor
vehicles, dollies, skids, storage containers and goods of any description.
Tenant acknowledges and agrees that the loitering, congregation or assemblage or
its employees in said areas and/or the maintenance or storage of its property or
property employees in said areas obstruct the flow of traffic in, through and
about the building and constitutes a fire hazard and as such, constitutes a
breach of a substantial obligation of this Lease and shall entitle Landlord to
declare Tenant default of this Lease and to exercise any remedies available
against the Tenant at law or in equity including, but not limited to, the right
to seek injunctive relief or commence eviction proceedings against the Tenant
notwithstanding the fact that the occurrences complained of are not within the
Demised Premises.
LOCKS
76. Any locks which are attached or installed on premises doors will become the
property of the Landlord. They may not be removed when Tenant vacates premises.
Keys to those locks must be returned to the Landlord. Any removal of locks on
doors will constitute a breach of this Lease and Landlord may sue to recover
damages caused by their removal from door.
EXCESSIVE NOISE PREVENTION
77. Tenant agrees that all clickers, hydraulic press machinery and all other
machinery which Landlord, in its reasonable opinion, deems to cause excessive
noise and vibration, must be put on springs and mounted on "I" beams or similar
structures to alleviate said excessive noise or vibration. Failure of Tenant to
place on springs and mount said machinery within two (2) days after receiving
notice to do so from Landlord shall constitute a breach of a substantial
obligation of Lease. In the event Tenant fails to comply with such notice from
Landlord, Landlord may exercise any remedies available against Tenant at law or
in equity including, but not limited to, the right to seek injunctive relief or
commerce eviction proceedings against Tenant and Landlord may, without limiting
the foregoing and without further notice to Tenant, install such springs and
mount said machinery as aforesaid, with the cost thereof chargeable to Tenant as
additional rent.
ADJACENT WALLS
78. Tenant has inspected the walls in the hallway directly adjacent to the
Demised Premises and acknowledges that same are in good condition. Tenant agrees
that any damage thereto may
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be repaired by Landlord, without notice, at Tenant's expense, with said expense
chargeable to Tenant as additional rent.
SIDEWALK ELEVATOR REPAIRS AND INSPECTIONS
79. In the event the Demised Premises includes the usage of a sidewalk
elevator, Tenant agrees that any maintenance, repairs or mandated sidewalk
elevator inspections in connection therewith will be undertaken and/or performed
by Landlord at Tenant's expense, which expense shall be chargeable to Tenant as
additional rent.
DOLLIES
80. All dollies utilized by Tenant, its agents, employees, invitees,
contractors and/or vendors, in or about the Demised Premises or the building
shall have rubber wheels. Tenant shall be responsible for any damage resulting
to the floors or walls of the Demised Premises and/or building and/or sidewalk
in the event of a breach of this paragraph, by Tenant, its agents, employees,
invitees, contractors or vendors. Tenant acknowledges and agrees that the
Landlord deems it of utmost importance to the safety and general welfare of its
tenants and the building that the common areas, including the hallways, and the
sidewalks appurtenant thereto, shall be kept free from and unencumbered by any
dollies belonging to Tenant, its employees, agents, invitee, contractors of
vendors. Tenant further acknowledges and agrees that the placement or storage of
dollies anywhere in said common areas obstructs the flow of traffic and
constitutes a fire hazard. Tenant further acknowledges and agrees that such
placement or storage of dollies shall constitute a breach of a substantial
obligation of this Lease and shall entitle Landlord to declare Tenant in default
of this Lease and to exercise any remedies available against the Tenant at law
or in equity including, but not limited to, the right to seek injunctive relief
or commence eviction proceeding against the Tenant notwithstanding the fact that
the occurrences complained of are not within the Demised Premises.
DEFERRED RENT
81. Landlord may, in its sole discretion, choose to defer the payment of the
entire rent and/or additional rent stipulated under the Lease. The acceptance by
Landlord of an amount less than the rent and/or additional rent stipulated under
the Lease shall not constitute a waiver of any amounts otherwise due but for
such deferral. Any endorsement or statement on any check or any letter
accompanying any check or payment as rent or additional rent shall not be deemed
an accord and satisfaction, and the Landlord may accept such check or payment
without prejudice to the owner's right to recover the full amount of the rent
and/or additional tents stipulated under the Lease. Landlord may,
notwithstanding any such deferral of rent or additional rent, demand the
differential between the deferred rent and the full amount of the rent and/or
additional rent stipulated under the Lease, and Tenant shall pay same as
additional rent on or before the first of the month not succeeding such demand,
whether such demand be made orally or in writing. The provisions of this
Paragraph are intended to supplement the provisions of Paragraph "25" of the
Lease and are not intended to limit any of owner's rights or remedies under any
paragraph of the Lease or this Rider including, but not limited to, said
Paragraph "25".
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SPRINKLER HEADS
82. Tenant agrees and acknowledges that is of utmost importance to the safety
and welfare of the occupants of the building that all sprinkler heads be fully
exposed and unobstructed. In the event any sprinkler head in the demised
premises is or becomes obstructed and/or covered in any manner whatsoever, owner
may, without notice and in the same manner as it such condition constituted an
emergency situation, enter the demised premises to perform the work necessary to
render said sprinkler head fully exposed and/or unobstructed. Such work shall be
performed at Tenant's sole cost and expense at $125.00 per head, and the cost
thereof shall be chargeable to Tenant as additional rent. Owner shall have no
liability whatsoever to Tenant in connection with any entry authorized and/or
work performed pursuant to this Paragraph based upon, by way of example, and not
by way of limitation, interruption to Tenant's business including, but not
limited to, lost profits. Further, Tenant shall not be entitled to any abatement
of rent or connection with any such entry authorized and/or work performed
pursuant to this Paragraph. No provision of this Paragraph shall impose upon
Owner any affirmative duty to perform the work described herein.
RENEWAL OPTION
83. Provided Tenant shall have fully and faithfully complied with the terms,
conditions and covenants of this Lease, and that, during the terms, Tenant shall
not have incurred late payment charges, as provided in paragraph 65 hereof, more
than three (3) times, and further provided that Tenant shall not have caused any
claim, lawsuit or proceeding to have been made or commenced against the
Landlord, its principals, agents or employees, Tenant shall have a one time
option to extend this Lease for an additional two (2) years, and otherwise under
the same terms and conditions. Nothing in this Lease, however, shall be
construed so as to allow any further renewal option other than as specifically
provided for in this paragraph. Tenant shall exercise the renewal option
provided in this paragraph by giving notice (hereinafter "Renewal Notice") to
Landlord by certified mail, return receipt requested, of its intention to renew
this Lease. The Renewal Notice shall be given no earlier that six months prior
to the expiration of the terms set forth in the preamble of this Lease and no
later than three months prior to the expiration of the term. Time shall be of
the essence in the giving of the Renewal Notice. Failure of the Tenant to give
the Renewal Notice within the time parameters specified herein shall render the
renewal option herein a nullity and shall entitle Landlord to re-let the demised
premises without any further notice to Tenant. This paragraph must be initialed
by all parties in the spaced provided above in order to be effective.
PORNOGRAPHIC USES PROHIBITED
84. Tenant agrees that the value of the demised premises and the reputation of
the Owner will be seriously injured if the premises are used for any obscene or
pornographic purposes of any sort of commercial sex establishment. Tenant agrees
that Tenant will not bring or permit any obscene or pornographic material on the
premises, and shall not permit or conduct any obscene, nude, or semi-nude live
performances on the premises, nor permit use of the premises for nude
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modeling, rap sessions, or as a so called rubber goods shop, or as a sex club of
any sort, or as a "massage parlor." Tenant agrees further that Tenant will not
permit any of these uses by any sublessee or assignee of the premises. This
Article shall directly bind any successors in interest of the Tenant. Tenant
agrees that at any time Tenant violates any of the provisions of this Article,
such violation shall be deemed a breach of a substantial obligation of the terms
of this Lease and objectionable conduct. Pornographic material is defined for
purposes of this Article as any written or pictorial manner with prurient appeal
or any objects of instrument that are primarily concerned with lewd or prurient
sexual activity. Obscene material is defined here as it is in Penal law 235.00.
MECHANICS LIENS
85. Notwithstanding anything to the contrary contained in this Lease, Tenant
hereunder for itself, its successors and designs, warrant and guarantee to and
Landlord named in the within Lease, its successor and assigns, that if any
mechanic's lien shall be filed against the building of which the demised
premises forms a part, for work claimed to have been done for, or materials
furnished to Tenant, the same shall be discharged by Tenant, by either payment
or by bond at the sole cost of Tenant, within twenty (20) days following the
filing of such mechanic's lien.
In the event such mechanic's lien is not discharged timely as aforesaid,
Landlord on ten (10) days prior notice to Tenant, may discharge same for the
account of and at the expense of Tenant and Tenant shall promptly reimburse
Landlord as additional rent for all costs, disbursements, fees and expenses,
including without limitation, reasonable legal fees incurred in connection with
so discharging said mechanic's lien.
LAVATORY SUPPLIES
86. Tenant shall supply, at its own cost and expense, its own lavatory
supplies, including, but not limited to toilet paper and paper towels.
BUILDING ATTENDANT
87. Tenant agrees to pay the monthly sum of zero (0) for the Building
Attendant. Tenant understands that the charge for Building Attendant may be
adjusted from time to time to provide for additional monies to meet the
buildings needs.
WATER METERS
88. Notwithstanding anything herein to the contrary, Landlord shall have the
option to install water meter(s) to measure the consumption of Tenant's water
usage. In such event, Tenant shall pay for the cost of said meter(s) and
its/their installation as well as for the consumption of water as per meter
readings and bills rendered by the supplier thereof.
SEVERABILITY
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<PAGE> 43
89. Each and every covenant contained in this Lease shall be deemed separate
and independent and not dependent on any other provision of this Lease or the
use and occupation of the Tenant. In the event that any portion or Article of
this Lease be declared invalid, the affected Article and the balance of the
provisions hereof shall remain in full force and effect.
MERGER
90. This Rider, combined with the pre-printed Form Lease to which it is
annexed, comprises the entirely of the agreement between the parties and no
modifications of same shall be permitted unless in writing, executed by, or on
behalf of both parties.
ADDITIONAL ELECTRIC SERVICE
91. If Landlord, in Landlord's sole discretion, determines that additional
electrical service is required due to Tenant's use of the demised premises, then
Landlord may, at Tenant's sole cost and expense, bring up additional electrical
service through new or existing lines, Such work will be performed by Landlord's
electricians with the cost and expense thereof due and payable on demand as
additional rent. All such additions or modifications to the electrical system of
the building shall be and remain the property of the Landlord.
ATTORNEYS FEES
92. In case it shall be necessary for Landlord to institute any action or
proceeding against Tenant for the nonpayment of rent or for the violation of any
of the covenants or provisions of this Lease or for the recovery of possessions
of the demised premises or should Landlord be compelled to intervene in any
action or proceeding wherein Tenant is a party in order to enforce or protect
Landlords interest or rights hereunder, then and in any of such events Tenant
shall be obligated to pay to Landlord reasonable attorneys' fees, costs and
disbursements incurred for the institution and prosecution of any such action,
proceeding or intervention. From time to time as the bills for such proceedings
are received, Landlord shall copy bills and serve them to Tenant with their rent
bill and this will represent those monies sought by Landlord to reimburse for
those expenses.
EFFECT OF RIDER
93. The provisions of this Rider supplement and are in limitation of the
provisions of the pre-printed Form Lease. Any conflict, however, between this
Rider and the pre-printed Form Lease shall be resolved and construed in favor of
this Rider.
RENT COMMENCEMENT
94. Rent shall commence January 1, 1999.**
Rent shall commence March 1, 1999,
Tenant shall pay rent for room 302/304
43
<PAGE> 44
for the month of February 1999.
------------------------------
LANDLORD
BY:
--------------------------
------------------------------
TENANT
BY:
--------------------------
DATE SIGNED: 1/15/99
-------
44
<PAGE> 45
Provide electrical service to meet the specifications of up to four air
conditioning units to be installed by the Tenant.
Clean and repaint the demised premises.
ACCESS AND SECURITY
98. Landlord shall permit Tenant to have access to the demised premises Twenty
four hours per day, seven days per week. Landlord shall also provide Tenant with
keys to the back entrance of the demised premises adjacent to the freight
elevators.
Agreed to:
- ---------------------------- ------------------------
One Fifteen West Assoc., L.P. Alloy Designs, Inc.
45
<PAGE> 46
ADDITIONAL RIDER ATTACHED TO AND FORMING A PART OF LEASE DATED
DECEMBER [], 1998 BETWEEN ONE FIFTEEN WEST ASSOC., L.P.,
LANDLORD, AND ALLOY DESIGNS, INC., TENANT
ALTERATIONS
95. Notwithstanding anything to the contrary in Article 3 hereof, (a)
Landlord's consent shall not be required in connection with alterations,
installations, additions or improvements made by Tenant which are nonstructural
and which do not affect utility services or plumbing and electrical lines, in or
to the interior of the demised premises and costing less than $10,000 in each
instance, and (b) Landlord shall not unreasonably withhold or delay its consent
to any alterations, installations, additions or improvements made by Tenant
which are nonstructural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the demised premises and costing
$10,000 or more in each instance.
ASSIGNMENT, MORTGAGE AND SUBLEASING
96. Notwithstanding anything to the contrary contained in Article 11 or Article
46 hereof, Landlord's consent shall not be required with respect to the
following: (a) transactions with an entity into which Tenant is merged or
consolidated, or to which all or substantially all of the stock or assets of
Tenant are transferred, or to which all or substantially all of Tenant's
business at the premises is transferred, provided such merger or consolidation
or transfer involves the transfer of Tenant as an ongoing business entity; (b)
transactions with an entity which controls, is controlled by or is under common
control with Tenant; (c) the initial public offering of the stock of Tenant on a
nationally recognized securities exchange; and (d) the trading of Tenant's stock
on a nationally recognized securities exchange.
LANDLORD'S WORK
97. Notwithstanding anything to the contrary contained in the Lease, upon the
execution of this Lease, Landlord shall with due diligence, in a good
workmanlike manner and in accordance with all applicable laws, perform the
following work with respect to the demised premises:
* Replace all broken glass which is substantially cracked or broken as of the
date that the Tenant takes possession.
* Install such number of quad outlets on the columns with a separate circuit
as the Tenant may reasonably request.
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<PAGE> 47
GUARANTY
FOR VALUE RECEIVED, and in consideration for, and as an inducement to One
Fifteen West Associates, L.P. ("Landlord"), for making the Lease dated as of
November 30, 1998, with ALLOY DESIGNS. INC. ("Tenant"), for the Premises known
as Room 207 in the Building located at 115 West 30th Street, New York, New York
("Lease") the undersigned guarantees to Landlord, Landlord's successors and
assigns, the full performance and payment of rent and additional rent payable
under the Lease, as therein provided, without requiring any notice of
non-payment, non performance, or non-observance or proof, or notice or demand
whereby to change the undersigned therefor, all of which the undersigned hereby
expressly waives; and the undersigned expressly agrees that. the validity of
this Guaranty and the obligations of the Guarantors hereunder shall in no way be
terminated, affected or impaired by reason of the assertion or non-assertion by
Landlord against Tenant of any of the rights or remedies reserved to Landlord
pursuant to the provisions of the Lease. The remedies reserved to Landlord
pursuant to the provisions of the Lease. The undersigned further covenants and
agrees that this Guaranty shall remain and continue in full force and effect
with respect to any renewal modification, extension, subletting or assignment,
permitted or otherwise, of the Lease unless otherwise agreed to by Landlord in
writing. As further inducement to Landlord to make the Lease and in
consideration thereof, Landlord and the undersigned covenant and agree that in
any action or proceeding brought by either Landlord or the undersigned against
the other on any matters whatsoever arising out of, under or by virtue of the
terms of this Lease or of this Guaranty that Landlord and the undersigned shall
do hereby waive trial by jury.
Anything herein to the contrary notwithstanding, this Guaranty shall not
extend to any obligations incurred by Tenant under the Lease after the date the
Tenant and anyone claiming through the Tenant vacated the Demised Premise as
defined under the Lease, and then delivers possession of the Demised Premises to
the Landlord in broom clean condition and otherwise in accordance with the
provisions of the Lease. This Guaranty does not modify the terms of the Lease
and nothing herein contained shall relieve Tenant from any liability thereunder
in accordance with the terms of the Lease.
The acceleration shall not apply to the Guarantee.
Guarantor:
-------------------------------
Address:
-------------------------------
Social Security Number
47
<PAGE> 1
Alloy Online, Inc. has omitted from this Exhibit 10.3 portions of the Agreement
for which Alloy Online, Inc. has requested confidential treatment from the
Securities and Exchange Commission. The portions of the Agreement for which
confidential treatment has been requested have been filed separately with the
Securities and Exchange Commission. Such omitted portions have been marked
with an asterisk.
EXHIBIT 10.3
AGREEMENT BETWEEN
HARRISON FULFILLMENT SERVICES, INC.
AND
ALLOY DESIGNS, INC.
JULY 23, 1997
<PAGE> 2
TABLE OF CONTENTS
Section Page
- ------- ----
1. APPOINTMENT...............................................................1
2. SERVICES..................................................................2
3. SERVICE LEVELS............................................................2
4. PLACE OF PERFORMANCE......................................................2
5. FEES AND CHARGES..........................................................3
6. PAYMENTS..................................................................5
7. IMPREST FUND..............................................................6
8. FORECASTS.................................................................7
9. SPECIAL SERVICES..........................................................9
11. RISK OF LOSS............................................................12
12. TAXES...................................................................13
13. MONETARY DEFAULT........................................................13
14. OTHER DEFAULTS..........................................................14
15. FORCE MAJEURE...........................................................14
16. TERM AND TERMINATION....................................................15
17. REPRESENTATIONS AND WARRANTIES..........................................16
18. COVENANTS OF THE COMPANY................................................18
19. INDEMNITY & LIABILITY...................................................19
20. INSURANCE...............................................................20
21. COMPLIANCE WITH LAWS....................................................20
22. RECORD INSPECTION.......................................................20
23. CONFIDENTIALITY.........................................................21
24. NOTICES.................................................................21
25. ASSIGNMENT..............................................................22
26. AMENDMENTS..............................................................23
27. GOVERNING LAW...........................................................23
28. ARBITRATION.............................................................23
29. COMPUTER PROGRAMS.......................................................24
30. BUSINESS DAY............................................................24
31. RELATIONSHIP............................................................24
32. HEADINGS................................................................25
33. SEVERABILITY............................................................25
34. NO WAIVER...............................................................25
35. FULL AGREEMENT..........................................................25
36. COUNTERPARTS............................................................26
Exhibit A - Services..........................................Attached
- Attachment 1 - Sample Report Package Contents.....Attached
Exhibit B - Service Levels....................................Attached
Exhibit C - Start-Up Services.................................Attached
i
<PAGE> 3
Exhibit D - Transaction Rates.................................Attached
Exhibit E - Sales Tax Jurisdictions...........................Attached
Exhibit F - Company's Certificate of Insurance................Attached
Exhibit G - HFS's Certificate of Insurance....................Attached
Schedule 1 - HFS Representation and Warranty Exceptions.......Attached
Schedule 2 - Company Representation and Warranty Exceptions...Attached
ii
<PAGE> 4
FULFILLMENT SERVICES AGREEMENT
This Fulfillment Services Agreement (the "AGREEMENT") dated as of July 23,
1997, by and between Harrison Fulfillment Services, Inc., a Tennessee
corporation ("HFS"), and Alloy Designs, Inc., a Delaware corporation (the
"COMPANY").
W I T N E S S E T H
WHEREAS, the Company has a direct marketing program for the sale of various
merchandise sold through the Alloy Catalog (respectively, the "MERCHANDISE" and
the "CATALOG"); and
WHEREAS, HFS is a provider of various services to the direct response
industry, including, but not limited to, order entry; data processing; inbound
and outbound telemarketing; customer service; pick, pack and ship; order
fulfillment; warehousing and storage; and returns processing, and HFS will
provide some or all of these services to the Company as more particularly
described herein (the "SERVICES"); and
WHEREAS, the Company desires that HFS provide Services in connection with
the operation of its direct response business and HFS desires to provide such
Services to the Company.
NOW, THEREFORE, in consideration of the mutual promises and conditions
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. APPOINTMENT.
The Company hereby appoints HFS as the primary provider of Services in
connection with the Catalog upon the terms and conditions set forth in this
Agreement.
<PAGE> 5
2. SERVICES.
During the Term and subject to the terms hereof, HFS shall provide to the
Company the Services set forth in EXHIBIT A hereto.
3. SERVICE LEVELS.
Certain of the Services set forth in EXHIBIT A are subject to the Service
Levels set forth in EXHIBIT B (the "SERVICE LEVELS"). Such Service Levels
define certain minimum standards of performance which HFS shall maintain in
the rendering of the Services so long as the Company is not in Default (as
defined in Section 14 hereof) hereunder. However, in circumstances in which
this Agreement does not stipulate a certain Service Level to determine the
minimum standard of performance HFS shall maintain with respect to any
particular Service, HFS and the Company shall jointly agree upon the scope
of HFS's obligations regarding such Service, and, in any event, HFS shall
use its reasonable best efforts to provide the highest service levels
reasonably possible under the circumstances. HFS shall deliver reports to
the Company on a weekly basis to enable the Company to determine whether
HFS is meeting the Service Levels.
4. PLACE OF PERFORMANCE.
The Services shall be performed at HFS's place of business in Chattanooga,
Tennessee and at such other business locations as HFS may maintain from
time to time; provided, however, that HFS shall not be precluded from
out-sourcing certain Services, if necessary, on a temporary basis to
providers which HFS determines to be reasonably acceptable so long as HFS
remains primarily responsible for the providing of such out-sourced
Services at the Service Levels. HFS will use its reasonable best efforts to
notify the Company of its intent to utilize outsource providers prior to
commencing any outsourcing.
2
<PAGE> 6
5. FEES AND CHARGES.
In consideration for performance of the Services during the Term (as
defined hereinafter), the Company shall pay to HFS the following fees and
charges:
(a) INITIAL START-UP FEE. The Company has paid HFS an initial start-up fee
of $[ ]* (the "INITIAL START-UP FEE") in consideration of the start-up
services agreed upon by the parties hereto as set forth in EXHIBIT C (the
"START-UP SERVICES").
(b) TRANSACTION FEES. (i) The Company shall pay HFS transaction fees
("TRANSACTION FEES") at the transaction rates set forth in EXHIBIT D, as
such rates may be adjusted from time to time by the C.P.I. Adjustment and
Forecast Adjustment described below (the "TRANSACTION RATES");
(ii) The Transaction Rates shall be subject to adjustment as follows:
A. The Transaction Rates shall be increased annually, effective
January 1, 1998 and on January 1 of each year thereafter during the Term,
by an amount equal to the percentage increase in the Urban Wage Earners and
Clerical Workers-South-All Items consumer price index published by the U.S.
Department of Labor for the most recent twelve (12) month period for which
statistics are available on such dates determined by comparing such index
to the index quoted for the immediately prior twelve month period (the
"C.P.I. ADJUSTMENT").
B. From and after the expiration of the sixth calendar month
following the date that the first mailing of Catalogs is launched (the
"FIRST MAILING"), the Transaction Rates shall also be subject to adjustment
(the "FORECAST ADJUSTMENT") as follows:
1. In the event that the number of phone orders, items shipped
or units received (each a "COMPONENT") during any calendar month varies
above or below the amount forecasted for such Component in the applicable
Quarterly Forecast (or a Revised Quarterly Forecast which has been
delivered to HFS by no later than least fifteen
3
<PAGE> 7
(15) days prior to the commencement of such month) by more than ten percent
(10%) but less than twenty-five percent (25%), then the Transaction Rates
for such month shall be increased by ten percent (10%).
2. In the event that a Component level during any calendar
month varies above or below the amount forecasted for such Component in the
applicable Quarterly Forecast (or a Revised Quarterly Forecast which has
been delivered to HFS by no later than least fifteen (15) days prior to the
commencement of such month) by more than twenty-five percent (25%), then
the Transaction Rates for such month shall be increased by twenty percent
(20%). The "First Mailing" shall be deemed to have been launched on the
date that the preponderant portion of the catalogs shall have been mailed
from the printer for distribution to consumers.
C. The Transaction Rates assume two lines per order and two item
units per shipment. Additional charges will apply for more than two lines
per order or more than two item units per shipment.
(c) SPECIAL SERVICES FEES. If the Company requests that HFS provide
Special Services (as defined and discussed in Section 9 hereinafter), the
Company shall pay HFS such amount in respect of such Special Services as
shall be agreed between the Company and HFS, which amount may include
charges for setting up the required Special Service as well as for the
performance thereof (the "SPECIAL SERVICES FEES").
(d) CLOSE DOWN FEE. Upon any termination, including termination for
Default as provided for in Sections 13 and 14, the Company shall pay
termination charges relating to all close-down activities for all
deprogramming for the HFS computer system and for such other activities as
shall be agreed upon between HFS and the Company (the "CLOSE DOWN FEE"),
including such activities as removal of Merchandise from racks, packing for
shipment (if necessary), preparing freight documents for shipment to the
Company's designated destination and loading on the trucks of the Company's
designated carrier, together with the cost of any necessary supplies. The
Company shall have the right to specify whether any required labor shall be
performed on regular time or an overtime
4
<PAGE> 8
basis. [All close down activities shall be completed within thirty (30)
days following termination. ]
6. PAYMENTS.
(a) INITIAL START-UP FEE. The initial start-up fee has been paid prior to
the date of this Agreement.
(b) TRANSACTION FEES. HFS shall, on a weekly basis, issue to the Company
an invoice for estimated transaction fees (the "ESTIMATED TRANSACTION
AMOUNT") in the amount equal to the product of (i) the number of orders
taken by HFS during that week (the "PROCESSED ORDERS") and (ii) $[ ]* per
order (the "ASSUMED PER ORDER PRICE"). Such invoice shall be due and
payable within ten (10) Business Days. Commencing January 1, 1998, the
Assumed Per Order Price for any calendar quarter shall be adjusted on a
quarterly basis to reflect the greater of (i) the actual average
Transaction Fee per order or (ii) the forecasted average Transaction Fee
per order set forth in the Quarterly Forecast (as defined in Section 8
hereinafter) for the current calendar quarter. HFS shall, on a monthly
basis, issue to the Company an invoice setting forth the difference between
the Estimated Transaction Fees paid during the previous month and the
actual Transaction Fees incurred in respect of Services performed by HFS
(the "ACTUAL TRANSACTION FEES") during the prior month. Any payments owing
to HFS pursuant to such reconciliation of the Estimated Transaction Amount
with the Actual Transaction Fees shall be due and payable within ten (10)
Business Days following receipt of such invoice issued by HFS. If at the
end of the applicable month there is a balance due the Company, HFS shall
offset such balance against the following month's invoice.
(c) SPECIAL SERVICES FEES. Special Services Fees shall be due and payable
by the Company as agreed between the Company and HFS.
(d) CLOSE DOWN FEE. Upon any termination, HFS will issue to the Company an
invoice for the reasonably estimated Close Down Fee (except for that
portion of the Close Down Fee relating to telecommunication charges and
costs addressed hereinbelow), and
5
<PAGE> 9
such invoices shall be due and payable no later than ten (10) Business Days
from the date of such invoice. After completion of the close-down
activities, HFS shall submit a final adjusted bill to the Company
reflecting agreed charges pursuant to Section 5(d) hereof and an
appropriate credit or charge with respect to any difference from the
previously invoiced amount, and HFS or the Company, as applicable, shall
pay within ten (10) Business Days any resulting amount owing to the other
that is not otherwise credited. HFS shall not be required to release any of
the Company assets in HFS's possession (other than customer billing and
order history) prior to payment in full of the Close Down Fee (except for
the portion of the Close Down Fee relating to charges and costs of AT&T
and/or such other telecommunications carrier used by HFS ); provided,
however, that the Company shall be allowed to substitute collateral
acceptable to HFS in place of Company assets in HFS's possession. The
portion of the Close Down Fee relating to the transfer of portable 800
numbers and estimated cost for calls not billed will be reconciled and
billed monthly until all such telephone activity has been billed. These
billings shall be payable on a net ten (10) day basis.
7. IMPREST FUND.
At all times during the term of this Agreement, the Company shall maintain
with HFS an imprest fund (the "IMPREST FUND") sufficient to cover certain
expenses paid by HFS on behalf of the Company, including all UPS, U.S.P.S.,
common carrier and other delivery service shipping costs, packing
materials, stationery and other similar expenses, and HFS shall pay such
expenses therefrom so long as and to the extent that a balance remains
therein. The Company and HFS shall agree in advance upon which costs and
charges are to be paid from the Imprest Fund, it being understood that such
list of charges may change from time to time according to the Company's
business needs and HFS's operations. The Imprest Fund shall (at a minimum)
be funded by the Company on a weekly basis to bring the balance of the fund
to an amount which would cover forecasted expenses for the ensuing two (2)
week period after taking into consideration such factors as forecasted
order volume, seasonality and other applicable factors. If the Imprest Fund
is insufficient to cover such expenses, HFS may, in its sole discretion:
(a) upon request
6
<PAGE> 10
of the Company, pay the expenses and immediately invoice the Company for
the amount of expenses incurred plus a fifteen percent (15%) mark-up and
such invoice amount shall be payable within ten (10) Business Days of
receipt; or (b) following ten (10) Business Days after providing the
Company with written notice of insufficient funds in the Imprest Fund (and
the Imprest Fund has not during such time been restored in full), not pay
the expenses, and if HFS so elects not to pay the expenses, it shall have
no liability whatsoever for any losses or liabilities incurred by the
Company for such nonpayment. HFS shall provide the Company with a weekly
statement setting forth the balance of, and accounting for disbursements
from, the Imprest Fund.
8. FORECASTS.
The parties acknowledge that orders for Merchandise may not be uniform from
month to month as a result of various factors, including the seasonal
nature of the demand for Merchandise and circulation plans and mailing
schedules which reflect such seasonality and which are subject to constant
changes, and that the inability of the Company to accurately predict the
volume of orders to be processed or the inventory to be received and
warehoused on a weekly basis may have a detrimental effect on HFS's ability
to provide the Services in accordance with the Service Levels.
The Company recognizes and understands the importance of keeping HFS
informed at all times of forecasted order volumes, schedule changes, fast
and slow selling items, Merchandise or vendor problems and all other
material business issues which might have an effect upon the performance by
HFS of its obligations hereunder and shall provide HFS with reasonable
notice after the Company is aware of any changes in any such forecasted
items. Specifically, but without limiting the generality of the foregoing,
the Company agrees as follows:
(a) The Company shall deliver to HFS a complete set of projections on or
before November 15, 1997 for the partial 1998 calendar year commencing on
the first day following the expiration of the sixth month following the
First Mailing and thereafter at least three months prior to the
commencement of each successive calendar year thereafter
7
<PAGE> 11
during the Term in respect of such calendar year, covering the operation of
its business for such calendar year, including, by month and quarter, mail
dates and quantities mailed, the forecasted number of telephone orders and
mail orders, the forecasted number of units received and shipped,
forecasted initial fill rates, forecasted inventory levels in dollars and
units, the Forecasted Inventory Turn, inbound telephone contacts-to-total
orders ratio, talk time per contact, the number of catalog requests, the
estimated returns percentage, the number of items per order and the number
of outbound telephone contacts and correspondence per order (such
projections being hereinafter referred to as the "ANNUAL FORECASTS").
(b) Four (4) weeks prior to the first day of each calendar quarter,
commencing with the first calendar quarter after the expiration of the
sixth month following the First Mailing, the Company shall deliver to HFS a
complete set of projections covering the operation of its business for the
next succeeding two calendar quarters, including, by week, mail dates and
quantities mailed, the forecasted number of telephone orders and mail
orders and forecasted inventory in dollars and units to be shipped each
week, forecasted initial fill rates, inbound telephone contacts to total
orders ratio, talk time per contact, the number of catalog requests, the
estimated returns percentage, the number of items per order, the number of
outbound telephone contacts and correspondence per order (such quarterly
projections being hereinafter referred to as the "QUARTERLY FORECASTS").
(c) The Company shall deliver to HFS a revised Quarterly Forecast (a
"REVISED QUARTERLY FORECAST") whenever it believes that any business
condition of which it is aware may have the effect of changing any item of
the previous Quarterly Forecast furnished to HFS. In the event that the
Company experiences an increase in telephone calls for any week of more
than ten percent (10%) over projected telephone calls for such week, as set
forth in any applicable Quarterly Forecast (or a Revised Quarterly Forecast
which has been delivered to HFS at least four (4) weeks prior to such
week), and has not advised HFS in writing at least four (4) weeks prior to
the week that the Company experiences such increase in telephone call
volume that such increase is forecasted, then HFS shall use its reasonable
best efforts but be under no obligation to meet those Service
8
<PAGE> 12
Levels directly or indirectly affected by telephone call volume for so long
as the Company's telephone call volume exceeds by more than ten percent
(10%) the call volume projected on the most recent Quarterly Forecast or
Revised Quarterly Forecast.
(d) The information contained in Quarterly Forecasts, Revised Quarterly
Forecasts and Annual Forecasts provided by the Company to HFS shall be
reasonably related to and consistent with the actual operating history of
the Company, subject to deviations therefrom as reasonably required by
changes in circumstances.
9. SPECIAL SERVICES.
The Company may at any time during the Term hereof request HFS to perform
services on its behalf not covered by this Agreement or to change any
Service Level ("SPECIAL SERVICES"). The Company shall notify HFS in writing
of its particular requirements with respect to such Special Services, and
HFS shall use its best efforts to comply with such requirements provided
that the written notification is given in a timely manner and the
requirements and procedures are reasonable and not economically burdensome.
HFS shall charge the Company for such Special Services such amount as set
forth in Section 5(c) hereof or, with respect to any upselling services to
be performed by HFS, at an agreed upon rate or amount, as applicable.
10. INVENTORY
Merchandise inventory shall be handled and processed as follows:
(a) The Company shall, at its own expense, supply HFS at its places of
business in Chattanooga, Tennessee, or such other places of business
designated by HFS, and maintain there, an inventory of Merchandise which
the Company reasonably believes is adequate in the ordinary course of
business to fill orders received for its Merchandise in line with its
Quarterly Forecasts or Revised Quarterly Forecasts. HFS shall use its
reasonable best efforts to preserve and maintain Merchandise received for
the Company in good and marketable condition.
9
<PAGE> 13
(b) HFS shall use its reasonable best efforts but is under no obligation
to receive Merchandise on behalf of the Company unless the Company has
transmitted to HFS, at least two (2) Business Days prior to the receipt of
such Merchandise, a copy of the purchase order by which the Company ordered
such Merchandise, or all requisite details of the purchase order to permit
HFS to identify the Merchandise as that of the Company.
(c) For inbound shipments, the Company shall advise its vendors that motor
carriers must contact HFS at least one (1) Business Day prior to delivery
and make a delivery appointment prior to arrival. Inbound shipments
arriving at an HFS warehouse without one Business Day's prior notice may be
refused or delayed depending on the space and manpower available at the
time of arrival. Each inbound shipment must have a packing slip and each
carton must be marked with the purchase order number and SKU number.
(d) For purposes of this Agreement, "PROBLEM MERCHANDISE" means
Merchandise shipped to HFS which in its sole reasonable discretion cannot
be processed by HFS without imposing an unreasonable hardship on HFS. For
illustrative purposes and without limiting the definition thereof, Problem
Merchandise shall include all Merchandise which (i) arrives with
insufficient paperwork, (ii) is delivered to HFS in the absence of a
delivery appointment or (iii) is faulty or damaged. HFS shall use its best
efforts to comply with the Company's written instructions regarding
handling and disposing of Problem Merchandise as set forth in the Service
Levels on EXHIBIT B and shall submit to the Company a report of Problem
Merchandise within two (2) Business Days of having received it. HFS shall
not include Problem Merchandise in the inventory of items available for
shipment to customers. The Company acknowledges that Problem Merchandise
cannot be stored indefinitely and that all Problem Merchandise shall be
removed within thirty (30) days of HFS notifying the Company of all
specific details relevant to the reasons for the classification of the
Merchandise as Problem Merchandise. HFS has the right to dispose of the
Problem Merchandise by returning the Merchandise to the Company on a
freight collect basis (provided that the Company has not provided HFS with
other directions within thirty (30) days following notice of such specific
details) or taking any other actions which are reasonable under the
circumstances; provided,
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<PAGE> 14
however, that HFS shall follow the Company's reasonable directions with
respect to any other disposition (at the Company's expense) of the Problem
Merchandise.
(e) HFS acknowledges and the Company agrees that the Company shall be
solely responsible for selecting, purchasing, paying for and arranging for
the shipment to HFS of Merchandise, and HFS agrees that it shall not have
and shall not represent that it has any authority to undertake any of such
activities on the Company's behalf.
(f) In the event that items shipped by HFS to customers are damaged or
lost in shipment, HFS agrees to notify the Company, store damaged and
returned Merchandise pending inspection by the carrier and file tracers for
the lost shipments and claims for damaged and lost shipments which
originated from HFS.
(g) HFS reserves the right to refuse, without liability of any kind,
acceptance of Merchandise which, because of its condition, might cause, in
HFS's reasonable sole judgment, infestation, contamination, or damage to
the warehouse facility or to other goods in the custody of HFS. HFS shall
notify the Company of its refusal to accept any such Merchandise and the
reason for its refusal within two (2) Business Days of such refusal. If HFS
believes that any Merchandise has caused or may cause damage to the
warehouse facility or to any other goods in the custody of HFS or has
characteristics which make its storage illegal, HFS, after giving
reasonable notice to the Company, may dispose of the Merchandise in any
lawful manner and will incur no liability by reason of such disposal, and
the Company shall pay HFS any costs incurred by HFS in connection with such
disposal.
(h) All Merchandise in the possession of HFS shall be and remain the
exclusive property of the Company except as noted in Sections 13, 16 and 18
herein, and HFS acknowledges and agrees that it shall acquire no right,
title or interest in or to any Merchandise by reason of this Agreement
except as set forth in Sections 13, 16 and 18 herein. HFS shall not
transfer, assign, exchange, lease, encumber, pledge, or create a security
interest in or otherwise dispose of the Merchandise and shall not subject
the
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<PAGE> 15
Merchandise to attachment, levy, or seizure by or on behalf of any creditor
of HFS, except as set forth in Sections 13, 16 and 18 hereof.
11. RISK OF LOSS.
(a) All risk of loss and damage to Merchandise from any cause prior to
receipt by HFS into, and from and after the removal by common carrier from,
the inventory at the HFS facility shall be borne by the Company. HFS shall
reimburse the Company at the Company's net Merchandise cost (i) [ ]* of all
Inventory Shrinkage which is equal to or less than [ ]*, (ii) [ ]* of all
Inventory Shrinkage which exceeds [ ]* but is equal to or less than [ ]*,
and (iii) [ ]* of all Inventory Shrinkage which exceeds [ ]*. For purposes
of this Agreement "INVENTORY SHRINKAGE" means the quotient which results
from dividing (A) the cumulative Variance (as defined below) between the
value of the Merchandise inventory as determined from the perpetual
inventory report on the requisite Count Date (as defined below) and the
value of the Merchandise inventory based upon a physical inventory or cycle
count (exclusive of markdowns and price adjustments) by (B) the total
Merchandise inventory receipts processed by HFS during the prior twelve
(12) months (or if such Count Date occurs prior to the first anniversary of
the date of the first mailing of the Catalog, the denominator of such
quotient shall be an amount equal to twelve (12) times the average monthly
Merchandise inventory receipts prior to such Count Date). For purposes of
this Section 11(a), "VARIANCE" shall mean the difference between the value
of the Merchandise inventory as determined from the perpetual inventory
report on any Count Date and the value of the Merchandise inventory
established by a cycle count or physical inventory on such date (the "COUNT
DATE"). The value of any adjustment made at any time to the perpetual
inventory report shall be added to or subtracted from, as the case may be,
the Variance for the purpose of calculating Inventory Shrinkage. HFS shall
make reasonable efforts to take reasonable care of the Merchandise
inventory.
(b) Notwithstanding anything contained herein to the contrary, the parties
acknowledge that HFS shall not be required to make any collection efforts
on the
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<PAGE> 16
Company's behalf and shall share no risk with respect to any failure of the
Company to collect on any order.
12. TAXES.
All fees, costs, charges and other amounts payable to HFS hereunder for
Services rendered by HFS to the Company are exclusive of applicable taxes,
if any, which (other than income taxes of HFS) are the responsibility of
the Company. In addition, HFS shall calculate for each customer sale all
applicable sales taxes based on information supplied by the Company.
Attached hereto as EXHIBIT E is a list prepared by the Company of all
jurisdictions in which the Company is required to collect sales taxes,
which the Company shall promptly update as required to keep such
information current during the term of this Agreement, and the Company
shall be solely responsible for the accuracy of such information. All sales
tax funds and the accompanying forms shall be transmitted by the Company to
the appropriate state authorities. The Company shall be responsible for the
collection and payment of all sales taxes, the preparation and filing of
all sales tax documentation and the compliance with all sales tax laws. HFS
shall have no such responsibilities for payment or collection of any such
taxes unless otherwise required by law in which event payment thereof shall
be timely made. The Company shall indemnify HFS for all claims, suits,
actions, debts, damages, costs, charges and expenses, including court costs
and attorneys' fees, incurred by HFS due to the Company's failure to
properly and timely file and pay applicable sales, use and tangible
personal property taxes.
13. MONETARY DEFAULT.
If the Company defaults on the payment of any fees, charges, invoices or
other amounts due to HFS, except and only for portions of invoices disputed
in good faith by the Company, HFS shall (i) charge a finance charge of 1.5%
per month of such past due fees, charges, invoices or other amounts and
(ii) if such default is continuing, upon ten (10) days prior written notice
stop providing Services and performing its obligations under this Agreement
and/or terminate this Agreement. Amounts disputed in good faith by the
Company and the reasons therefor shall be reported to HFS in writing within
twenty one
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<PAGE> 17
(21) days of receipt of the applicable invoice. HFS and the Company agree
to work diligently to resolve the dispute within thirty (30) days of the
receipt of such written notice by HFS. Once such dispute is resolved and to
the extent the Company owes any amount to HFS, if payment of such amount is
not made to HFS within ten (10) Business Days of the resolution of such
dispute, HFS will have the right to stop providing Services and/or
terminate this Agreement whereupon HFS shall have the right to institute
foreclosure proceedings against the Merchandise inventory or such other
collateral held by it and securing unpaid amounts owing to HFS under this
Agreement as well as any other rights available to HFS under the Uniform
Commercial Code.
14. OTHER DEFAULTS.
If either the Company or HFS believes the other party is in breach of any
of its non-monetary obligations under this Agreement due to any reason
other than force majeure, the party believing that such a breach by the
other party has occurred shall give written notice to the other party
specifying the nature of the breach (any such breach and any default in
payment under Section 13 hereof are sometimes referred to herein as a
"DEFAULT"). Such breaching party shall have fifteen (15) Business Days in
which to cure such breach or, if such breach cannot be completely cured
within fifteen (15) Business Days, a reasonable time to cure such breach as
long as the breaching party is diligently pursuing the cure of the breach;
provided, however, that with respect to a material breach relating to the
taking of telephone orders, the processing of mail orders, the receiving of
Merchandise into inventory or timely delivery of Merchandise to common
carriers for shipment, HFS shall have seven (7) days to cure such breach
or, if such breach cannot be completely cured within seven (7) days, a
reasonable time to cure such breach so long as the HFS is diligently
pursuing the cure of the breach.
15. FORCE MAJEURE.
Neither HFS nor the Company shall be liable for any delay or failure in
performance under this Agreement or interruption of service resulting,
directly or indirectly, from acts of God, civil or military authority, act
of public enemies, war, accidents, fire, explosions,
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<PAGE> 18
earthquakes, floods, the elements, strikes or any similar cause beyond the
reasonable control of such party (a "FORCE MAJEURE"), so long as, following
the cessation of such cause, such party uses its reasonable efforts to
resume its performance hereunder. If HFS is unable to perform the Services
due to a Force Majeure, then HFS may out-source Services on a temporary
basis pursuant Section 4 hereof.
16. TERM AND TERMINATION.
(a) TERM. The initial term of this Agreement shall commence on August 1,
1997 (the "COMMENCEMENT Date") and shall expire on July 31, 2000 unless
earlier terminated in accordance with this Section or elsewhere in this
Agreement (the "INITIAL TERM"). This Agreement shall automatically be
renewed for one year terms commencing after the expiration of the Initial
Term and, thereafter, after the expiration of any renewal term unless HFS
or the Company provides the other with at least one hundred twenty (120)
days prior written notice of its election to terminate this Agreement at
the end of the then current term (the Initial Term and all renewal terms
are collectively referred to as the "TERM"). In addition to any other
rights which HFS may have under this Agreement or as a matter of law, in
the event of termination by either the Company or HFS, HFS shall be
entitled to all amounts owing to it under this Agreement and may hold the
Company assets and Merchandise in its possession until all sums owed to HFS
by the Company pursuant to this Agreement are paid to HFS; provided,
however, that the Company shall be allowed to substitute collateral
acceptable to HFS in place of Company assets in HFS's possession.
(b) EARLY TERMINATION.
(i) MONETARY DEFAULT. HFS shall have the termination rights described
in Section 13 hereof.
(ii) NON-MONETARY DEFAULT. If there occurs a non-monetary Default by a
party under this Agreement that is not cured within the applicable time
periods set forth in
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<PAGE> 19
Section 14 hereof, then the non-defaulting party may terminate this
Agreement upon not less than forty-five (45) days prior written notice.
(iii) BANKRUPTCY. Either party may terminate this Agreement, effective
immediately upon giving written notice if the other party files a petition
in bankruptcy or files for a reorganization or for the appointment of a
receiver or trustee of all or substantially all of such party's property,
or makes an assignment or petitions for or enters into an arrangement for
the benefit of creditors, or if a petition in bankruptcy is filed against
the other party which is not discharged within ninety (90) days thereafter.
(iv) FORCE MAJEURE. In the event that following a Force Majeure, HFS
(with out-sourcing) is unable to perform at the Service Levels for a period
in excess of twenty (20) Business Days, the Company shall have the right to
terminate this Agreement.
(v) OTHER COMPANY TERMINATION RIGHTS. The Company shall have the
right to terminate this Agreement by providing HFS with written notice
thereof at least ninety (90) days prior to the second anniversary of the
Commencement Date in the event that the parties have not agreed upon
revised Transaction Rates prior to the date of such notice.
17. REPRESENTATIONS AND WARRANTIES.
(a) HFS AND THE COMPANY. HFS and the Company each hereby individually
represent and warrant that: (i) it has the full authority and legal right
to carry out the terms of this Agreement; (ii) the terms of this Agreement
will not violate the terms of any agreement, contract or other instrument
to which it is a party and no consent or authorization of any other person,
firm or corporation is a condition precedent to this Agreement; (iii) it
has taken all action necessary to authorize the execution and delivery of
this Agreement; and (iv) this Agreement is a legal, valid, and binding
obligation of HFS and the Company, as the case may be, enforceable in
accordance with its terms, except as limited by bankruptcy and other laws
of general application relating to or affecting the enforcement of
creditors' rights.
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<PAGE> 20
(b) HFS. HFS hereby warrants and represents that, except to the extent set
forth in SCHEDULE 1:
(i) to its knowledge, HFS is in compliance in all material respects
with all applicable laws relating to employment and employment practices,
terms and conditions of employment, wages and hours and occupational safety
and health and is not engaged in any unfair labor practice within the
meaning of any applicable law; there is no unfair labor practice, charge or
complaint or any other matter against or involving HFS pending or, to the
knowledge of the HFS, threatened before any labor relations board (or
equivalent agency having jurisdiction), any court of law or any arbitration
board; there is no labor strike, dispute, slowdown, or stoppage actually
pending or, to its knowledge, threatened against HFS; and HFS has not
experienced any organized work stoppage or other labor difficulty; and
(ii) there are no disputes with underwriters under HFS's insurance
policies; each such policy is valid and enforceable in accordance with its
terms and is in full force and effect; there exists no Default by HFS under
any such policy, and there has been no misrepresentation or inaccuracy in
any application therefor, which Default, misrepresentation or inaccuracy
would give the insurer the right to terminate such policy, binder or
fidelity bond or to refuse to pay a claim thereunder; and HFS has received
no notice of cancellation or non-renewal of any such policy.
(c) THE COMPANY. The Company hereby warrants and represents that except as
otherwise set forth on SCHEDULE 2:
(i) it has, to the best of its knowledge, and will use its best
efforts to continue to have for the Term of this Agreement, all necessary
authority from all of the corporations, partnerships and individuals whose
products are offered for sale in any of the Company's catalogs, to use
their trademarks, service marks and other intellectual property for the
purposes of conducting the Company's business. The Company's business as
conducted or as currently proposed to be conducted does not and will not,
to the best of the Company's knowledge, cause the Company to infringe or
violate any
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<PAGE> 21
patents, trademarks, service marks, trade names, copyrights, licenses,
trade secrets or other intellectual property rights of any other person or
entity.
(ii) it owns the initial Merchandise inventory free and clear of all
liens, restrictions, claims, charges, security interests or other
encumbrances of any nature whatsoever, including any chattel mortgages,
conditional sales contracts, collateral security arrangements and other
title or interest retention arrangements (a "LIEN").
18. COVENANTS OF THE COMPANY.
(a) CATALOG AND ORDER BLANK NOTATIONS. Unless otherwise agreed upon by the
parties, the Company shall conspicuously note in the Catalog and in all
order blanks separate telephone numbers for telemarketing and customer
service or an alternative mutually agreeable to the parties. In addition,
for all editions subsequent to the first Catalog edition, the Company shall
maintain two (2) colored blocks on the back of each Catalog and on the
order blanks within which an account number and a source code number (i.e.,
one number per block ) can be printed.
(b) LIENS. The Company hereby grants to HFS a first priority security
interest in the Merchandise held from time to time by HFS to secure the
obligations of the Company hereunder; provided, however, that HFS agrees to
release such security interest upon the reasonable request of the Company
in the event that the Company provides HFS collateral in substitution
therefore which is acceptable to HFS in HFS's sole discretion. The Company
shall execute all documents reasonably requested by HFS's legal counsel for
the perfection of such security interest. The Company shall not grant any
Lien to any third party on any Merchandise inventory without the prior
written consent of HFS which will not be unreasonably withheld.
19. INDEMNITY & LIABILITY.
(a) HFS agrees to indemnify and hold the Company harmless against any and
all claims, suits, actions, debts, damages, costs, charges, and expenses,
including without limitation court costs and reasonable attorneys' fees),
which the Company may at any
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<PAGE> 22
time incur by reason of a material breach of this Agreement by HFS (a
"COMPANY LOSS"); provided, however, that any Company Loss that is covered
by either party's insurance shall be limited to applicable insurance
proceeds; and further provided that the Company shall not be entitled to
payment in respect of any Company Loss resulting from a claim not covered
in whole or in part by either party's insurance except to the extent that
Company Losses exceed $[ ]* in the aggregate and then in an aggregate
amount not to exceed the aggregate Transaction Fees payable for the
calendar quarter in which the Default occurs.
(b) The Company agrees to indemnify and hold HFS harmless against any and
all claims (including claims by third party providers engaged by the
Company), suits, actions, debts, damages, costs, charges, and expenses,
including without limitation court costs and reasonable attorneys fees,
which HFS may at any time incur by reason of (i) a defect or claimed defect
in any Merchandise or (ii) a material breach of this Agreement by the
Company (an "HFS LOSS") other than a monetary Default covered by Section 13
hereof; provided, however, that HFS shall not be entitled to payment in
respect of any HFS Loss except to the extent that HFS Losses exceed $[ ]*
in the aggregate.
(c) The indemnifications set forth in Sections 19(a) and 19(b) shall apply
only to claims made against the respective indemnified party by third
parties. Either party hereto seeking indemnification by the other pursuant
to Section 19(a) or 19(b) shall promptly notify the other party of any
indemnifiable claim, and indemnifying party shall have the right to select
counsel and control the defense of the claim.
(d) Notwithstanding any other provision of this Agreement, neither party
shall be liable to the other for any lost profits, loss of goodwill or any
other special, incidental or consequential damages of any nature whatsoever
to the extent that any claims relating thereto are not payable from
insurance proceeds.
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20. INSURANCE.
The Company agrees to maintain insurance, at its sole cost and expense,
against loss or damage by fire or other casualty to the Company's inventory
on the premises of HFS, and against any claims and liability growing out of
either product liability, advertising liability or trademark or service
mark, patent or copyright infringement, and to list HFS as an additional
insured thereunder. Such insurance will be maintained with insurers
qualified to do business in the state of Tennessee. Attached hereto, as
EXHIBIT F, is a Certificate of Insurance for the Company reflecting such
coverage.
HFS shall not be responsible for the provision or maintenance of any
insurance coverage for the Merchandise or other inventory or for the
Company or its subsidiaries or respective businesses, products, goods and
property. HFS agrees to maintain at all times during the Term insurance
coverage at the levels set forth in the Certificate of Insurance for HFS
attached hereto as EXHIBIT G.
21. COMPLIANCE WITH LAWS.
The Company and HFS shall comply with all laws, rules and regulations,
whether local, state, or federal, applicable to the sale of Merchandise and
to the providing of Services, but only to the extent such laws, rules and
regulations are applicable to it, including without limitation the
applicable postal regulations and the Federal Trade Commission Rules on
Mail Order Merchandise.
22. RECORD INSPECTION.
The Company or its agents shall, during normal business hours, have the
right to inspect the Merchandise located at HFS's place of business, and
the Company shall, during normal business hours, have the right to inspect
the books and records of HFS pertaining to Merchandise and the Services
rendered by HFS to the Company pursuant to this Agreement.
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<PAGE> 24
23. CONFIDENTIALITY.
(a) In the course of its performance of this Agreement, it is anticipated
that HFS and the Company will come into possession of certain proprietary
information belonging to the other, including but not limited to (i) in the
case of the Company, marketing records, merchandising records, customer
records and mailing lists and (ii) in the case of HFS, its financial
condition, cost structures, allocation and pass through procedures,
staffing levels, systems information and general business plans (all such
information relating to the Company or HFS being "CONFIDENTIAL INFORMATION"
and the party to whom such Confidential Information relates being the
"PROPRIETARY PARTY"). HFS and the Company agree that each will not, during
the Term hereof or thereafter, willfully or through gross negligence
divulge, furnish, disclose, or make accessible to any third party any of
the other's Confidential Information unless otherwise instructed by the
Proprietary Party in writing; provided, however, that Confidential
Information shall not include any information which (i) at the time of
disclosure by the other party or thereafter is generally available to and
known by the public other than as a result of its disclosure by such party,
(ii) was available to the other party on a non-confidential basis from a
source other than the Proprietary Party, provided that such source is not
bound by a confidentiality agreement, or contractual or fiduciary
obligation with the Proprietary Party, or (iii) has been independently
acquired or developed by the other party without violating any obligations
under this Agreement, or of any other agreement between the Company and HFS
or by which either party is bound for the benefit of the other party.
(b) HFS agrees that the Company's mailing list will not be made available
for use by HFS, its affiliates or anyone else without the Company's
specific prior written permission for each occurrence of such use
24. NOTICES.
Any and all notices and all communication provided for in this Agreement
shall be given in writing. Such notices and other communications shall be
deemed given when received, when delivered by hand, by confirmed facsimile
transmission or when
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deposited in the United States Mail, Registered or Certified, with proper
postage prepaid, and addressed as follows:
(a) If to HFS:
Harrison Fulfillment Services, Inc.
P.O. Box 23057
2515 East 43rd Street
Chattanooga, TN 37422-3057
Attn: Bruce G. Godfray, President
Facsimile: (615) 867-8495
with a copy to:
Witt, Gaither & Whitaker, P.C.
1100 American National Bank Building
Chattanooga, TN 37402
Attn: Ralph M. Killebrew, Jr.
Facsimile: (615) 266-4138
(b) If to the Company:
Alloy Designs, Inc.
444 Washington Blvd. Suite 6549
Jersey City, NJ 07310
Attn: Sam Gradess
Facsimile: (201) 420-1907
or to such other address as HFS or the Company may designate to the other
in writing.
25. ASSIGNMENT.
This Agreement shall inure to the benefit of and be binding upon the
parties and their successors and permitted assigns. This Agreement may not
be assigned by either party without the prior written consent of the other
party; provided, however, that, it may be assigned to any person, firm or
corporation which purchases all or substantially all of the assets of
either party or to any person, firm or corporation into which or with which
either party consolidates or merges.
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<PAGE> 26
26. AMENDMENTS.
This Agreement shall not be modified or amended except by a written
agreement signed by authorized representatives of HFS and the Company.
27. GOVERNING LAW.
This Agreement has been entered into and shall be governed, construed, and
interpreted in accordance with the laws of the State of Tennessee without
reference to any conflicts of law principles.
28. ARBITRATION.
(a) Any controversy or claim arising out of or relating to this Agreement
or the breach thereof, whether common law or statutory, shall be settled
exclusively by arbitration in Chattanooga, Tennessee, using in either case
the American Arbitration Association. The arbitration shall be heard before
three arbitrators, one to be chosen by the Company, one to be chosen by
HFS, and the third to be chosen by those two arbitrators.
(b) The arbitrators shall apply the internal law of Tennessee in
determining the rights, obligations, and liabilities of the parties. The
arbitrators shall not have the power to alter, modify, amend, add to or
subtract from any term or provision to this Agreement, nor to grant
injunctive relief, including interim relief, of any nature. Such injunctive
relief may be pursued by HFS or the Company, as the case may be, from the
federal and state courts of the state of Tennessee. The availability of
such relief shall depend upon proofs and showings required under the
applicable law. In all other respects, the commercial rules of the American
Arbitration Association shall govern the arbitration. Judgment on the award
of the arbitrators may be entered by any court having jurisdiction to do
so, and the parties to the Agreement hereby irrevocably consent and submit
to the personal jurisdiction of the federal and state courts of the State
of Tennessee for this purpose as well as for any and all other purposes in
connection with this Agreement.
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(c) The failure or refusal of either party to submit to arbitration as
provided in this Agreement shall constitute a breach of this Agreement. If
judicial action is commenced in order to compel arbitration, and if
arbitration is in fact compelled, the party that shall have resisted
arbitration shall be required to pay to the other party all costs and
expenses, including reasonable attorneys' fees, that it incurs in
compelling arbitration. All other fees and charges of the American
Arbitration Association shall be borne as the arbitrators shall determine
in their award.
29. COMPUTER PROGRAMS.
The Company acknowledges that all computer programs used by HFS in
connection with the performance of its obligations under this Agreement are
the property of HFS (including but not limited to those developed by HFS
and modifications or new programs developed by HFS for the Company) and the
Company has no rights or interests whatsoever in such programs: provided,
however, that the Company is the owner of the data contained in such
programs which relate to the Merchandise and the sale thereof and HFS shall
provide such data to the Company or its representative in mutually
acceptable formats.
30. BUSINESS DAY.
For purposes hereof, "BUSINESS DAY" shall mean any day other than (1) a
Saturday or Sunday or (2) a day when the Federal Reserve Bank of Atlanta is
not open.
31. RELATIONSHIP.
Nothing contained in this Agreement shall be construed to imply a joint
venture, partnership or principal/agent relationship between the parties,
except where specifically provided for in this Agreement, and then only for
the limited purposes thereof. Except as specifically set forth herein,
neither party by virtue of this Agreement shall have any right, power or
authority to act or create any obligations, express or implied on behalf of
or for the use of any other party, and HFS and the Company shall not be
obligated, separately or jointly, to any third party by virtue of this
Agreement.
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32. HEADINGS.
The headings and section numbers appearing in this Agreement are inserted
only as a matter of convenience and in no way define, limit, construe or
otherwise describe the scope or intent of the sections of this Agreement.
33. SEVERABILITY.
If any one or more provisions of this Agreement shall be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability
of the remaining provisions contained herein shall not in any way be
affected or impaired; provided, however, that in such case the parties
agree to use their best efforts to achieve the purpose of the invalid
provision by a new legally valid provision.
34. NO WAIVER.
No failure or delay on the part of any party in the exercise of any right
hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or of any other right. All rights and remedies under this Agreement
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
35. FULL AGREEMENT.
This Agreement, and any exhibits and addenda attached hereto, contain and
embody the entire agreement of the parties hereto, and no representations,
inducements, or agreements, oral or otherwise made at any time between the
parties or with any third party relating to the subject matter hereof which
are not contained in this Agreement or in the exhibits or addenda, if any,
shall be of any force or effect.
36. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, all of which
taken together shall be deemed one original.
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IN WITNESS WHEREOF, the Company has executed this Agreement effective the
date first above written and HFS has executed and accepted this Agreement
effective the same date.
COMPANY:
ALLOY DESIGNS, INC.
By: /s/ Sam Gradess
-----------------
Name: Sam Gradess
Title: Corporate Secretary
HFS:
HARRISON FULFILLMENT SERVICES, INC.
By: /s/ Bruce Godfray
-----------------
Name: Bruce Godfray
Title: President
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ALLOY DESIGNS, INC.
EXHIBIT A
SERVICES
--------
The Services shall include the following services plus any Special Services
and other services for which the parties shall have agreed upon the Transaction
Fees or other Fees therefor:
1. Access to, and interface with the HFS proprietary order entry fulfillment
system (the "SYSTEM").
2. Order Entry.
A. Telephone.
B. Mail.
C. Faxed orders.
D. Internet orders.
3. Respond to all order and non-order inquiries.
4. Open and sort mail.
5. Prepare and make bank deposits into accounts maintained solely in the name
of ______________________. All payments received by HFS from customers of
the Company are to be payable to the order of the Company and deposited
directly into such accounts.
6. Answer customer service telephone inquiries and resolve customer problems
during days and hours of operation specified in EXHIBIT B:
7. Make staff available for merchandise and catalog training at the Company's
reasonable request.
8. Make available to the Company an agreed set of reports and information (the
"Reports") (Attachment 1 to this Exhibit) via a telecommunications link at
such times and at such schedule as the parties shall agree (the "REPORTS
SCHEDULE").
9. Receive merchandise against purchase orders provided by the Company either
electronically or by hard copy as agreed between the parties.
A. Sign for the number of cartons received.
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B. Perform quantity checks, quality assurance checks and inspection.
a. Non-problem merchandise: process into active, reserve or
backorder status
b. Problem Merchandise:
1. Segregate
2. Notify Company, in such form and at such times as agreed
between the parties.
10. Pick/Pack/Ship Backordered Merchandise according to specifications set
forth by the Company.
11. Pick/Pack/Ship Active or Reserve Merchandise according to specifications
set forth by the Company.
12. Write Gift Cards.
13. Gift wrap.
14. Insert additional materials (package inserts) into outbound shipments per
Company's instructions.
15. Process customer exchanges.
16. Process Customer returns:
A. Receive returned Merchandise.
B. Inspect returned Merchandise.
C. Process returned Merchandise in accordance with mutually agreed upon
specifications with respect to (i) refurbishment, (ii) holding it
pending receipt of RA number, (iii) returning it to active or reserve
inventory, and (iv) setting it aside for liquidated or special
handling.
D. Notify Company of returned Merchandise in such form and such times as
agreed between the parties.
17. Fulfill Catalog Requests according to the Company's specifications.
18. Provide warehouse security.
19. Batch and process credit orders to Credit Card Processor at times as
specified by HFS to meet Service Levels. Deposit receipts to Company
designated accounts.
28
<PAGE> 32
20. Maintain and operate a Drop Ship program as agreed between the parties.
21. Apply policies and procedures for catalog fulfillment operation as agreed
between the Company and HFS.
22. On behalf of the Company, make payments from the Imprest Fund for invoices
approved by the Company for fulfillment related expenses.
23. Generate refund checks and credit card credits in accordance with the
Company's written instructions.
24. Issue gift certificates, discount coupons or other purchase incentives in
accordance with the Company's lawful written instructions.
25. Maintain sales tax schedules in accordance with the Company's lawful
written instructions.
26. Create and dispatch customer notices in accordance with legal requirements
or the Company's lawful written instructions.
27. Maintain customer file records on tape and remit such files to the
Company's service bureau or other parties in accordance with the Company's
lawful written instructions.
28. Maintain a backup and "disaster recovery" system and procedures in
accordance with HFS specifications. On an annual basis, perform tests of
these systems and procedures to Company satisfaction.
29. Provide new program start-up services as agreed between the parties.
30. Provide close-down services as described herein.
31. Provide for computer programming and system design on a mutually agreed
upon basis.
32. Weekly performance measurement of all activities listed in EXHIBIT B.
33. Weekly performance measurements of (i) abandon rate for calls in queue
between 20 and 45 seconds (after new telephone software implementation) and
(ii) percent of incoming calls that go on hold/that go into queue.
34. Respond to credit card charge backs after such charge backs are forwarded
to HFS by the Company.
35. Screen incoming checks for potential fraud. (It being understood that HFS
shall have no liability for failure to detect any such fraud.)
36. Establish e-mail based and web page based catalog request and order
fulfillment mechanisms.
29
<PAGE> 33
ALLOY DESIGNS, INC.
ATTACHMENT 1 TO EXHIBIT A
SAMPLE REPORT PACKAGE
CONTENTS
REPORT # TITLE FREQUENCY
- -------- ----- ---------
5030R1 Order/Shipment Analysis Daily
1010R1 Accum. Order/Shipment Analysis Daily
1240R1 Media File Listing Daily
1260R1 Source Code Total Response Analysis Daily
10Y0R1 Purchase Orders with Receipts Daily
11W0R1 Reports Analysis As required
11D0R1 Order Profit Analysis Daily
11L0R1 Purchase Order Requirements Weekly
1030R1 Summary Backorder Status Weekly
10W0R1 True Back Order Report Daily
11A0R1 Return/Exchange Analysis by Item Weekly/monthly
1080R1 Daily Sales & Cash Control Daily
20R0R1 Order Summary Weekly
20S0R1 Shipment Summary by Document Type Monthly
2010R1 Perpetual Inventory Monthly
4800R1 Inventory Transaction Register Weekly
1530R1-R3 Check Register Weekly
20P9R1 Sales Tax Report Monthly
30
<PAGE> 34
ALLOY DESIGNS, INC.
EXHIBIT B
SERVICE LEVELS
TELEMARKETING AND CUSTOMER SERVICE - will operate order entry on a 24 hour
basis seven (7) days per week except that if customers call between the hours of
12:00 midnight and 8:00 a.m. daily or on Christmas Eve or Christmas Day such
calls will be electronically prompted and answered.
It is HFS's policy to have all incoming customer calls answered by an
associate (except as noted above). However, HFS reserves the right to "block"
calls during certain peak hours of peak days.
<TABLE>
<CAPTION>
TRANSACTION TYPE NON PEAK DAYS PEAK DAYS
---------------- ------------- ---------
<C> <C> <C>
1. Abandon rate for calls in queue greater than 45 sec. less than [ ]*% less than [ ]*%
2. Average time to answer less than [ ]* sec. less than [ ]* sec.
3. In stock order shipment from index (index
4. = clean order by noon) less than [ ]* hrs less than [ ]* hrs.
5. Mdse. dock to inspect (index = clean
6. receipt by noon) less than [ ]* hrs. less than [ ]* hrs.
7. Mdse inspect to stock (index = clean
8. receipt by noon) less than [ ]* hrs. less than [ ]* hrs.
9. Returns processing to monetary trans
10. (index = receipt by noon) less than [ ]* hrs. less than [ ]* hrs.
11. Mail orders through entry (index =
12. clean receipt by noon) less than [ ]* hrs. less than [ ]* hrs.
13. Non order mail inquires (index =
14. clean inquiries received by noon) less than [ ]* hrs. less than [ ]* hrs.
15. Catalog request mailed (index =
16. clean receipt by noon) less than [ ]* hrs. less than [ ]* hrs.
</TABLE>
Peak Days shall be deemed to be the Company's eighty (80) highest telephone
order volume days during a calendar year as determined from the Annual Forecast
for such year as updated by Quarterly Forecasts and Revised Quarterly Forecasts,
provided that any such Revised Quarterly Forecast shall have been received by
HFS at least four (4) weeks prior to such Peak Day. Abandon rate for calls in
queue for a day shall be determined by dividing the number of Abandoned Calls
experienced in a day by the total calls entered into the system on such day. An
"Abandoned Call" means an incoming call with respect to which the caller hangs
up at least 45 seconds after the call enters the system. The average time to
answer is the time which
31
<PAGE> 35
commences when the call is entered in the HFS telephone switch and ends upon
commencement of call handling.
32
<PAGE> 36
ALLOY DESIGNS, INC.
EXHIBIT C
START-UP SERVICES
33
<PAGE> 37
ALLOY DESIGNS, INC.
EXHIBIT D
TRANSACTION RATES
34
<PAGE> 38
ALLOY DESIGNS, INC.
EXHIBIT D
TRANSACTION RATES
<TABLE>
<CAPTION>
--------------------------------------------------------
this sheet sent to alloy Alloy
Transaction Rates
--------------------------------------------------------
- -------------------------------------
revised date 07/23/97 7/23/97 12:04 PM
revised time 12:00 PM
- -------------------------------------
<S> <C> <C>
-------------------
MINIMUM INVOICE FIRST YEAR $ [ ]*
-------------------
MINIMUM INVOICE SECOND YEAR $ [ ]*
-------------------
MINIMUM INVOICE THIRD YEAR $ [ ]*
- ------------------------------------------------------------------------------------------------------------------
SYSTEM DEVELOPMENT AND START UP Basic Fulfillment System Set up $ [ ]* 80 hours
-------------------
Compare Systems and Develop detailed designed (Systems $ [ ]* 40 hours
Requirements Documents)
-------------------
Customized Software Changes and File Conversions (Data $ [ ]* per hour
Base Creation/Selection)
(Detailed costing to be estimated from systems
requirements document)
- ------------------------------------------------------------------------------------------------------------------
FEES
- ------------------------------------------------------------------------------------------------------------------
ORDERS Phone orders (includes two (2) line items/Order) $ [ ]* each
(Assumes 4 minute call)
-------------------
Phone Order Call Time in excess of a monthly average
of 240 seconds per call will be billed at a rate of $.[ ]* per second.
-------------------
Mail orders (includes two 2) lines times/order $ [ ]*
-------------------
review order time in 90 days from Transmittal orders (includes two (2) line $ [ ]* each
start up (first orders) items/order)(Email or Web)
-------------------
each
-------------------
Additional line item per order $ [ ]* each
-------------------
Credit card Authorization $ [ ]* each
-------------------
Check/Cash/Money Order processing $ [ ]* each
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
SHIPMENTS Shipments (ups, usps) (includes two (2) unit $ [ ]* each
items/shipment)
-------------------
Shipments of freighted items (per shipment) $ [ ]* each
-------------------
Additional line items per shipment $ [ ]* each
-------------------
Drop ship items $ [ ]* each
-------------------
Create Automated Shipment Invoices (Automated From $ [ ]* each
Negative Option Order Files)
-------------------
Drop shipment Confirmation (Confirms order and creates $ [ ]* each
AR)
-------------------
Guaranteed same-day shipment (optional) $ [ ]* each
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
RECEIVING/STOCKING Receiving/inspecting $ [ ]* each
-------------------
Stocking/recording into inventory $ [ ]* each
-------------------
Inventory storage Reserve Warehouse (Calculated from $ [ ]* per cubic foot/m
peak day of month on actual space utilized)
-------------------
Inventory Storage Active Pick (Calculated on cubic foot $ [ ]* per cubic foot/m
of pick location)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RETURNS/EXCHANGES Returns Electronic $ [ ]* each
-------------------
Returns to Harrison Fulfillment Services $ [ ]* each
-------------------
Exchange processing $ [ ]* each
-------------------
Returns/Exchanges on freighted items additional $ [ ]* each
-------------------
Return to sender $ [ ]* each
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
CALL TAGS/TRACERS UPS call tags $ [ ]* each
-------------------
Tracers $ [ ]* each
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
GIFTS Gift Wrap $ [ ]* each
-------------------
Gift Cards $ [ ]* each
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
CUSTOMER SERVICE Marketing lead calls (inbound) (Assumes 3 min calls) $ [ ]* each
-------------------
Non-order calls (inbound) (Assumes 3 min call) $ [ ]* each
-------------------
In bound Catalog Request (assumes 1.5 min call) $ [ ]* each
(separate 800 number needed)
-------------------
Inbound Catalog Request Voice mail Transcription $ [ ]* each
(separate 800 number needed)
-------------------
Requests are transcribed from
voice mail and keyed into
system Includes mailing the
catalog request
-------------------
Non-order calls (outbound) (Assumes 3 min call) $ [ ]* each
-------------------
Customer Service Call Time in excess of a monthly
average of 130 seconds will be billed at a rate of
$[ ]* per second. Inbound Catalog Request Call Time
in excess of a monthly average of 90 seconds per
call will be billed at rate of $[ ]* per second.
-------------------
Remote Monitoring $ [ ]* hour
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
MAIL ROOM Non-order Correspondence $ [ ]* each
-------------------
Customer Service Research (Chargebacks, NSF or Returned $ [ ]* each
Checks)
-------------------
Catalog Request Mail $ [ ]* each
-------------------
Fax transmissions $ [ ]* each
-------------------
Copies $ [ ]* each
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
FIXED FEES Dedicated Services Management Fee (DSG) $ [ ]*
-------------------
Weekly Administrative fee First Year $ [ ]* week
-------------------
Weekly Administrative fee Second Year $ [ ]* week
-------------------
Weekly Administrative fee Third Year $ [ ]* week
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE BILLING Invoices Manual (institutional purchase order billing) $ [ ]* each
-------------------
Credit card statement processing (manual) $ [ ]* each
-------------------
Credit card automated processing (Authorizations $ [ ]* each
payments)
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
PRINT MAIL Marketing lead package (announcement/advances) $ [ ]* each
-------------------
Monthly news letters $ [ ]* each
-------------------
Automated Statement/past due notices $ [ ]* each
-------------------
Automated FTC Notices and Correspondence $ [ ]* each
-------------------
Automated Shipments Invoices $ [ ]* each
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
BANKING Lock Box Check processing US (regular) $ [ ]* each
-------------------
Lock Box Check processing CAN (us funds) $ [ ]* each
-------------------
Canadian Checks drawn on Canadian Bank $ [ ]* each
-------------------
PO Box Rental $ [ ]* per year
-------------------
Returned Checks/Recleared Checks and Cash Payments $ [ ]* each
-------------------
Research $ [ ]* per request
-------------------
Deposits and Deposits balancing $ [ ]* each
----------------------------------------------------------------------------
FDIC DDA Maintenance $ [ ]* monthly
-------------------
Additional DDA Statements $ [ ]* each
-------------------
Foreign collection Expense $ [ ]* each
-------------------
Wire Transfers (debit) $ [ ]* each
-------------------
ASH transfers (debit) $ [ ]* each
-------------------
</TABLE>
2
<PAGE> 40
<TABLE>
<CAPTION>
<S> <C> <C>
These fees are based on charges by the Federal Reserve,
FDIC and/or other depository Institutions and are
subject to change when the respective expense is
changed. You will be notified promptly of any changes
in prices for these services.
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
OPTIONAL SERVICES Optional Services:
-------------------
Weekly Customer Satisfaction Survey: $ [ ]* per month
-------------------
Survey Insertion into shipment Report
analysis compilation & distribution
Weekly report provided to client and
reviewed by HFS management team Plus
postage and supplies cost
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
INTERACTIVE VOICE RESPONSE (Interactive Voice Response Scriptings):
-------------------
1 to 5,000 $ [ ]* per minute
-------------------
5,001 to 10,000 $ [ ]* per minute
-------------------
10,001 to 20,000 $ [ ]* per minute
-------------------
20,001 to 30,000 $ [ ]* per minute
-------------------
30,001+ $ [ ]* per minute
-------------------
Above IVR equipment rates are charged on per minute $ [ ]* per call
basis
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
SPECIAL PROJECTS FEES Special Projects Fees:
Special projects include physical
inventory, customer
service/telemarketing operator
training special inventory processing
(assembly, rework, refurbishment,
etc.)
and close down service.
All special projects are estimated by
HFS and must be approved in writing by
client before project commencement.
Labor PER HOUR
-------------------
Office, Regular $ [ ]* hour
-------------------
Office, Overtime $ [ ]* hour
-------------------
Office, Sunday/Holiday $ [ ]* hour
-------------------
Warehouse/Regular $ [ ]* hour
-------------------
Warehouse/Overtime $ [ ]* hour
-------------------
Warehouse/Sunday/Holiday $ [ ]* hour
-------------------
Supervisory, Regular $ [ ]* hour
-------------------
Supervisory, Overtime $ [ ]* hour
-------------------
Supervisory, Sunday/Holiday $ [ ]* hour
-------------------
Consulting Services $ [ ]* hour
-------------------
Executive Consulting Services $ [ ]* day
Approved HFS travel [ ]*
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
DATA BASE SELECTION Initial Customer file/order file load per thousand $ [ ]* per thousand
records
-------------------
Selection Table Set Up (Source Codes) (output id) $ [ ]*
-------------------
Test Selection With no Output $ [ ]*
-------------------
Live Execution of Data Base $ [ ]*
-------------------
Build Negative Option Order File $ [ ]*
-------------------
Interface to third party data base and drop shippers $ [ ]*
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
DATA PROCESSING Data processing support $ [ ]* order
-------------------
Computer programming services $ [ ]* per hour
-------------------
Computer script changes (report distribution changes, $ [ ]* per hour
tape set-up, job changes, etc.)
-------------------
Orders transmitted via Email (Base rate) $ [ ]*
-------------------
Orders transmitted via Web page (Base rate) $ [ ]* per month
-------------------
Email and Web Page Price Ranges (cost per order)
0 to 5000 Per Month $ [ ]* each
-------------------
5001 to 10,000 Per Month $ [ ]* each
-------------------
10,001 to 20,000 Per Month $ [ ]* each
-------------------
20,001 to 30,000 Per Month $ [ ]* each
-------------------
30,001 to > Per Month $ [ ]* each
-------------------
</TABLE>
3
<PAGE> 41
<TABLE>
<CAPTION>
<S> <C> <C>
Data Storage:
-------------------
Record storage fees - House file account record with $ [ ]* per month
inactivity > 12 months
-------------------
Order record (includes supplementary detail records) $ [ ]* per month
completed > 12 months
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
OTHER Other:
-------------------
Supplies $ [ ]*
-------------------
Materials $ [ ]*
-------------------
Stationary $ [ ]*
-------------------
Special Packaging Materials $ [ ]*
-------------------
Postage and Courier $ [ ]*
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS Remote communications lines and hardware $ [ ]*
-------------------
Telephone hardware (Voicemail Catalog Request) $ [ ]* each line
-------------------
(This rate is calculated by dividing the peak hour in a
month by 60 calls per hour)
-------------------
Telephone hardware (orders) $ [ ]* each line
-------------------
(This rate is calculated by dividing the peak hour in a
month by 15 calls per hour)
-------------------
Outbound long distance usage $ [ ]* hour
-------------------
Toll free 800 usage (WATS charges) $ [ ]* hour
-------------------
Canadian toll free usage (WATS charges) Costs varies on usage and
province
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ASSUMPTIONS The following assumptions were made in
compiling the transaction rates:
Orders
(Positive Option) [ ]*
----------------
Telephone Percent [ ]%* Non-Order Call [ ]%*
outs
----------------
Mail Percentage [ ]%* Non-Order Call in [ ]%*
----------------
Transmittal Percent [ ]%* Catalog Request [ ]%*
Phone
----------------
Shipments per order [ ]* Non-Order [ ]%*
correspondence
----------------
Items per order [ ]* Call Tags [ ]%*
----------------
Return/exchanges [ ]%* Tracers [ ]%*
----------------
Returns Electronic [ ]%* Drop Ship % [ ]%*
----------------
Receiving [ ]%*
----------------
Gift Wrap Percentage [ ]%* Catalog Request [ ]%*
Mail
----------------
Gift Wrap Percentage [ ]%* Advances (Neg. [ ]%*
Option)
----------------
The pricing was developed to these base assumptions and is subject
to change if the assumptions change.
Transaction rates are double for the following holidays:
Christmas Eve, Christmas Day, New Year's Day, Memorial Day
Easter, July 4th, Labor day, Thanksgiving
APPROVED CARRIERS Approved Carriers: UPS, USPS, RPS, FEDX
Non Approved Carriers: Airborne Express, Burlington
Any Business Partner non-approved carriers will result in an
additional charge of $[ ]* a shipment
Any Business Partner requesting freight shipments will be charged a
per-shipment charge.
</TABLE>
<PAGE> 42
ALLOY DESIGNS, INC.
EXHIBIT E
SALES TAX JURISDICTIONS
35
<PAGE> 43
ALLOY DESIGNS, INC.
EXHIBIT F
COMPANY'S
CERTIFICATE OF INSURANCE
36
<PAGE> 44
ALLOY DESIGNS, INC.
EXHIBIT G
HFS'
CERTIFICATE OF INSURANCE
37
<PAGE> 45
ALLOY DESIGNS, INC.
SCHEDULE 1
HFS REPRESENTATION AND WARRANTY EXCEPTIONS
None
38
<PAGE> 46
ALLOY DESIGNS, INC.
SCHEDULE 2
COMPANY REPRESENTATION AND WARRANTY EXCEPTIONS
39
<PAGE> 1
Alloy Online, Inc. has omitted from this Exhibit 10.4 portions of the Agreement
for which Alloy Online, Inc. has requested confidential treatment from the
Securities and Exchange Commission. The portions of the Agreement for which
confidential treatment has been requested have been filed separately with the
Securities and Exchange Commission. Such omitted portions have been marked with
an asterisk.
EXHIBIT 10.4
AMENDMENT TO
FULFILLMENT SERVICES AGREEMENT
This Amendment to Fulfillment Services Agreement (the "AMENDMENT") dated as
of September 1, 1997, by and between Harrison Fulfillment Services, Inc., a
Tennessee corporation ("HFS"), and Alloy Designs, Inc., a Delaware corporation
(the "COMPANY").
W I T N E S S E T H
WHEREAS, the parties hereto have previously entered into that certain
Fulfillment Services agreement dated as of July 23, 1997 (the "AGREEMENT")
pursuant to which HFS has agreed to provide direct marketing services to Company
for its direct marketing program for the sale of various merchandise sold
through the Alloy Catalog (respectively, the "MERCHANDISE" and the "CATALOG");
WHEREAS, the parties desire that the Agreement be amended to provide for
catalog request processing and the pricing therefor.
NOW, THEREFORE, in consideration of the mutual promises and conditions
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. CATALOG REQUEST PROCESSING. HFS shall process catalog request on the
"alloy-41" and "alloy-55" lines upon the following pricing terms:
(a) Effective from and after September 1, 1997,
(i) The first 2,500 calls (daily) coming in over such lines (including
non-order calls) shall be billed at $[ ]* per call (voice mail rate).
1
<PAGE> 2
(ii) The balance of calls coming in over such lines will be billed at $[ ]*
per call.
(b) Effective December 1, 1997, during any month in which average call
length for such month is in excess of 90 seconds, each second of average call
length in excess of 90 seconds shall be billed at $[ ]* per second per call.
2. BINDING EFFECT AND BENEFIT. The parties agree that this Addendum is in
full compliance with Section 26 of the Agreement and is a valid modification and
supplement to the Agreement which shall inure to the benefit of, and shall be
binding upon, the parties, their heirs, successors and permitted assigns.
IN WITNESS WHEREOF, the Company has executed this Agreement effective the
date first above written and HFS has executed and accepted this Agreement
effective the same date.
COMPANY:
ALLOY DESIGNS, INC.
By: /s/ Sam Gradess
-------------------------
Name: Sam Gradess
Title: EVP & Director
HFS:
HARRISON FULFILLMENT SERVICES, INC.
By: /s/ Bruce Godfray
-------------------------
Name: Bruce Godfray
Title: President
2
<PAGE> 1
Alloy Online, Inc. has omitted from this Exhibit 10.5 portions of the Agreement
for which Alloy Online, Inc. has requested confidential treatment from the
Securities and Exchange Commission. The portions of the Agreement for which
confidential treatment has been requested have been filed separately with the
Securities and Exchange Commission. Such omitted portions have been marked with
an asterisk.
EXHIBIT 10.5
SECOND AMENDMENT TO
FULFILLMENT SERVICES AGREEMENT
This Second Amendment to Fulfillment Services Agreement (the "AMENDMENT")
dated as of October 9, 1998, by and between Harrison Fulfillment Services, Inc.,
a Tennessee corporation ("HFS"), and Alloy Designs, Inc., a Delaware corporation
(the "COMPANY").
WITNESSETH
WHEREAS, the parties hereto have previously entered into that certain
Fulfillment Services agreement dated as of July 23, 1997 (the "AGREEMENT")
pursuant to which HFS has agreed to provide direct marketing services to Company
for its direct marketing program for the sale of various merchandise sold
through the Alloy Catalog (respectively, the "MERCHANDISE" and the "CATALOG");
and
WHEREAS, the parties amended the Agreement pursuant to that certain
Amendment to Fulfillment Services Agreement dated as of September 1, 1997 to
provide for catalog request processing and the pricing therefor; and
WHEREAS, the parties desire that the Agreement be further amended as
described herein.
NOW, THEREFORE, in consideration of the mutual promises and conditions
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. EFFECTIVE DATE AND EXPIRATION DATE. The effective date of this
amendment shall be October 9, 1998 (the "EFFECTIVE DATE") and Section 16(a) of
the
<PAGE> 2
Agreement is hereby amended to provided that the Initial Term shall expire on
July 31, 2003.
2. TRANSACTION FEES. Section 5(b)(i) of the Agreement shall be deleted in
its entirety and the following shall be inserted in lieu thereof:
(b) TRANSACTION FEES. The Company shall pay HFS transaction fees
("TRANSACTION FEES") structured on a tiered basis determined quarterly in
January, April, July and October based on an annualization of the order
volume experienced during the three month period ending on the last day of
the calendar month immediately thereto. The applicable transaction rates at
each order volume tier are set forth in new EXHIBITS D/a-1 through D/a-4
(collectively with original EXHIBIT D, the "TRANSACTION RATE EXHIBITS"). In
the event that the annualized volume for any particular three month period
is less than 150,000, then the transaction rates for such period shall be
the rates set forth in original EXHIBIT D. The transaction rates shall be
adjusted from time to time by the C.P.I. Adjustment and Forecast Adjustment
described below (the transaction rates described herein as adjusted by the
C.P.I. Adjustment and Forecast Adjustment are referred to herein as the
"TRANSACTION RATES"). In the event that quarterly order volumes e qual or
exceed 1,000,000 orders, the parties shall negotiate in good faith to
determine mutually acceptable Transaction Rates for such volume levels.
3. FORECAST ADJUSTMENT. Section 5(b)(ii)B. shall be deleted in its
entirety and the following shall be inserted in lieu thereof:
B. From and after the Effective Date the Transaction Rates shall
also be subject to adjustment (the "FORECAST ADJUSTMENT") as follows:
1. In the event that the number of phone orders or items shipped
(each a "COMPONENT") during any calendar month varies below the amount
forecasted for such Component in the applicable Quarterly Forecast (or a
Revised Quarterly Forecast which has been delivered to HFS by no later than
least fifteen (15) days prior to the commencement of such month) by more
than ten percent (10%) but less than twenty-five percent (25%), then the
Transaction Rates for such month shall be increased by ten percent (10%).
2. In the event that a Component level during any calendar month
varies below the amount forecasted for such Component in the applicable
Quarterly Forecast (or a Revised Quarterly Forecast which has been
delivered to HFS by no later than least fifteen (15) days prior to the
commencement of such month) by more than twenty-five percent (25%), then
the Transaction Rates for such month shall be increased by twenty percent
(20%).
<PAGE> 3
4. PAYMENT OF TRANSACTION FEES. Section 6(b) shall be deleted in its
entirety and the following shall be inserted in lieu thereof:
(b) TRANSACTION FEES. HFS shall, on a weekly basis, issue to the Company an
invoice for estimated transaction fees (the "ESTIMATED TRANSACTION FEES")
in the amount equal to the product of (i) the estimated number of orders
taken by HFS during that week and (ii) the per order price prescribed by
the applicable Transaction Rate Exhibit as determined by the Quarterly
Forecast or Revised Quarterly Forecast applicable to such week (the
"ASSUMED PER ORDER PRICE"). Such invoice shall be due and payable within
ten (10) Business Days. HFS shall, on a monthly basis, issue to the Company
an invoice setting forth the difference between the Estimated Transaction
Fees paid during the previous month and the actual Transaction Fees
incurred in respect of confirmed transactions serviced by HFS and based on
the forecasted Transaction Rates (the "FORECAST TRANSACTION FEES") during
the prior month. Any payments owing to HFS pursuant to such reconciliation
of the Estimated Transaction Amount with the Forecast Transaction Fee s
shall be due and payable within thirty (30) days following receipt of such
invoice issued by HFS. If at the end of the applicable month there is a
balance due the Company, HFS shall offset such balance against the
following month's invoice. HFS shall, on a quarterly basis, issue to the
Company an invoice reconciling the difference between the Forecast
Transaction Fees paid during the previous quarter and the actual
Transaction Fees incurred in respect of Services performed by HFS based on
the applicable Transaction Rates for the actual transaction volume
experience for such quarter, as determined from the Transaction Rate
Exhibits, and as adjusted by the C.P.I. Adjustment and/or Forecast
Adjustment, if any (the "ACTUAL TRANSACTION FEES"). Any payments owing to
HFS pursuant to such reconciliation of the Forecast Transaction Amount with
the Actual Transaction Fees shall be due and payable within thirty (30)
days following receipt of such invoice issued by HFS. If at the end of the
applicable quarter there i s a balance due the Company, HFS shall offset
such balance against the following month's invoice.
5. CLOSE DOWN FEE PAYMENT. Section 6(d) of the Agreement shall be amended
by deleting the phrase "ten (10) Business Days" in every instance in which it
appears and inserting the phrase "thirty (30) days" in lieu thereof.
6. EARLY TERMINATION RIGHTS. (a) Section 16(b)(v) shall be deleted in its
entirety and the following shall be inserted in lieu thereof:
<PAGE> 4
(v) OTHER COMPANY TERMINATION RIGHTS. The Company shall have the
right to terminate this Agreement at any time after July 31, 1999 by
providing HFS with written notice thereof at least one hundred eighty
(180) days prior to such termination and payment of the unamortized
amounts described in Section 6(c) hereof.
(b) The following shall be inserted as a new Section 16(c):
(c) EARLY TERMINATION PAYMENTS. In connection with the Transaction
Rate and other changes contemplated by this Amendment, HFS will be
making certain capital investments and asset additions which the
parties believe are necessary to allow HFS to provide Services at the
increased order volumes anticipated to be experienced after the
Effective Date. In addition, HFS agreement to modify the Transaction
rates is based on the expectation of such order volume increase.
Consequently the parties agree that in the e vent that this Agreement
is terminated prior to the end of the Initial Term as a result of a
Default by the Company or as a result of the exercise by the Company
of its right to terminate under Section 16(b)(v), that HFS shall be
entitled to recoup its unamortized portion of the asset additions and
recoup the foregone revenues resulting from the reduction in
Transaction rates. Consequently, in the event of a termination of this
Agreement prior to the end of the Initial Term as a result of (i) a
Default by Company or (ii) an election by the Company pursuant to
Section 16(b)(v), in addition to any other rights which HFS may have
under this Agreement, the Company shall pay HFS an amount equal to sum
of (A) the unamortized value of the fixed asset expenditures directly
incurred by HFS to provide the Services to the Company plus (B) the
product of (x) the difference between the original EXHIBIT D
Transaction Rates and the revised Transaction Rates set forth in the
other Transaction Rate Exhibits and (y) the actual transactions
occurring between the Effective Date of this Amendment and [July 31,
1999] as more fully explained in the examples set forth in EXHIBIT H.
HFS shall provide the Company a minimum of ninety (90) days notice
prior to the purchase of such additional assets which will be involved
in the calculation set forth in this Section 16(c) during which time
the Company shall review the decision to add any such assets and
inform HFS as to whether to delay or cancel the addition. Any such
failure by the Company to notify HFS of its desire to cancel or delay
any asset acquisition shall be deemed to be a consent by the Company
to such asset acquisition. In the event of such cancellation or delay,
HFS shall be obligated to use its reasonable best efforts to meet
Service Levels but will otherwise be relieved from delivering Services
at Service Levels not reasonably obtainable in the absence such asset
additions. In the event of a termination requiring payment to be made
to HFS under this Section 16(c), the Company may obtain valid offers
and arrange for the disposal of the asset to a third party, and the
proceeds therefrom may be applied against the amount owing to HFS
hereunder
<PAGE> 5
with any remaining deficiency being the obligation of the Company.
Upon receipt of a bona fide offer to purchase any such asset from a
third party. The Company shall deliver a copy of such bona fide offer
to HFS and HFS shall have ____ business days to agree to retain such
asset(s) and offset the amount owing to HFS by the Company under this
Section 16(c) by the price set forth in the bona fide offer of the
third party
6. EXHIBIT A ADDITIONS. The following shall be added to Exhibit A as
additional Services to be provided:
37. A dedicated service group for the Company will be
established.
38. Account executives and support staff will be provided in the
following numbers for the respective forecasted volume tiers:
TIER STAFF
Exhibit D 1 Account Representative
Exhibit D/a- 1 2 Account Representatives
Exhibit D/a-2 2 Account Representatives and
one clerical support person
Exhibit D/a-3,a-4 3 Account Representatives and
one clerical support person
7. BINDING EFFECT AND BENEFIT. The parties agree that this Amendment
is in full compliance with Section 26 of the Agreement and is a valid
modification and supplement to the Agreement which shall inure to the benefit
of, and shall be binding upon, the parties, their heirs, successors and
permitted assigns. All provisions of the Agreement not specifically amended
hereby shall remain in full force and effect but shall be read so as to give
effect to the foregoing amendments however, no further changes shall be effected
by this Amendment.
<PAGE> 6
IN WITNESS WHEREOF, the Company has executed this Agreement effective the
date first above written and HFS has executed and accepted this Agreement
effective the same date.
COMPANY:
ALLOY DESIGNS, INC.
By: /s/ Samuel A. Gradess
----------------------------------
Name: Samuel A. Gradess
Title: Director, Finance & Administration
HFS:
HARRISON FULFILLMENT SERVICES, INC.
By: /s/ Joe Dresnok
----------------------------------
Name: Joe Dresnok
Title: President
<PAGE> 7
Exhibit D/1a
EXHIBIT D
Alloy Designs, Inc.
150 Thousand Orders
Transaction Rates
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Revised Date 09/17/98 Current Date 09/29/98
9:00AM Current Time 6:39 PM
- ----------------------------------------------------------------------------------------------
FEES
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ORDERS Phone orders (per minute charge) $ [ ]* each minute
-------------------
Mail Orders/Fax Orders (includes two (2)) line $ [ ]* each
items/order
-------------------
Check Verifications $ [ ]* each
Minimum $[ ]* per month
-------------------
Check Verification and recovery [ ]* each
Minimum $[ ]* per month
-------------------
Check Verification and Check Guarantee $ [ ]* each
Minimum $[ ]* per month
-------------------
Transmittal orders (includes all line items) $ [ ]* each
-------------------
Additional line items per order (Mail Order/Fax Orders $ [ ]* each
Only)
-------------------
Credit card Authorization $ [ ]* each
-------------------
Manual Credit Card Authorization $ [ ]* each
-------------------
Check/Cash/Money Order processing $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
KITTING Includes 3 items per kit $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
SHIPMENTS Catalog Shipments (includes 2 line items/shipment) $ [ ]* shipment
-------------------
Catalog Shipment line items greater than two (2) $ [ ]* line item
- -----------------------------------------------------------------------------------------------------------------
-------------------
Guaranteed same-day shipment (optional) $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RECEIVING/STOCKING Receiving/Inspecting $ [ ]* each
-------------------
Stocking/recording into inventory $ [ ]* each
-------------------
Inventory storage Reserve Warehouse (Calculated from $ [ ]* per cubic foot/mo
peak day of the month on actual space utilized)
-------------------
Inventory Storage Active Peak (Calculated on cubic foot $ [ ]* per cubic foot/mo
of pick location)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RETURNS/EXCHANGES Returns to Harrison Fulfillment Services $ [ ]* each
-------------------
Exchange processing $ [ ]* each
-------------------
Returns/Exchanges on freighted items additional $ [ ]* each
-------------------
Return to vendor $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
CALL TAGS/TRACERS UPS call tags $ [ ]* each
-------------------
Tracers $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
GIFTS Gift Wrap $ [ ]* each
-------------------
Gift Cards $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
CUSTOMER SERVICE Calls
Marketing lead calls (inbound) $ [ ]* each
-------------------
Non-order calls (inbound) $ [ ]* each minute
-------------------
Inbound Catalog Request (Alloy specified-Live $ [ ]* each minute
Operator)
-------------------
Inbound Catalog Request (Voice Mail) (Customer $ [ ]* each minute
Talk Time)
-------------------
Non-order calls (outbound) $ [ ]* each minute
-------------------
Non-Order correspondence
-------------------
Customer Service Letters $ [ ]* each
Chargebacks $ [ ]* each
NSF Check Collection $ [ ]* each
AR Manual Payments $ [ ]* each
Order Research $ [ ]* each hour
Remote Monitoring $ [ ]* each hour
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
Exhibit D/1a
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MAIL ROOM Catalog Request $ [ ]* each
-------------------
Fax transmissions $ [ ]* each
-------------------
Copies $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
FIXED FEES Dedicated Services Management Fee (DSG) $ [ ]* week
-------------------
Administrative fees $ [ ]* week
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE BILLING Invoices Manual (Institutional purchase order billing) $ [ ]* each
-------------------
Credit card statement processing (manual) each
-------------------
Credit card automated processing (Authorizations each
payments)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
PRINT MAIL Marketing lead package (announcements/advances) $ [ ]* each
-------------------
Monthly news letters $ [ ]* each
-------------------
Automated Statement/past due notices $ [ ]* each
-------------------
Automated FTC Notices and Correspondence $ [ ]* each
-------------------
Automated Shipments invoices $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
BANKING Lock Box Check processing US (regular) $ [ ]* each
-------------------
Lock Box Check processing CAN (us funds) $ [ ]* each
-------------------
Canadian Checks drawn on Canadian Bank $ [ ]*
-------------------
PO Box Rental $ [ ]* per year
-------------------
Returned Checks/Recleared Checks and Cash Payments $ [ ]* each
-------------------
Research $ [ ]* per request
-------------------
Deposits and Deposit balancing $ [ ]* each
----------------------------------------------------------------------------
FDIC DDA Maintenance $ [ ]* monthly
-------------------
Additional DDA Statements $ [ ]* each
-------------------
Foreign Collection Expense $ [ ]* each
-------------------
Wire Transfers (debit) $ [ ]* each
-------------------
ASH transfers (debit) $ [ ]* each
-------------------
These fees are ased on charges by the
Federal Reserve, FDIC and/or other
depository institutions and are
subject to change when the respective
expense is changed. You will be
notified promptly of any changes in
prices for these services.
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
OPTIONAL SERVICES Optional Services:
-------------------
Weekly Customer Satisfaction Survey: $ [ ]* per month
-------------------
Quarterly Business Reviews: $ [ ]* per review
-------------------
Upsell: $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
SPECIAL PROJECTS FEES Special Projects Fees:*
Special projects include physical
inventory, customer
service/telemarketing operator
training, special inventory processing
(assembly, rework, refurbishment,
etc.) and close down service
All special projects are estimated by
HFS and must be approved in writing by
client before project commencement.
Labor PER HOUR
-------------------
Office, Regular $ [ ]* hour
-------------------
Office, Overtime $ [ ]* hour
-------------------
Office, Sunday/Holiday $ [ ]* hour
-------------------
Warehouse, Regular $ [ ]* hour
-------------------
Warehouse, Overtime $ [ ]* hour
-------------------
Warehouse, Sunday/Holiday $ [ ]* hour
-------------------
Supervisory, Regular $ [ ]* hour
-------------------
Supervisory, Overtime $ [ ]* hour
-------------------
Supervisory, Sunday/Holiday $ [ ]* hour
-------------------
Consulting Services $ [ ]* hour
-------------------
Executive Consulting Services $ [ ]* day
-------------------
Approved HFS travel $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 9
Exhibit D/1a
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATA BASE SELECTION Initial Customer file/order file load per thousand $ [ ]* per thousand
records
-------------------
Selection Table Set Up (Source Codes) (output id) $ [ ]*
-------------------
Test Selection With No Output $ [ ]*
-------------------
Live Execution of Data Base $ [ ]*
-------------------
Build Negative Option Order File $ [ ]* per order
-------------------
File Downloads $ [ ]* per record
-------------------
Interface to third party data base and drop shippers $ [ ]* per order
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
DATA PROCESSING Data processing support $ [ ]* order
-------------------
EDI Interface transactions (order status, returns, $ [ ]* each
cancels, etc.)
-------------------
Computer programming services $ [ ]* per hour
-------------------
Computer script changes (report distribution changes, $ [ ]* per hour
tape set-up, job changes, etc.)
-------------------
Data Storage:
-------------------
House file customer account record with inactivity >12 $ [ ]* per month
months
-------------------
Order record (includes supplementary detail records) per record
- -----------------------------------------------------------------------------------------------------------------
competed >12 months $ [ ]* per month
per record
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
OTHER Other:
-------------------
Supplies $ [ ]*
-------------------
Materials $ [ ]*
-------------------
Stationery $ [ ]*
-------------------
Special Packaging Materials $ [ ]*
-------------------
Postage and Courier $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
COMMUNICATIONS Remote communications lines and hardware $ [ ]*
Telephone hardware (minimum lines = to number of 800 $ [ ]* each line
numbers)
-------------------
(Regular lines rate is calculated by dividing the peak
hour in a month by 15 calls per hour)
-------------------
(Request lines rate is calculated by dividing the peak
hour in a month by 60 calls per hour)
-------------------
Outbound long distance usage $ [ ]* hour
-------------------
Toll free 800 usage (WATS charges) First 25,000 hours $ [ ]* hour
annually
-------------------
Toll free 800 usage (WATS charges) Hours in excess of $ [ ]* hour
25,000 annually
-------------------
Canadian toll free usage (WATS charges) Cost varies on $ [ ]*
usage & province
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ASSUMPTIONS The following assumptions were made in compiling the transaction rates:
<S> <C> <C> <C>
Orders
------------------ ------------------
(Positive Option) [ ]* Non-Order Call outs [ ]%*
------------------ ------------------
Telephone Percentage [ ]%* Non-Order Calls in [ ]%*
------------------ ------------------
Mail Percentage [ ]%* Catalog Request Phone [ ]%*
------------------ ------------------
Transmitted Percentage [ ]%* Non-Order [ ]%*
------------------ correspondence
Shipments per order [ ]* ------------------
------------------ Call Tags [ ]%*
Items per order [ ]* ------------------
------------------ Tracers [ ]%*
Returns/exchanges to HFS [ ]%* ------------------
------------------ Drop Ship % [ ]%*
Returns Electronic [ ]%* ------------------
------------------
Receiving [ ]%* ------------------
------------------ Catalog Request Mail [ ]%*
Gift Wrap Percentage [ ]%* ------------------
------------------ Advances (Neg. Option) [ ]%*
Gift Card Percentage [ ]%* ------------------
------------------
The pricing was developed to these base assumptions and is subject to
change if the assumptions change. Transaction rates are double for the
following holidays: Christmas Eve, Christmas Day, New Year's Day,
Memorial Day, Easter, July 4th, Labor day, Thanksgiving.
APPROVED CARRIERS Approved Carriers: UPS, USPS, RPS, FEDX
Any Business Partner requesting non-approved carriers will result in
an additional charge of [ ]* a shipment.
Any Business Partner requesting freight shipments will be charged a
per-shipment charge.
</TABLE>
prepared by Richard A. Pelletier
<PAGE> 10
Exhibit D/1b
ALLOY DESIGN, INC
THREE CONSECUTIVE MONTHS CUMULATIVE ORDERS GREATER THAN 150,000
TRANSACTION RATES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Revised Date 09/28/98 Current Date 09/29/98
9:00 AM Current Time 6:41 PM
- ----------------------------------------------------------------------------------------------
FEES
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ORDERS Phone orders (per minute charge) $ [ ]* each minute
-------------------
Mail Orders/Fax Orders (includes two (2)) line $ [ ]* each
items/order
-------------------
Check Verifications $ [ ]* each
Minimum $[ ]* per month
-------------------
Check Verification and recovery [ ]* each
Minimum $[ ]* per month
-------------------
Check Verification and Check Guarantee $ [ ]* each
Minimum $[ ]* per month
-------------------
Transmittal orders (includes all line items) $ [ ]* each
-------------------
Additional line items per order (Mail Order/Fax Orders $ [ ]* each
Only)
-------------------
Credit card Authorization $ [ ]* each
-------------------
Manual Credit Card Authorization $ [ ]* each
-------------------
Check/Cash/Money Order processing $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
KITTING Includes 3 items per kit $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
SHIPMENTS Catalog Shipments (includes 2 line items/shipment) $ [ ]* shipment
-------------------
Catalog Shipment line items greater than two (2) $ [ ]* line item
- -----------------------------------------------------------------------------------------------------------------
-------------------
Guaranteed same-day shipment (optional) $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RECEIVING/STOCKING Receiving/Inspecting $ [ ]* each
-------------------
Stocking/recording into inventory $ [ ]* each
-------------------
Inventory storage Reserve Warehouse (Calculated from $ [ ]* per cubic foot/mo
peak day of the month on actual space utilized)
-------------------
Inventory Storage Active Peak (Calculated on cubic foot $ [ ]* per cubic foot/mo
of pick location)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RETURNS/EXCHANGES Returns to Harrison Fulfillment Services $ [ ]* each
-------------------
Exchange processing $ [ ]* each
-------------------
Returns/Exchanges on freighted items additional $ [ ]* each
-------------------
Return to vendor $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
CALL TAGS/TRACERS UPS call tags $ [ ]* each
-------------------
Tracers $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
GIFTS Gift Wrap $ [ ]* each
-------------------
Gift Cards $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
CUSTOMER SERVICE Calls
Marketing lead calls (inbound) $ [ ]* each
-------------------
Non-order calls (inbound) $ [ ]* each minute
-------------------
Inbound Catalog Request (Alloy specified-Live $ [ ]* each minute
Operator)
-------------------
Inbound Catalog Request (Voice Mail) (Customer $ [ ]* each minute
Talk Time)
-------------------
Non-order calls (outbound) $ [ ]* each minute
-------------------
Non-Order correspondence
-------------------
Customer Service Letters $ [ ]* each
Chargebacks $ [ ]* each
NSF Check Collection $ [ ]* each
AR Manual Payments $ [ ]* each
Order Research $ [ ]* each hour
Remote Monitoring $ [ ]* each hour
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 11
Exhibit D/1b
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MAIL ROOM Catalog Request $ [ ]* each
-------------------
Fax transmissions $ [ ]* each
-------------------
Copies $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
FIXED FEES Dedicated Services Management Fee (DSG) $ [ ]* week
-------------------
Administrative fees $ [ ]* week
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE BILLING Invoices Manual (Institutional purchase order billing) $ [ ]* each
-------------------
Credit card statement processing (manual) each
-------------------
Credit card automated processing (Authorizations each
payments)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
PRINT MAIL Marketing lead package (announcements/advances) $ [ ]* each
-------------------
Monthly news letters $ [ ]* each
-------------------
Automated Statement/past due notices $ [ ]* each
-------------------
Automated FTC Notices and Correspondence $ [ ]* each
-------------------
Automated Shipments invoices $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
BANKING Lock Box Check processing US (regular) $ [ ]* each
-------------------
Lock Box Check processing CAN (us funds) $ [ ]* each
-------------------
Canadian Checks drawn on Canadian Bank $ [ ]*
-------------------
PO Box Rental $ [ ]* per year
-------------------
Returned Checks/Recleared Checks and Cash Payments $ [ ]* each
-------------------
Research $ [ ]* per request
-------------------
Deposits and Deposit balancing $ [ ]* each
----------------------------------------------------------------------------
FDIC DDA Maintenance $ [ ]* monthly
-------------------
Additional DDA Statements $ [ ]* each
-------------------
Foreign Collection Expense $ [ ]* each
-------------------
Wire Transfers (debit) $ [ ]* each
-------------------
ASH transfers (debit) $ [ ]* each
-------------------
These fees are ased on charges by the
Federal Reserve, FDIC and/or other
depository institutions and are
subject to change when the respective
expense is changed. You will be
notified promptly of any changes in
prices for these services.
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
OPTIONAL SERVICES Optional Services:
-------------------
Weekly Customer Satisfaction Survey: $ [ ]* per month
-------------------
Quarterly Business Reviews: $ [ ]* per review
-------------------
Upsell: $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
SPECIAL PROJECTS FEES Special Projects Fees:*
Special projects include physical
inventory, customer
service/telemarketing operator
training, special inventory processing
(assembly, rework, refurbishment,
etc.) and close down service
All special projects are estimated by
HFS and must be approved in writing by
client before project commencement.
Labor PER HOUR
-------------------
Office, Regular $ [ ]* hour
-------------------
Office, Overtime $ [ ]* hour
-------------------
Office, Sunday/Holiday $ [ ]* hour
-------------------
Warehouse, Regular $ [ ]* hour
-------------------
Warehouse, Overtime $ [ ]* hour
-------------------
Warehouse, Sunday/Holiday $ [ ]* hour
-------------------
Supervisory, Regular $ [ ]* hour
-------------------
Supervisory, Overtime $ [ ]* hour
-------------------
Supervisory, Sunday/Holiday $ [ ]* hour
-------------------
Consulting Services $ [ ]* hour
-------------------
Executive Consulting Services $ [ ]* day
-------------------
Approved HFS travel $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
Exhibit D/1b
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATA BASE SELECTION Initial Customer file/order file load per thousand $ [ ]* per thousand
records
-------------------
Selection Table Set Up (Source Codes) (output id) $ [ ]*
-------------------
Test Selection With No Output $ [ ]*
-------------------
Live Execution of Data Base $ [ ]*
-------------------
Build Negative Option Order File $ [ ]* per order
-------------------
File Downloads $ [ ]* per record
-------------------
Interface to third party data base and drop shippers $ [ ]* per order
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
DATA PROCESSING Data processing support $ [ ]* order
-------------------
EDI Interface transactions (order status, returns, $ [ ]* each
cancels, etc.)
-------------------
Computer programming services $ [ ]* per hour
-------------------
Computer script changes (report distribution changes, $ [ ]* per hour
tape set-up, job changes, etc.)
-------------------
Data Storage:
-------------------
House file customer account record with inactivity >12 $ [ ]* per month
months
-------------------
Order record (includes supplementary detail records) per record
- -----------------------------------------------------------------------------------------------------------------
competed >12 months $ [ ]* per month
per record
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
OTHER Other:
-------------------
Supplies $ [ ]*
-------------------
Materials $ [ ]*
-------------------
Stationery $ [ ]*
-------------------
Special Packaging Materials $ [ ]*
-------------------
Postage and Courier $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
COMMUNICATIONS Remote communications lines and hardware $ [ ]*
Telephone hardware (minimum lines = to number of 800 $ [ ]* each line
numbers)
-------------------
(Regular lines rate is calculated by dividing the peak
hour in a month by 15 calls per hour)
-------------------
(Request lines rate is calculated by dividing the peak
hour in a month by 60 calls per hour)
-------------------
Outbound long distance usage $ [ ]* hour
-------------------
Toll free 800 usage (WATS charges) First 25,000 hours $ [ ]* hour
annually
-------------------
Toll free 800 usage (WATS charges) Hours in excess of $ [ ]* hour
25,000 annually
-------------------
Canadian toll free usage (WATS charges) Cost varies on $ [ ]*
usage & province
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ASSUMPTIONS The following assumptions were made in compiling the transaction rates:
<S> <C> <C> <C>
Orders
------------------ ------------------
(Positive Option) [ ]* Non-Order Call outs [ ]%*
------------------ ------------------
Telephone Percentage [ ]%* Non-Order Calls in [ ]%*
------------------ ------------------
Mail Percentage [ ]%* Catalog Request Phone [ ]%*
------------------ ------------------
Transmitted Percentage [ ]%* Non-Order [ ]%*
------------------ correspondence
Shipments per order [ ]* ------------------
------------------ Call Tags [ ]%*
Items per order [ ]* ------------------
------------------ Tracers [ ]%*
Returns/exchanges to HFS [ ]%* ------------------
------------------ Drop Ship % [ ]%*
Returns Electronic [ ]%* ------------------
------------------
Receiving [ ]%* ------------------
------------------ Catalog Request Mail [ ]%*
Gift Wrap Percentage [ ]%* ------------------
------------------ Advances (Neg. Option) [ ]%*
Gift Card Percentage [ ]%* ------------------
------------------
The pricing was developed to these base assumptions and is subject to
change if the assumptions change. Transaction rates are double for the
following holidays: Christmas Eve, Christmas Day, New Year's Day,
Memorial Day, Easter, July 4th, Labor day, Thanksgiving.
APPROVED CARRIERS Approved Carriers: UPS, USPS, RPS, FEDX
Any Business Partner requesting non-approved carriers will result in
an additional charge of [ ]* a shipment.
Any Business Partner requesting freight shipments will be charged a
per-shipment charge.
</TABLE>
prepared by Richard A. Pelletier
<PAGE> 13
Exhibit D/1c
ALLOY DESIGN, INC
THREE CONSECUTIVE MONTHS CUMULATIVE ORDERS GREATER THAN 300,000
TRANSACTION RATES
<TABLE>
<CAPTION>
Revised Date 09/28/98 Current Date 09/29/98
9:00 AM Current Time 6:42 PM
- ----------------------------------------------------------------------------------------------
FEES
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ORDERS Phone orders (per minute charge) $ [ ]* each minute
-------------------
Mail Orders/Fax Orders (includes two (2)) line $ [ ]* each
items/order
-------------------
Check Verifications $ [ ]* each
Minimum $[ ]* per month
-------------------
Check Verification and recovery [ ]* each
Minimum $[ ]* per month
-------------------
Check Verification and Check Guarantee $ [ ]* each
Minimum $[ ]* per month
-------------------
Transmittal orders (includes all line items) $ [ ]* each
-------------------
Additional line items per order (Mail Order/Fax Orders $ [ ]* each
Only)
-------------------
Credit card Authorization $ [ ]* each
-------------------
Manual Credit Card Authorization $ [ ]* each
-------------------
Check/Cash/Money Order processing $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
KITTING Includes 3 items per kit $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
SHIPMENTS Catalog Shipments (includes 2 line items/shipment) $ [ ]* shipment
-------------------
Catalog Shipment line items greater than two (2) $ [ ]* line item
- -----------------------------------------------------------------------------------------------------------------
-------------------
Guaranteed same-day shipment (optional) $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RECEIVING/STOCKING Receiving/Inspecting $ [ ]* each
-------------------
Stocking/recording into inventory $ [ ]* each
-------------------
Inventory storage Reserve Warehouse (Calculated from $ [ ]* per cubic foot/mo
peak day of the month on actual space utilized)
-------------------
Inventory Storage Active Peak (Calculated on cubic foot $ [ ]* per cubic foot/mo
of pick location)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RETURNS/EXCHANGES Returns to Harrison Fulfillment Services $ [ ]* each
-------------------
Exchange processing $ [ ]* each
-------------------
Returns/Exchanges on freighted items additional $ [ ]* each
-------------------
Return to vendor $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
CALL TAGS/TRACERS UPS call tags $ [ ]* each
-------------------
Tracers $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
GIFTS Gift Wrap $ [ ]* each
-------------------
Gift Cards $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
CUSTOMER SERVICE Calls
Marketing lead calls (inbound) $ [ ]* each
-------------------
Non-order calls (inbound) $ [ ]* each minute
-------------------
Inbound Catalog Request (Alloy specified-Live $ [ ]* each minute
Operator)
-------------------
Inbound Catalog Request (Voice Mail) (Customer $ [ ]* each minute
Talk Time)
-------------------
Non-order calls (outbound) $ [ ]* each minute
-------------------
Non-Order correspondence
-------------------
Customer Service Letters $ [ ]* each
Chargebacks $ [ ]* each
NSF Check Collection $ [ ]* each
AR Manual Payments $ [ ]* each
Order Research $ [ ]* each hour
Remote Monitoring $ [ ]* each hour
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 14
Exhibit D/1c
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MAIL ROOM Catalog Request $ [ ]* each
-------------------
Fax transmissions $ [ ]* each
-------------------
Copies $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
FIXED FEES Dedicated Services Management Fee (DSG) $ [ ]* week
-------------------
Administrative fees $ [ ]* week
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE BILLING Invoices Manual (Institutional purchase order billing) $ [ ]* each
-------------------
Credit card statement processing (manual) each
-------------------
Credit card automated processing (Authorizations each
payments)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
PRINT MAIL Marketing lead package (announcements/advances) $ [ ]* each
-------------------
Monthly news letters $ [ ]* each
-------------------
Automated Statement/past due notices $ [ ]* each
-------------------
Automated FTC Notices and Correspondence $ [ ]* each
-------------------
Automated Shipments invoices $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
BANKING Lock Box Check processing US (regular) $ [ ]* each
-------------------
Lock Box Check processing CAN (us funds) $ [ ]* each
-------------------
Canadian Checks drawn on Canadian Bank $ [ ]*
-------------------
PO Box Rental $ [ ]* per year
-------------------
Returned Checks/Recleared Checks and Cash Payments $ [ ]* each
-------------------
Research $ [ ]* per request
-------------------
Deposits and Deposit balancing $ [ ]* each
----------------------------------------------------------------------------
FDIC DDA Maintenance $ [ ]* monthly
-------------------
Additional DDA Statements $ [ ]* each
-------------------
Foreign Collection Expense $ [ ]* each
-------------------
Wire Transfers (debit) $ [ ]* each
-------------------
ASH transfers (debit) $ [ ]* each
-------------------
These fees are ased on charges by the
Federal Reserve, FDIC and/or other
depository institutions and are
subject to change when the respective
expense is changed. You will be
notified promptly of any changes in
prices for these services.
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
OPTIONAL SERVICES Optional Services:
-------------------
Weekly Customer Satisfaction Survey: $ [ ]* per month
-------------------
Quarterly Business Reviews: $ [ ]* per review
-------------------
Upsell: $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
SPECIAL PROJECTS FEES Special Projects Fees:*
Special projects include physical
inventory, customer
service/telemarketing operator
training, special inventory processing
(assembly, rework, refurbishment,
etc.) and close down service
All special projects are estimated by
HFS and must be approved in writing by
client before project commencement.
Labor PER HOUR
-------------------
Office, Regular $ [ ]* hour
-------------------
Office, Overtime $ [ ]* hour
-------------------
Office, Sunday/Holiday $ [ ]* hour
-------------------
Warehouse, Regular $ [ ]* hour
-------------------
Warehouse, Overtime $ [ ]* hour
-------------------
Warehouse, Sunday/Holiday $ [ ]* hour
-------------------
Supervisory, Regular $ [ ]* hour
-------------------
Supervisory, Overtime $ [ ]* hour
-------------------
Supervisory, Sunday/Holiday $ [ ]* hour
-------------------
Consulting Services $ [ ]* hour
-------------------
Executive Consulting Services $ [ ]* day
-------------------
Approved HFS travel $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 15
Exhibit D/1c
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATA BASE SELECTION Initial Customer file/order file load per thousand $ [ ]* per thousand
records
-------------------
Selection Table Set Up (Source Codes) (output id) $ [ ]*
-------------------
Test Selection With No Output $ [ ]*
-------------------
Live Execution of Data Base $ [ ]*
-------------------
Build Negative Option Order File $ [ ]* per order
-------------------
File Downloads $ [ ]* per record
-------------------
Interface to third party data base and drop shippers $ [ ]* per order
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
DATA PROCESSING Data processing support $ [ ]* order
-------------------
EDI Interface transactions (order status, returns, $ [ ]* each
cancels, etc.)
-------------------
Computer programming services $ [ ]* per hour
-------------------
Computer script changes (report distribution changes, $ [ ]* per hour
tape set-up, job changes, etc.)
-------------------
Data Storage:
-------------------
House file customer account record with inactivity >12 $ [ ]* per month
months
-------------------
Order record (includes supplementary detail records) per record
- -----------------------------------------------------------------------------------------------------------------
competed >12 months $ [ ]* per month
per record
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
OTHER Other:
-------------------
Supplies $ [ ]*
-------------------
Materials $ [ ]*
-------------------
Stationery $ [ ]*
-------------------
Special Packaging Materials $ [ ]*
-------------------
Postage and Courier $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
COMMUNICATIONS Remote communications lines and hardware $ [ ]*
Telephone hardware (minimum lines = to number of 800 $ [ ]* each line
numbers)
-------------------
(Regular lines rate is calculated by dividing the peak
hour in a month by 15 calls per hour)
-------------------
(Request lines rate is calculated by dividing the peak
hour in a month by 60 calls per hour)
-------------------
Outbound long distance usage $ [ ]* hour
-------------------
Toll free 800 usage (WATS charges) First 25,000 hours $ [ ]* hour
annually
-------------------
Toll free 800 usage (WATS charges) Hours in excess of $ [ ]* hour
25,000 annually
-------------------
Canadian toll free usage (WATS charges) Cost varies on $ [ ]*
usage & province
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ASSUMPTIONS The following assumptions were made in compiling the transaction rates:
<S> <C> <C> <C>
Orders
------------------ ------------------
(Positive Option) [ ]* Non-Order Call outs [ ]%*
------------------ ------------------
Telephone Percentage [ ]%* Non-Order Calls in [ ]%*
------------------ ------------------
Mail Percentage [ ]%* Catalog Request Phone [ ]%*
------------------ ------------------
Transmitted Percentage [ ]%* Non-Order [ ]%*
------------------ correspondence
Shipments per order [ ]* ------------------
------------------ Call Tags [ ]%*
Items per order [ ]* ------------------
------------------ Tracers [ ]%*
Returns/exchanges to HFS [ ]%* ------------------
------------------ Drop Ship % [ ]%*
Returns Electronic [ ]%* ------------------
------------------
Receiving [ ]%* ------------------
------------------ Catalog Request Mail [ ]%*
Gift Wrap Percentage [ ]%* ------------------
------------------ Advances (Neg. Option) [ ]%*
Gift Card Percentage [ ]%* ------------------
------------------
The pricing was developed to these base assumptions and is subject to
change if the assumptions change. Transaction rates are double for the
following holidays: Christmas Eve, Christmas Day, New Year's Day,
Memorial Day, Easter, July 4th, Labor day, Thanksgiving.
APPROVED CARRIERS Approved Carriers: UPS, USPS, RPS, FEDX
Any Business Partner requesting non-approved carriers will result in
an additional charge of [ ]* a shipment.
Any Business Partner requesting freight shipments will be charged a
per-shipment charge.
</TABLE>
prepared by Richard A. Pelletier
<PAGE> 16
Exhibit D/1d
ALLOY DESIGN, INC.
THREE CONSECUTIVE MONTHS CUMULATIVE ORDERS GREATER THAN 600,000
TRANSACTION RATES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
REVISED DATE 09/28/98 CURRENT DATE 09/29/98
9:00 AM CURRENT TIME 6:45 PM
- ----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ORDERS Phone orders (per minute charge) $ [ ]* each minute
-------------------
Mail Orders/Fax Orders (includes two (2)) line $ [ ]* each
items/order
-------------------
Check Verifications $ [ ]* each
Minimum $[ ]* per month
-------------------
Check Verification and recovery [ ]* each
Minimum $[ ]* per month
-------------------
Check Verification and Check Guarantee $ [ ]* each
Minimum $[ ]* per month
-------------------
Transmittal orders (includes all line items) $ [ ]* each
-------------------
Additional line items per order (Mail Order/Fax Orders $ [ ]* each
Only)
-------------------
Credit card Authorization $ [ ]* each
-------------------
Manual Credit Card Authorization $ [ ]* each
-------------------
Check/Cash/Money Order processing $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
KITTING Includes 3 items per kit $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
SHIPMENTS Catalog Shipments (includes 2 line items/shipment) $ [ ]* shipment
-------------------
Catalog Shipment line items greater than two (2) $ [ ]* line item
- -----------------------------------------------------------------------------------------------------------------
-------------------
Guaranteed same-day shipment (optional) $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RECEIVING/STOCKING Receiving/Inspecting $ [ ]* each
-------------------
Stocking/recording into inventory $ [ ]* each
-------------------
Inventory storage Reserve Warehouse (Calculated from $ [ ]* per cubic foot/mo
peak day of the month on actual space utilized)
-------------------
Inventory Storage Active Peak (Calculated on cubic foot $ [ ]* per cubic foot/mo
of pick location)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
RETURNS/EXCHANGES Returns to Harrison Fulfillment Services $ [ ]* each
-------------------
Exchange processing $ [ ]* each
-------------------
Returns/Exchanges on freighted items additional $ [ ]* each
-------------------
Return to vendor $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
CALL TAGS/TRACERS UPS call tags $ [ ]* each
-------------------
Tracers $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
GIFTS Gift Wrap $ [ ]* each
-------------------
Gift Cards $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
CUSTOMER SERVICE Calls
Marketing lead calls (inbound) $ [ ]* each
-------------------
Non-order calls (inbound) $ [ ]* each minute
-------------------
Inbound Catalog Request (Alloy specified-Live $ [ ]* each minute
Operator)
-------------------
Inbound Catalog Request (Voice Mail) (Customer $ [ ]* each minute
Talk Time)
-------------------
Non-order calls (outbound) $ [ ]* each minute
-------------------
Non-Order correspondence
-------------------
Customer Service Letters $ [ ]* each
Chargebacks $ [ ]* each
NSF Check Collection $ [ ]* each
AR Manual Payments $ [ ]* each
Order Research $ [ ]* each hour
Remote Monitoring $ [ ]* each hour
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 17
Exhibit D/1d
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MAIL ROOM Catalog Request $ [ ]* each
-------------------
Fax transmissions $ [ ]* each
-------------------
Copies $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
FIXED FEES Dedicated Services Management Fee (DSG) $ [ ]* week
-------------------
Administrative fees $ [ ]* week
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE BILLING Invoices Manual (Institutional purchase order billing) $ [ ]* each
-------------------
Credit card statement processing (manual) each
-------------------
Credit card automated processing (Authorizations each
payments)
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
PRINT MAIL Marketing lead package (announcements/advances) $ [ ]* each
-------------------
Monthly news letters $ [ ]* each
-------------------
Automated Statement/past due notices $ [ ]* each
-------------------
Automated FTC Notices and Correspondence $ [ ]* each
-------------------
Automated Shipments invoices $ [ ]* each
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
BANKING Lock Box Check processing US (regular) $ [ ]* each
-------------------
Lock Box Check processing CAN (us funds) $ [ ]* each
-------------------
Canadian Checks drawn on Canadian Bank $ [ ]*
-------------------
PO Box Rental $ [ ]* per year
-------------------
Returned Checks/Recleared Checks and Cash Payments $ [ ]* each
-------------------
Research $ [ ]* per request
-------------------
Deposits and Deposit balancing $ [ ]* each
----------------------------------------------------------------------------
FDIC DDA Maintenance $ [ ]* monthly
-------------------
Additional DDA Statements $ [ ]* each
-------------------
Foreign Collection Expense $ [ ]* each
-------------------
Wire Transfers (debit) $ [ ]* each
-------------------
ASH transfers (debit) $ [ ]* each
-------------------
These fees are based on charges by the
Federal Reserve, FDIC and/or other
depository institutions and are
subject to change when the respective
expense is changed. You will be
notified promptly of any changes in
prices for these services.
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
OPTIONAL SERVICES Optional Services:
-------------------
Weekly Customer Satisfaction Survey: $ [ ]* per month
-------------------
Quarterly Business Reviews: $ [ ]* per review
-------------------
Upsell: $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
SPECIAL PROJECTS FEES Special Projects Fees:*
Special projects include physical
inventory, customer
service/telemarketing operator
training, special inventory processing
(assembly, rework, refurbishment,
etc.) and close down service
All special projects are estimated by
HFS and must be approved in writing by
client before project commencement.
Labor PER HOUR
-------------------
Office, Regular $ [ ]* hour
-------------------
Office, Overtime $ [ ]* hour
-------------------
Office, Sunday/Holiday $ [ ]* hour
-------------------
Warehouse, Regular $ [ ]* hour
-------------------
Warehouse, Overtime $ [ ]* hour
-------------------
Warehouse, Sunday/Holiday $ [ ]* hour
-------------------
Supervisory, Regular $ [ ]* hour
-------------------
Supervisory, Overtime $ [ ]* hour
-------------------
Supervisory, Sunday/Holiday $ [ ]* hour
-------------------
Consulting Services $ [ ]* hour
-------------------
Executive Consulting Services $ [ ]* day
-------------------
Approved HFS travel $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 18
Exhibit D/1d
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
DATA BASE SELECTION Initial Customer file/order file load per thousand $ [ ]* per thousand
records
-------------------
Selection Table Set Up (Source Codes) (output id) $ [ ]*
-------------------
Test Selection With No Output $ [ ]*
-------------------
Live Execution of Data Base $ [ ]*
-------------------
Build Negative Option Order File $ [ ]* per order
-------------------
File Downloads $ [ ]* per record
-------------------
Interface to third party data base and drop shippers $ [ ]* per order
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
DATA PROCESSING Data processing support $ [ ]* order
-------------------
EDI Interface transactions (order status, returns, $ [ ]* each
cancels, etc.)
-------------------
Computer programming services $ [ ]* per hour
-------------------
Computer script changes (report distribution changes, $ [ ]* per hour
tape set-up, job changes, etc.)
-------------------
Data Storage:
-------------------
House file customer account record with inactivity >12 $ [ ]* per month
months
-------------------
Order record (includes supplementary detail records) per record
- -----------------------------------------------------------------------------------------------------------------
competed >12 months $ [ ]* per month
per record
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
OTHER Other:
-------------------
Supplies $ [ ]*
-------------------
Materials $ [ ]*
-------------------
Stationery $ [ ]*
-------------------
Special Packaging Materials $ [ ]*
-------------------
Postage and Courier $ [ ]*
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
COMMUNICATIONS Remote communications lines and hardware $ [ ]*
Telephone hardware (minimum lines = to number of 800 $ [ ]* each line
numbers)
-------------------
(Regular lines rate is calculated by dividing the peak
hour in a month by 15 calls per hour)
-------------------
(Request lines rate is calculated by dividing the peak
hour in a month by 60 calls per hour)
-------------------
Outbound long distance usage $ [ ]* hour
-------------------
Toll free 800 usage (WATS charges) First 25,000 hours $ [ ]* hour
annually
-------------------
Toll free 800 usage (WATS charges) Hours in excess of $ [ ]* hour
25,000 annually
-------------------
Canadian toll free usage (WATS charges) Cost varies on $ [ ]*
usage & province
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ASSUMPTIONS The following assumptions were made in compiling the transaction rates:
<S> <C> <C> <C>
Orders
------------------ ------------------
(Positive Option) [ ]* Non-Order Call outs [ ]%*
------------------ ------------------
Telephone Percentage [ ]%* Non-Order Calls in [ ]%*
------------------ ------------------
Mail Percentage [ ]%* Catalog Request Phone [ ]%*
------------------ ------------------
Transmitted Percentage [ ]%* Non-Order [ ]%*
------------------ correspondence
Shipments per order [ ]* ------------------
------------------ Call Tags [ ]%*
Items per order [ ]* ------------------
------------------ Tracers [ ]%*
Returns/exchanges to HFS [ ]%* ------------------
------------------ Drop Ship % [ ]%*
Returns Electronic [ ]%* ------------------
------------------
Receiving [ ]%* ------------------
------------------ Catalog Request Mail [ ]%*
Gift Wrap Percentage [ ]%* ------------------
------------------ Advances (Neg. Option) [ ]%*
Gift Card Percentage [ ]%* ------------------
------------------
The pricing was developed to these base assumptions and is subject to
change if the assumptions change. Transaction rates are double for the
following holidays: Christmas Eve, Christmas Day, New Year's Day,
Memorial Day, Easter, July 4th, Labor day, Thanksgiving.
APPROVED CARRIERS Approved Carriers: UPS, USPS, RPS, FEDX
Any Business Partner requesting non-approved carriers will result in
an additional charge of [ ]* a shipment.
Any Business Partner requesting freight shipments will be charged a
per-shipment charge.
</TABLE>
prepared by Richard A. Pelletier
<PAGE> 19
ALLOY DESIGNS, INC.
EXHIBIT H
AMORTIZATION OF TRANSACTION SAVINGS AND FIXED ASSET ADDITIONS
TRANSACTION RATE CHARGES: In the event of a termination of this
agreement the difference in transaction rates charged via the second amendment
(schedules D/1a, D/1b, D/1c and D/1d) and the prior transaction rate schedule
(D) multiplied by the actual transactions for the period August 8, 1998 through
July 31, 1999, shall be amortized on a straight-line basis. The following
additional points are to be incorporated into this amoritization.
* Amortization period to be four years (from August 1, 1999 through July 31,
2003).
* For purposes of the calculation of the transaction rate savings, Exhibit D
telephone charges are defined to be $[ ]* per minute. Calls on the catalog
request line are defined to be $[ ]* /minute.
* For purposes of the calculation of the transaction rate savings for catalog
request calls, the difference between the rate charged and the $[ ]*
/minute (defined rate for Schedule D) will be multiplied by actual
transactions (minutes) billed then multiplied by [ ]*%. (Only [ ]*% of the
savings will be included in the calculation of the amount to be
amortized.).
Regarding Additions:
* Additions will be amortized over the remaining life of the contract on a
straight-line basis.
ESTIMATED VALUE OF PRESENT CONTRACT CHANGES. This is an example to
demonstrate the calculation of buy-out cost to Alloy in the event of a contract
change. (Note that while the example below assumes a cost per order for
calculation purposes, the actual calculation will be based on the individual
transaction components of the bill).
<PAGE> 20
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Time Period Total Orders Cost/Order Old Cost/Order New Difference Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
June-Jan [ ]* $[ ]* $[ ]* $[ ]* $[ ]*
- -------------------------------------------------------------------------------------------
Feb-July 99 [ ]* $[ ]* $[ ]* $[ ]* $[ ]*
- -------------------------------------------------------------------------------------------
TOTAL [ ]* $[ ]*
- -------------------------------------------------------------------------------------------
</TABLE>
Estimated Additions to support Alloy Designs growth.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Additions Timing Cost
- ----------------------------------------------------------------------------
<S> <C> <C>
Call Center Seats (50) Summer 1999 $[ ]*
- ----------------------------------------------------------------------------
DC-packing line diverter, OH scan, return Summer 1999 $[ ]*
lines
- ----------------------------------------------------------------------------
Call Center Seats (50) Summer 2000 $[ ]*
- ----------------------------------------------------------------------------
</TABLE>
TRANSACTION SAVINGS/ADDITION AMORTIZATION SCHEDULE
This schedule is for example only; the value of contract proposal to be
calculated will be based on actual transaction billings for the period from
contract extension through July 1999, Amortization to be done on a monthly
basis (versus the half year that is shown).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
DATE INVESTMENTS AMORTIZATION UNAMORTIZED BALANCE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Transaction Savings Period prior $[ ] $[ ] $[ ]
to 7/99
- --------------------------------------------------------------------------------------------
Additions prior 7/99 $[ ]* $[ ]* $[ ]*
- --------------------------------------------------------------------------------------------
Jan 2000 $[ ]* $[ ]* $[ ]*
- --------------------------------------------------------------------------------------------
July 2000 $[ ]* $[ ]* $[ ]*
- --------------------------------------------------------------------------------------------
Jan 2001 $[ ]* $[ ]* $[ ]*
- --------------------------------------------------------------------------------------------
July 2001 $[ ]* $[ ]* $[ ]*
- --------------------------------------------------------------------------------------------
Jan 2002 $[ ]* $[ ]* $[ ]*
- --------------------------------------------------------------------------------------------
July 2002 $[ ]* $[ ]* $[ ]*
- --------------------------------------------------------------------------------------------
Jan 2003 $[ ]* $[ ]* $[ ]*
- --------------------------------------------------------------------------------------------
July 2003 $[ ]* $[ ]* $[ ]*
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
Alloy Online, Inc. has omitted from this Exhibit 10.6 portions of the Agreement
for which Alloy Online, Inc. has requested confidential treatment from the
Securities and Exchange Commission. The portions of the Agreement for which
confidential treatment has been requested have been filed separately with the
Securities and Exchange Commission. Such omitted portions have been marked with
an asterisk.
EXHIBIT 10.6
[iName LOGO] CONFIDENTIAL
Agreement between Alloy Designs, Inc.
and iName, a Division of GlobeComm, Inc.
Agreement made this 19th day of June, 1998 ("Effective Date") by and between
Alloy ("Alloy"), a Delaware corporation with a principal place of business at
115 W. 30th St., Suite 304, New York, NY 10001and iName, a division of
GlobeComm, Inc., a Delaware corporation having its principal place of business
at 11 Broadway, Suite 660, New York, NY 10004 ("iName").
1.0 TERM
1.1 TERM. The Term of this Agreement shall be for a period of six
(6) months commencing on the Effective Date, with automatic
successive six (6) month renewals. Either party may cancel
this Agreement with written notice thirty (30) days prior to
the start of any new term.
1.2 CONTINUATION OF SERVICE. In the event this Agreement expires
or terminates, iName will continue to provide support services
for individuals who have registered for Alloy's Alloymail.com
e-mail service ("Users") during a 60-day transitionary period,
unless a shorter transitionary period is mutually agreed upon.
During such transitionary period iName shall transfer all User
data to Alloy or a third party chosen by Alloy to enable Alloy
or such third party to continue providing comparable email
service to these Users.
2.0 iNAME COMMITMENTS
2.1. EMAIL TRANSFER: iName will receive and incorporate all Alloy
existing Users' email addresses and passwords and all Inbox
mail from such Users.
2.2. DESIGN AND OPERATION OF EMAIL SITE. iName shall design with
Alloy's input and final approval a fully co-branded web site
offering email services ("Email Site") for Alloy which shall
have the "look and feel" of the Alloyonline(TM) Web Site
("Alloy Site") with the appropriate iName logo, trademark and
copyright notices. The Email Site shall be hosted on iName's
servers and shall integrate with the Alloy Site such that
Internet users signing up for email services at the Email Site
("Users") will be able to seamlessly travel between the Alloy
Site and the Email Site.
2.3. INFRASTRUCTURE. The Email Site shall be hosted on iName's
state-of-the-art fully redundant, multi-homed server network.
2.4. EMAIL SITE FEATURES. The Email Site shall have: i) a
fully-automated registration area where Users can sign-up for
web-based email services; ii) a log-in portal where Users can
access their accounts; iii) personalized web mail box
accounts; iv) an automated email customization center allowing
Users flexibility to modify personal information and customize
their email functionality at any time; v) an automated
customer support center; and vi) an area where Users can
sign-up for additional value-added email services. The Alloy
Site navigation bar will appear
1 of 5
<PAGE> 2
[iName LOGO] CONFIDENTIAL
throughout the Email Site enabling Users to access the Alloy
Site from their web mail box and other sections of the Email
Site.
2.5. EMAIL SERVICES. Users will have access to web-based email upon
signup, allowing them to send and receive email from the Email
Site.
2.6. VALUE-ADDED SERVICES. Users shall have the option of
purchasing or subscribing to additional value-added email
services as soon as they are available to other users in the
iName partner network including, but not limited to, email
forwarding, POP email services, email to fax, email to pager,
email virus scanning, email vacation notices, and language
translation.
2.7. EMAIL ADDRESS. Users will be able to signup for an email
address at the domain name alloymail.com
2.8. CONTRACTUAL RESPONSIBILITY. iName shall enter into contractual
relationships with Users for the provision of Email Services.
iName shall be solely responsible for the billing and
collection of revenues relating to Email Services. iName shall
ensure in its terms and conditions that Users understand that
iName, and not Alloy, is responsible for all obligations with
respect to the support of Email Services. To the extent that
Alloy subsequently assumes responsibility for operating the
service Alloy will assume contractual obligation for the Users
future email services and indemnify iName in a manner similar
to iName's indemnification herein for faults occurring while
Alloy or its designated party is running the service.
2.9. LOGIN PORTAL. iName will provide an email login portal to
Alloy that Alloy can place on the pages of the Alloy Site.
2.10. ACCEPTABLE USE POLICY. iName will strictly enforce the
Acceptable Use Policy contained in the iName Service Agreement
which prohibits the sending of unsolicited or harassing
emails.
2.11. CUSTOMER SUPPORT. iName, and not Alloy, shall be solely
responsible for providing support services to Users. Support
services shall include, but are not limited to:
ONLINE SUPPORT: iName shall maintain up-to-date support
information at the Email Site and offer Users automated
support technology including but not limited to personalized
email client setup screens and an automatic password
generation facility.
TELEPHONE SUPPORT: iName shall provide telephone customer
support during iName's normal business hours.
EMAIL SUPPORT: iName shall provide customer support via email
seven days per week.
2.12. USERREGISTRATION DATA. iName shall provide Alloy via email
with its choice of weekly or daily real-time reports
containing registration data for all Users who sign-up for
service at the Email Site. Such data transfer typically takes
2 - 4
2 of 5
<PAGE> 3
[iName LOGO] CONFIDENTIAL
weeks to implement from the launch date but once implemented
all historic data will be transferred along with the current
ongoing data. iName shall not sell or otherwise provide User
contact information or data specifically identifying any User
to any third party without the express written permission of
Alloy.
2.13. PRIVACY. iName shall not monitor or disclose the contents of
Users' private communications unless required to do so by law
or in the good faith belief that such action is necessary to
protect and defend iName's rights or property, or under
exigent circumstances to protect the personal safety of its
customers or the public.
3.0 ALLOY COMMITMENTS
3.1 LINKS. Alloy shall place on the Alloy Site a prominent link to
the Email Site including but not limited to an email log-in
portal on the home page "above the fold" and a "Free Email"
button on the Alloy Site navigation bar.
4.0 ECONOMICS
4.1 SET-UP FEE. In consideration for iName building the Email
Site, Alloy shall pay iName a set-up fee of [ ]* dollars
($[ ]*) following launch of the Email Site.
4.2 NET ADVERTISING FEES. iName shall be responsible for the sale
of the banner inventory at the Email Site. At Alloy's option,
it can elect to assume responsibility for selling the banner
advertising inventory. If it makes such election it will allow
iName to complete ad programs previously sold prior to such
date. If excess banner advertising inventory remains, it shall
be used to promote the Email Site and the Alloy Site in
similar proportion. In addition, either party may sell
non-banner advertising or sponsorships on the Email Site,
provided that all such other advertising or sponsorships shall
be subject to the approval of the other party, which shall not
be unreasonable withheld. "Net Advertising Fees" shall be
defined as the gross amounts actually collected by either
iName or Alloy for the sale of advertising, minus the amount
of sales and agency commissions (not to exceed [ ]*%), credits
and refunds. Subject to Section 4.4, all Net Advertising Fees
shall be calculated monthly and split [ ]* between iName and
Alloy. The shared Net Advertising Fees and Net Advertising
Fees receivable shall be reported by the collecting party to
the non-collecting party 30 days following the end of each
month. Net Advertising Fees will be paid to the non-collecting
party within 30 days at the end of each quarter.
4.3 NET SERVICES REVENUE. In addition to sharing Net Advertising
Fees [ ]*, iName will split [ ]* with Alloy all Net
Services Revenue iName collects from the Email Site Subject to
Section 4.4. "Net Services Revenue" is defined as revenue
collected from the sale of Value-Added Email Services and any
other services at the Email Site by iName, less any User
credits or refunds and any iName direct out-of-pocket costs to
unaffiliated third parties in connection with such services.
Net Services Revenue shall be calculated monthly and paid 30
days following the end of each month.
4.4 ALLOY PAYMENTS. Alloy will pay to iName a monthly fee of
[ ]* dollars ($[ ]*) for operating the Email Site. All Net
Advertising Fees and Net Services
3 of 5
<PAGE> 4
[iName LOGO] CONFIDENTIAL
Revenue generated in a month up to $[ ]* will first be paid
to Alloy as reimbursement for the monthly fee. Any amounts
over and above $[ ]* generated in a month will be split
[ ]* between iName and Alloy as described in Sections 4.2
and 4.3. Alloy's payments to iName will be due on a quarterly
basis on the 15th day of the second month of the quarter and
will cover the three months of the quarter.
4.5 PAYMENTS. All payments due shall be made 30 days after the end
of each month during the Term for payments accrued during such
month. With all payments, the paying party shall provide the
recipient party with reports containing information reasonably
satisfactory to the recipient to verify the paying party's
compliance with the provisions of this Section 4.0.
4.6 RIGHT TO AUDIT. The parties agree to allow each other to
perform audits of its records to determine compliance with its
obligations pursuant to this Section 4.0, provided that the
individual conducting the audit and the party requesting the
audit agree not to disclose any confidential information
revealed in the course of the audit. Any audit shall be
conducted during regular business hours at the offices of the
party being audited and shall not unreasonably interfere with
its business activities. Audits may be performed no more
frequently than twice per year and the party requesting the
audit shall give the other at least thirty (30) days' prior
written notice of each audit.
5.0 GENERAL
5.1 INDEMNIFICATION. iName shall defend, hold harmless, and
indemnify Alloy from any claims, losses, and expenses,
including reasonable attorney's fees, arising out of iName's
failure to comply with its obligations under this Agreement,
provided that Alloy promptly notifies iName of any iName
failures of which Alloy has knowledge. iName shall not be
responsible hereunder for costs, expenses, or settlements
incurred directly by Alloy after obtaining knowledge of
iName's failure and before notifying iName of same and giving
iName reasonable time to correct such failures where
reasonably feasible.
5.2 USER DATA OWNERSHIP. [
]*.
In the event this Agreement expires or terminates iName will
transfer to Alloy or Alloy's designated third party all User
Data in iName's possession at such time in accordance with the
process described in Section 1.2 of this Agreement. Upon
request from Alloy, iName will destroy any and all copies of
the User Data, provided that Alloy agrees to preserve its
record of such User Data for no less than four (4) years
following such destruction, and provide copies of any and all
such User Data to iName or a designated third party in the
event a need for such User Data arises out of legal
obligation. In the event that Alloy is unable to provide the
user Data as set forth due to its failure to preserve it,
Alloy shall be liable for any damages incurred by iName due to
it not being able to meet its legal obligations to produce the
User Data, and shall indemnify, defend and hold harmless iName
for any related claims or liability.
5.3 EXCLUSIVITY. Both parties agree not to carry knowingly on any
web property under its control linking to the Email Site, nor
on the Email Site itself, any advertising in any form,
including but not limited to banners, portals, links, buttons,
sponsorship pages, or promotions, from the following [
]*
and from the following [
]*.
4 of 5
<PAGE> 5
[iName LOGO] CONFIDENTIAL
Alloy shall have the right to terminate this agreement in its
sole discretion in the event that iName enters into an
agreement to provide e-mail services to and/or to develop
and/or to improve any service to the following [
]*.
5.4 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement, and supersedes any and all prior agreements between
the parties. The Agreement may be amended only by a writing
signed by both parties.
5.5 EXECUTION BY FACSIMILE. An executed copy of this Agreement
transmitted via facsimile by the executing party and received
via facsimile by the other party shall have the same legal
force as an executed original version of this Agreement.
5.6 NO AGENCY RELATIONSHIP. The relationship created by this
Agreement is that of independent contractor. Nothing in this
Agreement shall be construed to make either party the partner,
agent, employee or representative of the other or grant any
third party any rights hereunder. Neither party has authority
to make any warranties or incur any liabilities or obligations
on behalf of or binding on the other party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the Effective Date.
ALLOY DESIGNS, INC. iNAME, A DIVISION OF GLOBECOMM, INC.
By: /s/ Matt C. Diamond By: /s/ Gary Millin
------------------- ---------------
Name: Matt C. Diamond Name: Gary Millin
Title: President Title: President
Date: 8/28/98 Date: 8/26/98
5 of 5
<PAGE> 1
EXHIBIT 10.7
ONESOFT CORPORATION ALLOY DESIGNS, INC.
ALLOY ONLINE, INC. HAS OMITTED FROM THIS EXHIBIT 10.7 PORTIONS OF THE AGREEMENT
FOR WHICH ALLOY ONLINE, INC. HAS REQUESTED CONFIDENTIAL TREATMENT FROM THE
SECURITIES AND EXCHANGE COMMISSION. THE PORTIONS OF THE AGREEMENT FOR WHICH
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. SUCH OMITTED PORTIONS HAVE BEEN MARKED WITH
AN ASTERISK.
SERVICES AGREEMENT CONTRACT NUMBER 2001-801
- --------------------------------------------------------------------------------
THIS AGREEMENT, is entered into on February 9, 1999 between ONESOFT CORPORATION
(hereinafter "OneSoft" having an office at 7010 Little River Turnpike, Suite
410, Annandale, VA 22003, and ALLOY DESIGNS, INC. (hereinafter "Alloy"), with
its principal office at 115 West 30th Street, Suite 304, New York, NY 10001.
WHEREAS, OneSoft is a service provider; and
WHEREAS, OneSoft thereby offers managed information and communication services
and facilities for its customers under the definitions, terms and conditions set
forth in this Agreement, and as in Scope(s) of Work that may from time to time
be attached, incorporated and/or amended hereto; and
WHEREAS, Alloy will utilize OneSoft's services and its facilities, and will
compensate OneSoft for said services as provided for and defined under this
Agreement and as in Scope(s) of Work that may from time to time be attached,
incorporated and/or amended hereto.
NOW THEREFORE, in consideration of the terms, mutual promises and agreements
contained herein, the parties do hereby agree as follows:
COMMERCE
1. [
]*.
2. OneSoft Commerce Server(TM) product business application objects support
flexible product display, shopping cart processing, and order processing.
OneSoft will work with Alloy to provide direction and additional alternatives or
modifications to these objects so that Alloy has the flexibility needed to
present product offerings effectively to its consumers.
4. OneSoft will provide additional order notification to Alloyonline.com
customers via email and on-line. Once an order is placed, customers will be
notified via email that their order is being processed. In order for customers
to check their order online they will need to create an account and log into
that account. OneSoft will set up such accounts at the direction of Alloy.
1
<PAGE> 2
ONESOFT CORPORATION ALLOY DESIGNS, INC.
CHAT
1. OneSoft's [ ]* chat application currently provides administrative
monitoring and other features that are enabled when users and administrators are
logged into the system. OneSoft will provide more instruction and documentation
regarding the current features and functionality as requested by Alloy.
2. The Chat interface can be customized as necessary to meet the requirements
of the AlloyOnline.com users. OneSoft will work with Alloy to provide the
interface and features to this application that best meet the goals of Alloy,
subject to reasonable commercial limitations.
3. Celebrity Chat has been mocked-up per Alloy's requirements. This
functionality will be available for Alloy to use for its Celebrity chat events.
Additional monitoring functionality will be added to the [ ]* Chat application
in the coming weeks and months.
COMMUNITY FUNCTIONALITY / PERSONALIZATION
1. OneSoft will work with Alloy to determine the way in which users will
register and log into their AlloyOnline.com accounts. Once Alloy is comfortable
with the user account creation and log in procedures, account registration and
authentication features of OneSoft's software will be activated.
2. OneSoft will work with Alloy to determine the type of user and content
profile data required to support personalized product offerings and
advertisements on the AlloyOnline.com system. Once users and content have been
profiled, OneSoft will activate personalization features of OneSoft's product to
serve targeted ads and product offerings.
3. [
]*.
CO-LOCATION
1. [
]*.
2. OneSoft will provide monthly AlloyOnline.com system traffic statistic
reports by page and section to Alloy's reasonable specifications.
3. OneSoft will provide tape management and backup services to Alloy's
reasonable specifications for the AlloyOnline.com system.
4. OneSoft will provide 24/7 monitoring of the AlloyOnline.com systems.
SERVICE/COST AGREEMENT
1. [ ]*.
2. This Services Agreement will be for a period of one (1) year from the date
of its execution.
3. OneSoft will provide maintenance to ensure that the above functionality is
working correctly and to acceptable commercial standards.
2
<PAGE> 3
ONESOFT CORPORATION ALLOY DESIGNS, INC.
4. In the event of non-renewal of this Service Agreement, OneSoft will use
reasonable best efforts to ensure the non-disruptive, safe and secure
transfer of user data.
5. [
]*.
6. [
]*.
7. OneSoft will retain rights to all software object and source code that it
provides and creates (all third-party software provided by Alloy will of
course remain as Alloy Designs property).
ADDITIONAL SERVICES
OneSoft shall remain available to perform modifications and updates to the
System on a time and material basis. Such additional services will be available
as follows:
o Alloy shall inform OneSoft of a desired change or modification and OneSoft
will complete a project change request form with an estimate as to the
level of effort and fee.
o Alloy will sign the form to approve OneSoft to perform the work.
[
]*.
CONFIDENTIAL INFORMATION
1. ACKNOWLEDGMENT OF CONFIDENTIALITY. EACH PARTY HEREBY ACKNOWLEDGES THAT IT
MAY BE EXPOSED TO CONFIDENTIAL INFORMATION BELONGING TO OR SUPPLIED BY THE
OTHER PARTY OR RELATING TO ITS AFFAIRS INCLUDING, WITHOUT LIMITATION,
SOFTWARE, BUSINESS PLANS AND PROCEDURES, THE TERMS OF THIS AGREEMENT, THE
CLIENT GUIDE, AND OTHER CONFIDENTIAL INFORMATION (HEREINAFTER REFERRED TO
AS "CONFIDENTIAL INFORMATION"). CONFIDENTIAL INFORMATION DOES NOT INCLUDE
(a) INFORMATION ALREADY KNOWN OR INDEPENDENTLY DEVELOPED BY THE RECIPIENT
OUTSIDE THE SCOPE OF THIS PROJECT; (b) INFORMATION IN THE PUBLIC DOMAIN
THROUGH NO WRONGFUL ACT OF THE RECIPIENT, OR (c) INFORMATION RECEIVED BY
THE RECIPIENT FROM A THIRD PARTY WHO WAS FREE TO DISCLOSE IT.
2. COVENANT NOT TO DISCLOSE. WITH RESPECT TO THE OTHER PARTY'S
CONFIDENTIAL INFORMATION, AND EXCEPT AS EXPRESSLY AUTHORIZED HEREIN OR AS
REQUIRED BY A COURT OF COMPETENT JURISDICTION, THE RECIPIENT HEREBY AGREES
THAT DURING THE TERM HEREOF, AND AT ALL TIMES THEREAFTER, IT SHALL
COMMERCIALIZE OR DISCLOSE SUCH CONFIDENTIAL INFORMATION TO ANY PERSON OR
ENTITY, EXCEPT TO EMPLOYEES HAVING A "NEED TO KNOW" (AND WHO ARE THEMSELVES
BOUND BY SIMILAR NONDISCLOSURE RESTRICTIONS), AND TO SUCH OTHER RECIPIENTS
AS THE OTHER PARTY MAY APPROVE IN WRITING. IN NO EVENT SHALL EITHER PARTY
ATTEMPT TO DECOMPILE, DISASSEMBLE OR REVERSE ENGINEER THE OTHER PARTY'S
CONFIDENTIAL OR PROPRIETARY INFORMATION AND ANY INFORMATION DISCOVERED IN
VIOLATION OF THIS PROVISION SHALL BE TREATED AS CONFIDENTIAL INFORMATION
BELONGING EXCLUSIVELY TO THE OTHER PARTY. EACH PARTY SHALL USE AT LEAST THE
SAME DEGREE OF CARE IN SAFEGUARDING THE OTHER PARTY'S CONFIDENTIAL
INFORMATION AS IT USES IN SAFEGUARDING ITS OWN CONFIDENTIAL INFORMATION,
BUT IN NO EVENT SHALL LESS THAN DUE DILIGENCE AND CARE BE EXERCISED.
CHOICE OF LAW
THIS AGREEMENT SHALL BE INTERPRETED, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE COMMONWEALTH OF VIRGINIA, EXCLUSIVE
OF ITS CHOICE OF LAW RULES. ANY PROCEEDING OR DISPUTE RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY, SHALL BE INITIATED AND MAINTAINED IN
THE COURT SYSTEM OF SAID DESIGNATED STATE.
3
<PAGE> 4
ONESOFT CORPORATION ALLOY DESIGNS, INC.
WARRANTY DISCLAIMER
ONESOFT MAKES NO WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE
SERVICES RENDERED OR THE RESULTS OBTAINED FROM ONESOFT'S WORK, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. IN NO EVENT SHALL ONESOFT OR ITS SUPPLIERS BE LIABLE FOR: (1) ANY
DIRECT, INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED
OF THE POSSIBILITY THEREOF, AND REGARDLESS OF WHETHER ANY CLAIM IS BASED UPON
ANY AGREEMENT, NEGLIGENCE, WARRANTY, STRICT LIABILITY OR OTHER LEGAL OR
EQUITABLE THEORY; OR (2) ANY AMOUNTS OF DIRECT DAMAGES IN EXCESS OF THE
AGGREGATE OF THE FEES RECEIVED BY ONESOFT FROM ALLOY HEREUNDER, NOTWITHSTANDING
ANY FAILURE OF ESSENTIAL PURPOSES OF ANY LIMITED REMEDY.
LIABILITIES
ONESOFT SHALL NOT BE LIABLE FOR ANY AMOUNT EXCEEDING THE AMOUNT PAID BY
ALLOY FOR SERVICES DURING THE THIRTY (30) DAYS PRIOR TO THE EVENT GIVING RISE TO
THE ALLEGED CLAIM. EXCEPT FOR INDEMNIFICATION CLAIMS OR DISCLOSURE OF
CONFIDENTIAL INFORMATION, NEITHER PARTY SHALL BE LIABLE, WHETHER IN CONTRACT OR
TORT LAW (INCLUDING NEGLIGENCE) OR OTHERWISE, FOR ANY INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST SAVINGS, PROFIT OR BUSINESS INTERRUPTION
EVEN IF NOTIFIED IN ADVANCE OF SUCH POSSIBILITY) ARISING OUT OF, OR PERTAINING
TO THE SUBJECT MATTER OF THIS AGREEMENT, AND/OR ANY SCOPE(S) OF WORK ATTACHED
HERETO.
MODIFICATION, WAIVER & MISCELLANEOUS
This document, as well as other Scope(s) of Work that may be legally
attached hereto in the future, which are hereby incorporated by reference in
their entirety, constitute the entire agreement between the parties with respect
to the subject matter hereof, and supersede all other communications, whether
written or oral. This Agreement, and/or any Scope(s) of Work attached hereto,
may be modified or amended only by a writing signed by both parties, which may
be in the form of a Scope of Work. Any provision hereof found by a tribunal of
competent jurisdiction to be illegal or unenforceable shall be automatically
conformed to the minimum requirements of law and all other provisions shall
remain in full force and effect. Waiver of any provision hereof in one instance
shall not preclude enforcement thereof on future occasions. Headings are for
reference purposes only and have no substantive effect.
IN WITNESS WHEREOF, for adequate consideration and intending to be legally
bound, the parties hereto have caused this Agreement to be executed by their
duly authorized representatives.
ONESOFT CORPORATION ALLOY DESIGNS, INC.
By: By:
- --------------------------------- ----------------------------------
Name: Name:
- --------------------------------- ----------------------------------
Title: Title:
- --------------------------------- ----------------------------------
Date: Date:
- --------------------------------- ----------------------------------
4
<PAGE> 1
Alloy Online, Inc. has omitted from this Exhibit 10.8 portions of the Agreement
for which Alloy Online, Inc. has requested confidential treatment from the
Securities and Exchange Commission. The portions of the Agreement for which
confidential treatment has been requested have been filed separately with the
Securities and Exchange Commission. Such omitted portions have been marked with
an asterisk.
EXHIBIT 10.8
MAILING LIST PURCHASE AGREEMENT
This Mailing List Purchase Agreement (the "Agreement") is made as of
February 22, 1999 by and between Alloy Designs, Inc., a Delaware corporation
("Alloy"), and Just Nikki, Inc. a Delaware corporation (the "Seller").
WHEREAS, the Seller has developed a mailing list of names and addresses
of potential customers in connection with its Just Nikki catalogs (the "Mailing
List"); and
WHEREAS, the Seller has decided to discontinue its Just Nikki catalog
business; and
WHEREAS, the Seller is willing to sell a single copy of the Mailing
List and Alloy is willing to buy a single copy the Mailing List on a
non-exclusive basis.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. PURCHASE AND SALE OF MAILING LIST. Subject to the terms and
conditions of this Agreement, the Seller hereby agrees to sell to Alloy, and
Alloy hereby agrees to purchase from the Seller, the Mailing List, free and
clear of all liens, claims or encumbrances.
2. PURCHASE PRICE. In full consideration for the purchase and sale of
the Mailing List contemplated by this Agreement, Alloy shall pay the Seller the
sum of [ ]* ($[ ]*) (the "Purchase Price"). The Purchase Price will be
payable by Alloy to the Seller upon delivery of the Mailing List to Alloy by the
Seller in computer or machine readable form reasonably acceptable to Alloy.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents
and warrants to Alloy as follows:
(a) ORGANIZATION AND QUALIFICATION. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b) CORPORATE POWER AND AUTHORITY. The Seller has the corporate power
and authority to execute, deliver and perform this Agreement and the other
documents and instruments contemplated hereby. The execution, delivery and
performance of this Agreement and the documents contemplated hereby and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized and approved by the Seller. This Agreement and the other documents
and instruments to be executed and delivered by the Seller have been duly
executed and delivered by, and constitute the legal, valid and binding
obligations of, the Seller enforceable against the Seller in accordance with
their terms.
(c) VALIDITY, ETC. Neither the execution and delivery of this Agreement
and the other documents and instruments contemplated hereby, the consummation of
the transactions contemplated hereby or thereby, nor the performance of this
Agreement and such other
<PAGE> 2
agreements in compliance with the terms and conditions hereof and thereof will
(i) violate, conflict with or result in any breach of any certificate of
incorporation, bylaw, judgment, decree, order, statute or regulation applicable
to the Seller, (ii) require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority,
(iii) result in a breach of or default under any law, rule or regulation or any
judgment, decree, order, governmental permit, license or order, or any of the
provisions of any material agreement or other instrument to which the Seller is
a party, (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Seller, or (v) result in the creation of any lien,
claim or encumbrance upon the Mailing List.
(d) LITIGATION. There is no action, suit, claim, arbitration,
proceeding or investigation pending or, to the Seller's knowledge, threatened
against or affecting the Seller, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, relating to the Mailing
List.
(e) MAILING LIST. The Seller owns the Mailing List free of all liens,
claims and encumbrances and has the full power and right to sell the Mailing
List to Alloy as set forth in this Agreement. The Mailing List contains a total
of [ ]* names and addresses more or less, of which approximately [ ]* names
and addresses are of persons who made at least one purchase from the Just Nikki
catalog between February 1, 1998 and January 10, 1999 and approximately [ ]*
names and addresses of persons who requested a copy of the Just Nikki catalog
between such dates.
4. REPRESENTATIONS AND WARRANTIES OF ALLOY. Alloy represents and
warrants to the Seller as follows:
(a) ORGANIZATION. Alloy is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware.
(b) POWER AND AUTHORITY. Alloy has the corporate power and authority to
execute, deliver and perform this Agreement and the other documents and
instruments contemplated hereby. The execution, delivery and performance of this
Agreement and the documents contemplated hereby and the consummation of the
transactions contemplated hereby and thereby have been duly authorized and
approved by Alloy. This Agreement and the other documents and instruments to be
executed and delivered by Alloy have been duly executed and delivered by, and
constitute the legal, valid and binding obligation of Alloy enforceable against
Alloy in accordance with their terms.
(c) VALIDITY, ETC. Neither the execution and delivery of this Agreement
and the other documents and instruments contemplated hereby, the consummation of
the transactions contemplated hereby or thereby, nor the performance of this
Agreement and such other agreements in compliance with the terms and conditions
hereof and thereof will (i) conflict with or result in any breach of any
certificate of incorporation, bylaw, judgment, decree, order, statute or
regulation applicable to Alloy, (ii) require any consent, approval,
authorization or permit of, or
2
<PAGE> 3
filing with or notification to, any governmental or regulatory authority, (iii)
result in a breach of or default under any law, rule or regulation or any
judgment, decree, order, governmental permit, license or order, or any of the
terms, conditions or provisions of any material agreement or other instrument to
which Alloy is a party, or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Alloy.
(d) NON-EXCLUSIVE. Alloy recognizes and agrees that it is purchasing a
single copy of the Mailing List on a non-exclusive basis and, accordingly, that
the Seller may sell the Mailing List to one or more additional buyers other than
Alloy.
(e) USAGE. Alloy agrees to use the Mailing List for internal purposes
only and agrees not to re-sell the Mailing List in the form in which it is
delivered by the Seller to any third party. Buyer further agrees not to use the
Mailing List for any illegal or immoral purpose.
5. FURTHER ASSURANCES. Each of Alloy and the Seller agrees to execute
and deliver such additional instruments and documents as the other party may
reasonably request to confirm and carry out the intent and purposes of this
Agreement.
6. INDEMNITY. Each party agrees to indemnify, defend, and hold the
other party, its officers, directors, employees and shareholders and their
respective successors and assigns from, against and with respect to any claim,
liability, obligation, loss, damage, assessment, judgment, cost and expense
(including, without limitation, reasonable attorneys' and accountants' fees and
other costs and expenses reasonably incurred by them) of any kind or character,
arising out of or relating to any inaccuracy or breach of the representations,
warranties and covenants of that party contained in this Agreement.
7. NOTICES. All notices and other communications required or permitted
to be given hereunder shall be in writing, shall be addressed to the receiving
party's address set forth below or to such other address as a party may
designate by notice hereunder, and shall be either (i) delivered by hand, (ii)
made by telex, telecopy or facsimile transmission, (iii) sent by overnight
courier, or (iv) sent by registered or certified mail, return receipt requested,
postage prepaid:
If to Alloy to: Alloy Designs, Inc.
115 West 30th Street
New York, NY 10001
Facsimile: 212/244-4311
Attention: Matthew C. Diamond
If to the Seller to: Just Nikki, Inc.
________________________
________________________
Facsimile: ____________
Attention: Officer of Just Nikki
3
<PAGE> 4
All notices and other communications hereunder shall be deemed to have
been given either (i) if by hand, at the time of the delivery thereof to the
receiving party at the address of such party set forth above, (ii) if made by
telex, telecopier or facsimile transmission, at the time that receipt thereof
has been acknowledged by electronic confirmation or otherwise, (iii) if sent by
overnight courier, on the next business day following the day such notice is
delivered to the courier service, or (iv) if sent by registered or certified
mail, on the fifth (5th) business day following the day such mailing is made.
8. MISCELLANEOUS.
(a) This Agreement (i) is to be construed and enforced in accordance
with the law of the State of New York without regard to the conflict of laws
principles thereof, (ii) is binding upon and shall inure to the benefit of the
parties hereto and (iii) may be canceled, modified or amended only by a written
instrument executed by both parties hereto.
(b) The terms and provisions of this Agreement may be waived, or
consent for the departure therefrom granted, only by a written document executed
by the party entitled to the benefits of such terms or provisions. No such
waiver or consent shall be deemed to be or shall constitute a waiver or consent
with respect to any other terms or provisions of this Agreement, whether or not
similar. Each such waiver or consent shall be effective only in the specific
instance and for the purpose for which it was given, and shall not constitute a
continuing waiver or consent.
(c) Any legal action or proceeding with respect to this Agreement shall
be brought in the courts of the State of New York or of the United States of
America located in the State of New York. Each of the parties hereto irrevocably
consents to the service of process of any of the aforementioned courts in any
such action or proceeding by the mailing of copies thereof by certified mail,
postage prepaid, to the party at its address set forth in Section 7 hereof.
(d) The headings and captions of the various subdivisions of this
Agreement are for convenience of reference only and shall in no way modify, or
affect the meaning or construction of any of the terms or provisions hereof.
(e) Each of the parties hereto shall pay its own fees and expenses
(including the fees of any attorneys engaged by such party) in connection with
this Agreement and the transactions contemplated hereby whether or not the
transactions contemplated hereby are consummated.
(f) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior oral
or written agreements and understandings relating to the subject matter hereof.
(g) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute a single
agreement,
4
<PAGE> 5
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed and delivered by their respective duly authorized representatives as of
the date first set forth above.
ALLOY DESIGNS, INC.
By: /s/ Matt C. Diamond
-------------------
Name: Matt C. Diamond
Title: C.E.O.
JUST NIKKI, INC.
By: /s/ Ira Kaplan
-------------------
Name: Ira Kaplan
Title: C.F.O.
6
<PAGE> 1
Alloy Online, Inc. has omitted from this Exhibit 10.9 portions of the Agreement
for which Alloy Online, Inc. has requested confidential treatment from the
Securities and Exchange Commission. The portions of the Agreement for which
confidential treatment has been requested have been filed separately with the
Securities and Exchange Commission. Such omitted portions have been marked with
an asterisk.
EXHIBIT 10.9
YAHOO! SHOPPING
INSERTION ORDER
ORDER # SALES CONTACT: Lisa Carrieri
REVISION
TYPE PHONE
DATE 11-18-98 FAX
EMAIL
MERCHANT
Alloy Designs, Inc.
115 West 30th Street, Ste. 304
NY, NY 10001
Ph: 212 244-4307
Fax: 212 244-4311
ADDRESS
Attn: MATT DIAMOND EMAIL
- --------------------------------------------------------------------------------
START DATE: 11/25
POSITION:
Yahoo! Shopping Page:
Apparel/Accessories
Text of Link:
Link to URL:
TOTAL NET COST/MONTH
TOTAL NET COST $[ ]*
Terms: See Billing Instructions
BILLING INSTRUCTIONS
Bill to Customer.
Net 30 from date of invoice.
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS: This insertion order is subject to the terms and
conditions ("Standard Terms") attached hereto as Exhibit A of this Insertion
Order, and such Standard Terms are made a part of this insertion order by
reference. The signatory of this Insertion Order represents that he has read and
agrees to such Standard Terms.
AUTHORIZED BY: _______________________________PHONE:______________DATE:_________
PRODUCTION CONTACT: MATT C. DIAMOND PHONE:______________DATE:_________
---------------------------
PLEASE RETURN TO YAHOO! SALE OPERATIONS DEPT. FAX # 9408)731-3495
Yahoo! Inc.
3420 Central Expressway
Santa Clara, CA 95051
<PAGE> 2
YAHOO! SHOPPING STANDARD MERCHANT TERMS
The following terms and conditions (the "Standard Terms") shall be deemed
to be incorporated into the attached insertion order (the "Insertion Order")
between Yahoo! Inc. ("Yahoo!") and the company indicated on the Insertion Order
("Merchant"). Yahoo! reserves the right, in its sole discretion, to change,
modify, add or remove all or part of the Standard Terms at any time with or
without notice.
1. Merchant shall provide to Yahoo! information relating to Merchant's
products and/or services in accordance with Yahoo!'s specifications. Such
information shall include, without limitation, Merchant's name, product
description, product name, availability, price, any warranty notices and
disclaimers, and, if applicable, return information, size, color, SKU number,
html pages and graphic files (collectively referred to as "Merchant Content").
All html pages provided by Merchant shall be subject to Yahoo!'s approval and
shall conform with Yahoo!'s specifications. Merchant agrees to update all
Merchant Content in accordance with Yahoo!'s specifications. Yahoo! reserves the
right not to post or include any Merchant Content on Yahoo! Shopping and has the
absolute right to reject any URL embodied within any Merchant Content.
2. Yahoo! will host the Merchant Content on Yahoo! services and include the
Merchant Content in the pages set forth on the Insertion Order of Yahoo!'s U.S.
based on-line shopping property (referred to as "Yahoo! Shopping" or the
"Service") commencing on the date set forth on the Insertion Order and, except
as otherwise provided on the Insertion Order, continuing on a monthly basis
thereafter until terminated by either party with no less than thirty (30) days
written notice (the "Term"). Yahoo! is solely responsible for the design,
layout, posting and maintenance of Yahoo! Shopping. Upon termination, Yahoo!
reserves the right to delete from its servers any and all Merchant Content and
other information contained in Merchants account, including but not limited to
order processing information. The Indemnity and Disclaimer of Warranties and
Liabilities provisions of these Standard Terms shall survive any termination.
3. Merchant hereby grants to Yahoo! a worldwide, perpetual, sublicensable
license to use, disclose, display, reproduce and distribute such Merchant
Content and any portions thereof and any derivative works therefrom in any
media, to incorporate Merchant Content into a database, and to display in any
manner the results of search queries and comparisons conducted by users of the
service. Merchant also authorizes Yahoo! to use Merchant Content for purposes of
promoting Merchant's products, Yahoo! or Yahoo! Shopping generally and grants
Yahoo! the right to maintain such Merchant Content on Yahoo! servers during the
Term and to authorize the downloading and printing of such material, or any
portion thereof, by users.
4. Merchant shall pay Yahoo! the monthly fee set forth on the Insertion
Order. All fees are payable in U.S. dollars. Merchant will make the first
payment to Yahoo! on the date that the Merchant Content is first posted on
Yahoo! Shopping and shall make subsequent payments on the first day of every
month thereafter. Late payments shall bear interest at the rate of one percent
(1%) per month (or the highest rate permitted by law, if less). In the event of
any failure
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<PAGE> 3
by Merchant to make payment, Merchant will be responsible for all reasonable
expenses (including attorneys' fees) incurred by Yahoo! in collecting such
amounts. Yahoo! may, upon 30 days prior notice to Merchant alter its fee
schedules.
5. Yahoo! may provide Merchant with access to certain software owned by
Yahoo! (the "Software") to facilitate the maintenance of Merchant Content and
Merchant's access to customer orders and other information. Yahoo! hereby grants
Merchant a non-exclusive, non-transferable license to use the Software in object
code form only on a server controlled by Yahoo! for the sole purpose of
maintaining Merchant's Content, facilitating access to customer orders and other
information on Yahoo! Shopping. Merchant shall not copy the Software or use it
on computers other than a server controlled by Yahoo!. Merchant may not use Web
pages or parts of Web pages generated by means of the Software, other than
content that originates from and is proprietary to Merchant, on any server other
than the servers controlled by Yahoo! without Yahoo!'s express written consent.
Merchant also acknowledges and agrees that the Software is intended for access
and use by means of web browsing software, and that Yahoo! does not commit to
support any particular browsing platform. Yahoo! reserves the right at any time
to revise and modify the Software, release subsequent versions thereof and to
alter features, specifications, capabilities, functions, and other
characteristics of the Software, without notice to Merchant. Merchant shall
receive a password from Yahoo! to provide access to and use of the Software.
Merchant is entirely responsible for any and all activities that occur under
Merchants account and password. Merchant agrees to keep its password
confidential, to allow no other person or company to use its account, and to
notify Yahoo! promptly if Merchant has any reason to believe that the security
of its account has been compromised.
6. Merchant represents and warrants that it
(a) has full power and authority under all relevant laws and
regulations to offer, sell and distribute the goods and services
offered by it, including but not limited to holding all necessary
licenses from all necessary jurisdictions to engage in the
advertising and sale of such goods and services;
(b) will not engage in any activities:
(i) that constitute or encourage a violation of any applicable
law or regulation, including but not limited to the sale of
illegal goods or the violation of export control or
obscenity laws;
(ii) that infringe the rights of any third party, including but
not limited to the intellectual property, business,
contractual, or fiduciary rights of others; and
(iii) that are in any way connected with the transmission of
"junk mail" "spam" or the unsolicited mass distribution of
email, or with any unethical marketing practices.
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<PAGE> 4
7. Yahoo! maintains information about Merchant and the Merchant Content on
Yahoo! servers, including but not limited to Merchant's account registration
information, Merchant's customer order information, sales information, and
clickstream data ("Merchant Information"). Merchant agrees that Yahoo! may use
Merchant Information in aggregate form for marketing or other promotional
purposes. Merchant agrees that Yahoo! may disclose Merchant Information in the
good faith belief that such action is reasonably necessary:
(a) to comply with the law or legal process;
(b) to enforce these Standard Terms; or
(c) to protect the rights or interests of Yahoo! or others; provided,
however, that nothing in this section shall impose a duty on
Yahoo! to make any such disclosures. Merchant also acknowledges
and agrees that Yahoo! may access Merchant's account and its
contents as necessary to identify or resolve technical problems
or respond to complaints about the Service.
8. Customers of Yahoo! Shopping shall place orders on a Yahoo! transaction
page designed and hosted by Yahoo!. Order information, including product,
quantity, shipping address, customer name, email address and credit card
information shall be collected via the Software and retrieved by Merchant from
Yahoo! servers. Merchant shall notify each customer via email within 1 Business
Day after Yahoo! transmits the order information to Merchant whether the order
is confirmed or the order cannot be fulfilled. Merchant shall be solely
responsible for all goods, and services offered by Merchant on Yahoo! Shopping,
including, without limitation billing, shipping and fulfillment of goods and
services, returns and customer service and for any acts or omissions that occur
in connection with Merchant's account or password. Merchant agrees that Yahoo!
may delete customer credit card information from Yahoo! servers 14 days after
Merchant retrieves such information, and may delete all other Merchant
Information from Yahoo! servers at the end of each calendar year. Merchant
agrees to implement adequate security protections to ensure the privacy of
customer information retrieved from Yahoo! servers and Merchant agrees not to
disclose such customer information to any third party or use such information in
any way except for the fulfillment of the customer order.
9. Merchant agrees to indemnify and hold harmless Yahoo!, and its parents,
subsidiaries, affiliates, officers, directors, shareholders, employees and
agents, from any claim or demand, including reasonable attorneys fees, made by
any third party due to or arising out of, any products or services offered,
distributed or sold by Merchant in connection with the Service, any mistake,
error or omission made by merchant, including but not limited to data corruption
and/or wrongful disclosure of customer information, any alleged violation of
these Standard Terms, or any alleged violation of any rights of another,
including but not limited to Merchant's use of any content, trademarks, service
marks, trade names, copyrighted or patented material, or other intellectual
property used by Merchant. Yahoo! reserves the right, at its own expense, to
assume the exclusive defense and control of any matter otherwise subject to
indemnification by Merchant, but doing so shall not excuse Merchant's indemnity
obligations.
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<PAGE> 5
10. DISCLAIMER OF WARRANTIES AND LIABILITIES
THE SERVICE AND SOFTWARE ARE PROVIDED ON AN "AS IS" AND "AS AVAILABLE"
BASIS WITHOUT WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING
BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR NON-INFRINGEMENT. NEITHER THIS AGREEMENT OR ANY DOCUMENTATION
FURNISHED UNDER IT IS INTENDED TO EXPRESS OR IMPLY ANY WARRANTY THAT THE
SERVICES WILL BE UNINTERRUPTED, TIMELY OR ERROR-FREE OR THAT THE SOFTWARE
WILL PROVIDE UNINTERRUPTED, TIMELY OR ERROR-FREE SERVICE. THE SECURITY
MECHANISM INCORPORATED IN THE SOFTWARE HAS INHERENT LIMITATIONS AND
MERCHANT MUST DETERMINE THAT THE SOFTWARE ADEQUATELY MEETS ITS
REQUIREMENTS. MERCHANT ACKNOWLEDGES AND AGREES THAT ANY MATERIAL AND/OR
DATA DOWNLOADED OR OTHERWISE OBTAINED THROUGH THE USE OF THE SERVICE IS
DONE AT ITS OWN RISK AND THAT MERCHANT WILL BE SOLELY RESPONSIBLE FOR ANY
DAMAGES TO ITS COMPUTER SYSTEM OR LOSS OF DATA THAT RESULTS FROM THE
DOWNLOAD OF SUCH MATERIAL AND/OR DATA. YAHOO!, AND ITS PARENTS,
SUBSIDIARIES, AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND
AGENTS, SHALL NOT BE LIABLE, UNDER ANY CIRCUMSTANCES OR LEGAL THEORIES
WHATSOEVER, FOR ANY LOSS OF BUSINESS, PROFITS OR GOODWILL, LOSS OF USE OR
DATA, INTERRUPTION OF BUSINESS, OR FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY CHARACTER, EVEN IF YAHOO! IS AWARE OF THE RISK
OS SUCH DAMAGES, THAT RESULT IN ANY WAY FROM MERCHANT'S USE OR INABILITY TO
USE THE SOFTWARE, OR THAT RESULT FROM ERRORS, DEFECTS, OMISSIONS, DELAYS IN
OPERATION OR TRANSMISSION, OR ANY OTHER FAILURE OF PERFORMANCE OF THE
SOFTWARE. YAHOO!'S LIABILITY TO MERCHANT SHALL NOT, FOR ANY REASON, EXCEED
THE AGGREGATE PAYMENTS ACTUALLY MADE BY MERCHANT TO YAHOO!.
SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF CERTAIN WARRANTIES OR
LIABILITIES, SO SOME OF THE ABOVE EXCLUSIONS MAY NOT APPLY TO YOU.
11. Any notices or communications shall be by electronic mail or in writing
and shall be deemed delivered upon receipt to the party to whom such
communication is directed. If to Yahoo!, such notices shall be addressed to 3420
Central Expressway, Santa Clara, CA 95051. If to Merchant, such notices shall be
addressed to the electronic or mailing address specified on the Insertion Order.
These Standard Terms and the relationship between Merchant and Yahoo! shall be
governed by the laws of the State of California without regard to its conflict
of law provisions. Merchant and Yahoo! agree to submit to the personal and
exclusive jurisdiction of the Superior Court of the "State of California for the
County of Santa Clara or the United States District Court
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<PAGE> 6
for the Northern District of California. Yahoo!'s failure to exercise or enforce
any right or provision of these Standard Terms shall not constitute a waiver of
such right or provision. Merchant agrees that regardless of any statute or law
to the contrary, any claim or cause of action arising out of or related to use
of the Service or these Standard Terms must be filed within one (1) year after
such claim or cause of action arose, or be forever barred. The Insertion Order
and these Standard Terms constitute the entire agreement between the parties
with respect to the subject matter hereof and supersedes all previous proposals.
6
<PAGE> 1
Alloy Online, Inc. has omitted from this Exhibit 10.10 portions of the Agreement
for which Alloy Online, Inc. has requested confidential treatment from the
Securities and Exchange Commission. The portions of the Agreement for which
confidential treatment has been requested have been filed separately with the
Securities and Exchange Commission. Such omitted portions have been marked with
an asterisk.
EXHIBIT 10.10
TOP TIER E-SALES AGREEMENT FORM____________________________________
Please complete and this Agreement Form and return to:
Catalog City - Sales Dept. Phone 888-846-4808
510 Lighthouse Avenue Fax 831-647-4888
Pacific Grove, CA 93950
CATALOG CITY
Please Print or Type
- --------------------------------------------------------------------------------
Contact Name JOAN ROSENSTOCK Phone (212) 714-2044
------------------------------ ------------------------
Merchant Name ALLOY DESIGNS, INC. Toll-Free ( )______________
------------------------------
Address ____________________________________ Fax ( )_______________
City ___________________________________ State_____ ZIP___________
Web Site (URL) http:// __________________________ E-mail______________________
Catalog Name ___________________Volume Name___________Expiration Date__________
Please indicate how we should send your CATALOG REQUESTS. Choose One
E-mail ______________________________ Fax ( )_______________________
Please send E-COMMERCE ORDERS to: Contact MATT DIAMOND Fax (212) 244-4317
------------ -------------
Program Description
- --------------------------------------------------------------------------------
E-Sales Now! For Top Tier Accounts
* Free hosting for one (1) year*
* [ ]*% commission on orders through Catalog City ([ ]*% on linked
orders). Commission is based on net sales, less S&H
* Any additional catalog volumes posted after Dec. 31, 1998, will incur
a $[ ]*/page set-up fee.
* Your complete catalog scanned (or electronic files) and placed on
catalogcity.com, including catalog description and URL link
* Each product enabled for purchase and linked to the Catalog City
Shopping Cart and Gift Registry
* Free Catalog requests sent via e-mail or facsimile
* If you are not satisfied at any time, we will disable the e-commerce
capability, but will continue offering free catalog requests
* 20 Free featured products to showcase your top-selling products
MUST SIGN UP BY 12/31/98, TO RECEIVE FREE HOSTING
PLEASE SELECT PAYMENT METHOD
- --------------------------------------------------------------------------------
Billing Address/Contact same address as above? (circle one) (Y) N
Billing Contact__________________________________ Phone ( ) __________________
Billing Address__________________________________ Fax ( ) __________________
Billing City_________________ State___________ ZIP__________ Email____________
PLEASE SIGN. SIGNATURE REQUIRED TO PROCESS.
- --------------------------------------------------------------------------------
Your catalog and products will remain online for the term of this agreement,
starting the first day your volume goes online ("online date"). The undersigned
agrees to the terms presented on the attached Catalog City Merchant Agreement.
Signature ______________________ Merchant (Print Co. Name) ALLOY DESIGNS, INC.
(Print Name) MATT C. DIAMOND Date 12/9/98 -------------------
-------------------- -------
Catalog city Top Tier E-Sales Agreement 11/30/98
<PAGE> 1
EXHIBIT 10.11
-------------
ALLOY ONLINE, INC. HAS OMITTED FROM THIS EXHIBIT 10.11 PORTIONS OF THE AGREEMENT
FOR WHICH ALLOY ONLINE, INC. HAS REQUESTED CONFIDENTIAL TREATMENT FROM THE
SECURITIES AND EXCHANGE COMMISSION. THE PORTIONS OF THE AGREEMENT FOR WHICH
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED ARE DENOTED BY AN ASTERISK HEREIN AND
HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
FASHIONMALL.COM
March 8, 1999
Agreement between INTERNET FASHION MALL, LLC and Alloy.com Inc. (Merchant).
Whereas Internet Fashion Mall, LLC (IFM) has established a site on the Internet,
http://fashionmall.com (Fashionmall.com or FM), through which it can provide
access by users to the Merchant's web site located on the Internet at
alloyonline.com (Site) where Merchant may display and/or sell products and/or
content as defined in this agreement, the parties agrees as follows:
LOCATION & VALUE AD
- -------------------
IFM will provide the following to Merchant:
1) A tenant listing and/or presence within Fashionmall.com for a period of
12 months merchant's "live date" on FM, retroactive to 1/1/99.
2) Monthly reports of traffic in the form of total "click throughs" to
merchant's site.
3) Merchant will be entitled to inclusion in the Fashionmall.com contextual
and/or advertorial marketing opportunities (these terms being defined as
they are commonly understood within the industry) through Fashionmall.com
and affiliated and co-branded sites where appropriate and available and
included, in addition, in co-sponsored events if applicable and as space is
available. There may or may not be additional fees involved.
4) Anchor tenant icon placement and feature graphic icon on the what is now
referred to as "Team/Lemon soda" home page of Fashionmall.com
FEE
- ---
1) A fixed rate of $[ ]* per month for contract duration.
CREATION & CONTENT
- ------------------
1) Merchant may create and provide content, as mutually agreed, for display
and distribution within IFM's site(s).
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<PAGE> 2
TRANSACTION
- -----------
1) Merchant will sell product directly to consumers using Merchant's own, or
third party, e-commerce system.
TERMS AND REQUIREMENTS
- ----------------------
1) IFM does not warrant the accuracy or correctness of content within
Merchant's site.
2) Merchant is responsible for all rights to content provided, and ensures IFM
that it possesses all required rights.
3) IFM may archive data that is stored, or processed, through IFM,
Fashionmall.com or Merchant's site, and will maintain copies, of, and
utilize, data on transactions, communications and activities.
4) Merchant indemnifies IFM against any liability related to Merchant's
failure to comply with this agreement.
5) Merchant may tag print advertising with the address
"http://fashionmall.com/alloyonline".
6) IFM may use merchant content to promote Merchant or IFM.
7) Charges will be billed via monthly report/invoice and are net 10 days.
Agreed by:
/s/ Matthew C. Diamond
- -------------------------------------- -----------------------------------
(Signature) (Name)
3/8/99
- -------------------------------------- -----------------------------------
(Title) (Date)
575 Madison Avenue, New York, NY 10022 (212) 891-4226 fax (212) 891-6033
2
<PAGE> 1
Alloy Online, Inc. has omitted from this Exhibit 10.12 portions of the Agreement
for which Alloy Online, Inc. has requested confidential treatment from the
Securities and Exchange Commission. The portions of the Agreement for which
confidential treatment has been requested have been filed separately with the
Securities and Exchange Commission. Such omitted portions have been marked with
an asterisk.
EXHIBIT 10.12
MEMORANDUM OF UNDERSTANDING
This memorandum will serve to summarize the agreement between Primedia
Consumer Marketing (SEVENTEEN) and Alloy Designs, Inc. (ALLOY) regarding an
offline and online partnership. Please note that this agreement is for the
Spring Break '99 catalog (in home late March, early April 1999) and online for
the month of February. At that point ALLOY and SEVENTEEN will revisit the
agreement to discuss a longer-term relationship.
CATALOG
* ALLOY will offer a special rate (10 issues for $11.96) for a one year
subscription to SEVENTEEN. ALLOY will design the ad and SEVENTEEN will
supply the art and offer details.
* SEVENTEEN will pay ALLOY a one-time sponsorship fee of $[ ]*.
ONLINE
* During the month of February, SEVENTEEN's will receive prominent
positioning (vs. the other teen magazines) in the ALLOY Newsstand.
SEVENTEEN's participation in ALLOY Newsstand is detailed in the Partnership
Agreement (see attached).
* During the month of February, SEVENTEEN will be featured in an issue of
ALLOY E-Mag (emailed to database of 350,000 requestors). The feature will
highlight the 10/$11.96 offer and provide a direct link to the ALLOY
Newsstand for ordering.
* During the month of February, SEVENTEEN will provide a link from
www.seventeen.com to www.alloyonline.com. The specifics of the link program
will be worked out by SEVENTEEN's Online Marketing Director and ALLOY's
Marketing Director.
TELEMARKETING
* In advance of the test, ALLOY must feel comfortable with all the upfront
details (phone script, training operators, magazine fulfillment) that
SEVENTEEN has agreed to provide. At this point, ALLOY will agree to a 7-day
test.
* ALLOY will run a 7-day telemarketing test beginning ASAP (preferably
February 8th) whereby the 10/$11.96 SEVENTEEN subscription rate will be
offered on every phone order placed. SEVENTEEN will remit [ ]*% of the
subscription rate for the seven-day period. Once this test is analyzed by
both parties, SEVENTEEN and ALLOY will renegotiate a telemarketing remit
rate for a longer time period.
ALLOY Signature: /s/ JOAN D. ROSENSTOCK Date: 1/28/99
----------------------
SEVENTEEN Signature: ______________________ Date: 1/28/99
<PAGE> 2
ALLOY NEWSSTAND(TM)
PARTNER AGREEMENT
Alloy operates an Internet web site, www.alloyonline.com, and in the future
www.alloy.com, containing magazines of various publishers. Publisher wishes to
have an online presence of its magazine displayed on Alloy's web site, and is
willing to accept and fulfill orders for all subscriptions and trial offers
placed through Alloy's web site. The Publisher has agreed to display its
magazine and related information as defined by the terms and services in this
Partner Agreement Form. Alloy and Publisher agree as follows:
PUBLISHER GUARANTEE
Publisher guarantees that the information provided to Alloy is accurate and
the offer is the lowest price available to the general public on the Internet.
If a customer finds (and provides evidence of) a lower offer on the web,
Publisher will refund the difference to the customer. This guarantee excludes
non-publisher-authorized offers, expired offers, non-Internet offers, offers
originating outside the US and offers not available to the general public (i.e.
institutional and educational offers).
PUBLISHER RESPONSIBILITIES
(i) Publisher will provide a description of the magazine not to exceed
100 words and the terms of the subscription offer as follows:
LENGTH (MOS.) # OF ISSUES SUBSCRIPTION PRICE VS. COVER PRICE
(ii) Publisher will provide magazine art (PSD preferred or jpeg, gif).
(iii) At time of agreement, Publisher will place Alloy on a comp list
sending the issues to:
Attn: Editor
The Alloy Newsstand(TM)
c/o Alloy Designs
115 West 30th Street, Suite 304
New York, NY 10001
(iv) Publisher agrees to start issue service of the subscription with the
most current issue of the magazine within 4-6 weeks after receipt of
the order.
(v) Publisher will provide a customer service number and contact for
customer questions/referrals.
ALLOY NEWSSTAND RESPONSIBILITIES
(i) Alloy is responsible for maintaining all operational aspects of the
site including updating magazine covers and adding timely information
on cover topics.
(ii) Alloy is responsible for submitting all orders in the required format
directly to your fulfillment house.
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<PAGE> 3
(iii) Alloy is responsible for sending a standard email order confirmation
to the customer.
PUBLISHER WARRANTY AND RETURNS
Publisher agrees that if publication ceases operation, Publisher shall be
responsible for the subscription liability or comparable magazine offer to
subscribers. Publisher agrees to accept cancellation ON SUBSCRIPTIONS SOLD
WITHIN THIRTY (30) DAYS OF NOTICE.
MAGAZINE PRICING
Publisher guarantees that the published offer is the lowest legitimate
price available to the general public on the Internet (and includes all shipping
and handling charges and/or sales tax.) Over the term length of an individual
customer's offer, Publisher will honor the subscription offer stated. Publisher
will have complete control over its pricing and may change pricing of the
subscription offer at any time. Advisement of a subscription offer price change
is to be made at least thirty (30) days prior to the effective date of the
change.
COMMISSION AND BILLING
Each month, Alloy will REMIT to Publisher [ ]*% of the total subscriptions
generated. In the case where Alloy is notified of a cancellation, Alloy will
refund the prorated amount (time remaining multiplied by cost per issue) to
customer and deduct from the upcoming monthly remittance.
RIGHTS
Publisher grants Alloy nonexclusive right and privilege to use, copy, scan,
digitize, index, reproduce, distribute, and display Publisher's offer throughout
the world, for the purposes of distributing, marketing, selling, promoting, and
generating leads for Alloy Newsstand(TM). Alloy will not modify, enhance or
reconfigure any parts of the magazine or offer without obtaining approval by the
Publisher. Alloy reserves the right to exclude any portion of Publisher's
magazine for objectionable, harmful, threatening, defamatory, obscene,
harassing, or racially or ethnically unsuitable content or graphics.
CUSTOMER NAMES
Each business work day (M-F) Alloy will send customer names to Publisher or
fulfillment house in desired format (i.e. email, fax). When Publisher receives
customer names from Alloy, Publisher is permitted to use these names in the
customary industry manner (i.e. sell or rent customer names to other vendors).
TERM
This authorization becomes effective immediately upon signing and will
remain in effect for the term of one year unless canceled by either party upon
sixty (60) days written notice.
3
<PAGE> 4
INDEMNIFICATION
Publisher shall indemnify, defend and hold harmless Alloy against any
actions, expenses or liabilities arising out of or in any way connected with any
breach of representation, warranty and payments. Likewise, Alloy will indemnify,
defend and hold harmless Publisher against any actions, expenses or liabilities
arising out of or in any way connected with the negligent activities or
operations of Alloy or its officers, director, employees or agents.
GOVERNING LAW
This agreement shall be governed by the laws of the United States and the
State of New York without reference to its choice of law principles.
AGREED & ACCEPTED:
Partner Name: _______________________________________
Authorized Signature: _______________________________________
Date: _______________________________________
Alloy Name: _______________________________________
Authorized Signature: _______________________________________
Date: _______________________________________
4
<PAGE> 1
EXHIBIT 10.25
ALLOY DESIGNS, INC.
NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
February 16, 1999
Neil Vogel
5 East 16th Street, #8
New York, NY 10003
Dear Mr. Vogel:
In order to accept your offer of employment with Alloy Designs, Inc. (the
"Company") which term shall include any subsidiaries or affiliates of Alloy
Designs, Inc.), you must sign and return this Non-Competition and
Confidentiality Agreement (the "Agreement"). No provision of this Agreement
shall be construed to create an express or implied employment contract, or a
promise of employment for a specific period of time, and the Company may
terminate your employment at any time, with or without cause (i.e., you are an
"at-will" employee).
As you know, the Company has by letter made you an offer of employment which
sets forth the terms and conditions of your proposed employment with the
Company, including your initial pay and benefits.
In consideration of the employment currently offered to you by the Company, you
agree to the following:
1. CONFIDENTIALITY:
The Company has developed, uses and maintains trade secrets and other
confidential and proprietary information including, without limitation, training
materials, product information, personnel information relating to Company
employees, operating procedures, marketing information, profit and loss
information, inventory strategy, product costs, gross profit margins, selling
strategies, client lists, supplier information, and customer information (the
"Confidential Information"), and the Company has taken and shall continue to
take, and expects you to take, all reasonable measures to protect the
confidentiality of such Confidential Information.
For purposes hereof, Confidential Information does not include information
(i) already in the public domain or that becomes public knowledge otherwise than
by the act or omission of the Employee, (ii) that is or becomes available to the
employee without obligation or confidence from a source (other than the
Corporation, or any affiliate thereof) having the legal right to disclose such
information, (iii) that is already in possession of the Employee in documented
form
<PAGE> 2
without an obligation of confidence and was not received by the employee as a
result of the Employee's prior relationship with the Company or (iv) in the
written opinion of the Employee's counsel that is required to be disclosed by
applicable law or legal process as long as the Employee promptly notifies the
Corporation of such pending disclosure as the advisability of seeking a
protective order or other means of preserving the confidentiality of the
information.
You acknowledge that during your employment with the Company you will have
direct access to and knowledge of the Confidential Information, and you
acknowledge that if you become employed or affiliated with any competitor of the
Company in violation of your obligations in Section 2 of the Agreement, it is
inevitable that you would disclose the Company's Confidential Information to
such competitor. You covenant and agree that all such Confidential Information
is and shall remain the sole property of the Company and that you will hold in
strictest confidence, and will not (except as required in the course of your
employment with the Company) disclose to any business, firm, entity or person,
either directly or indirectly, any of the Confidential Information. You further
agree that you will return all such Confidential Information (regardless of how
it is maintained) and any copies thereof, to the Company within three days of
the termination of your employment, whether voluntary or involuntary and
regardless of the reason for termination. The terms of this paragraph are in
addition to, and not in lieu of any legal or other contractual obligations that
you may have relating to the protection of the Company's Confidential
Information. The terms of this paragraph shall survive indefinitely the
termination of this Agreement and/or your employment with the Company.
2. NON-COMPETITION AND NON-SOLICITATION:
You acknowledge that the Company has invested substantial time, money and
resources in the development and retention of its customers, accounts and
Confidential Information, and further acknowledge that during the course of your
employment you will be introduced to customers and accounts of the Company. You
acknowledge and agree that any and all "goodwill" associated with any customer
or account belongs exclusively to the Company including, but not limited to, any
goodwill created as a result of direct or indirect contacts or relationships
between yourself and any customers or accounts of the Company.
In recognition of this and as a condition of your initial (and any continued)
employment with the Company, you covenant and agree as follows:
2.1 DEFINITION OF COMPETITIVE BUSINESS. I understand and acknowledge that
the Company's business interests are world-wide because the Company's
products and/or services are sold in countries around the world and
the Company's competitors similarly operate from and market their
products and/or services in many locations around the world. In order
to protect the Company's interests wherever they may be affected by
the matters addressed in this Agreement, wherever it is used in this
Agreement the term "Competitive Business" means any business anywhere
in the world which engages or plans to engage in the sale,
distribution or licensing of clothing apparel through catalogue
(catalog) direct marketing to teenagers and young adults, in any media
now existing or hereafter
<PAGE> 3
developed or which engages or plans to engage in intemet-based
commerce and/or community building targeted specifically towards
teenagers and young adults.
2.2 NON-COMPETITION. I acknowledge that my employment or engagement by the
Company will give me access to the Confidential Information, and that
my knowledge of the Confidential Information will enable me to put the
Company at a significant competitive disadvantage if I am employed or
engaged by or become involved in a Competitive Business. Accordingly,
during the term of my employment or engagement by the Company and for
the periods set out below following my employment or engagement by the
Company, I will not, without the prior written consent of the Company,
directly or indirectly, individually or in partnership or in
conjunction with any other entity:
(a) for a period of 12 months after the date of termination of my
employment or engagement with the Company (regardless of the
reason for the termination), be engaged directly or indirectly,
in any manner whatsoever, including, without limitation, either
individually or in partnership, jointly or in conjunction with
any other person, or as an employee, consultant, adviser,
principal, agent, member or proprietor in any Competitive
Business;
(b) For a period of 12 months after the date of termination of my
employment or engagement with the Company, advise, invest in,
lend money to, guarantee the debts or obligations of, or
otherwise have any other financial interest in any Competitive
Business.
2.3 NO SOLICITATION OF CLIENTS AND SUPPLIERS. I acknowledge the importance
to the business carded on by the Company of the client and supplier
relationships developed by it and the unique opportunity that my
employment or engagement and my access to the Confidential Information
offers to interfere with these relationships. Accordingly, I will not
for a period of 12 months after the termination of my employment or
engagement with the Company, directly or indirectly, contact or
solicit any person who I know to be a prospective, current or former
client or supplier of the Company for the purpose of selling to such
client or buying from such supplier any products or services which are
the same as or substantially similar to, or in any way competitive
with, the products or services sold or purchased by the Company during
my employment or engagement or at the end thereof, as the case may be,
which in any such case would have a material adverse effect on the
Company's business.
2.4 NO SOLICITATION OF EMPLOYEES. I acknowledge the importance to the
business carded on by the Company of the human resources engaged and
developed by it and the unique access that my employment or engagement
offers to interfere with these resources. Accordingly, I will not
while employed or engaged by the Company and for a period of 12 months
after the termination of my employment
<PAGE> 4
or engagement with the Company, induce or solicit or assist any third
party in inducing or soliciting any employee or consultant of the
Company who was employed by the Company at the time of my termination
or who became employed during the 12 months immediately following my
termination, to leave the Company or to accept employment or
engagement elsewhere.
3. PROVISIONS NECESSARY AND REASONABLE:
You agree that (i) the provisions of Sections 1 and 2 are necessary and
reasonable to protect the Company's Confidential Information and goodwill; (ii)
the specific time, geography and scope provisions set forth in Section 2 are
reasonable and necessary to protect the Company's business interests; and (iii)
in the event of your breach of any of your agreements set forth in Sections 1
and 2, the Company would suffer substantial irreparable harm and that the
Company would not have an adequate remedy at law for such breach. In recognition
of the foregoing, you agree that in the event of a breach or threatened breach
of any of these covenants, in addition to such other remedies as the Company may
have at law, without posting any bond or security, the Company shall be entitled
to seek and obtain equitable relief, in the form of specific performance, or
temporary, preliminary or permanent injunctive relief, or any other equitable
remedy which then may be available. The seeking of such injunction or order
shall not affect the Company's right to seek and obtain damages or other
equitable relief on account of any such actual or threatened breach.
4. CHOICE OF LAW; ENFORCEABILITY; WAIVER OF JURY TRIAL:
You acknowledge that a substantial portion of the Company's business is
based out of and directed from the State of New York, where the Company
maintains its main office and administers all employee compensation and
benefits. You also acknowledge that during the course of your employment with
the Company you will have substantial contacts with New York.
This Agreement shall be deemed to have been made in the State of New York,
shall take effect as an instrument under seal within New York, and the validity,
interpretation and performance of this Agreement shall be governed by, and
construed in accordance with, the internal law of New York, without giving
effect to conflict of law principles. Both parties further acknowledge that the
last act necessary to render this Agreement enforceable is its execution by the
Company in New York, and that the Agreement thereafter shall be maintained in
New York. Both parties agree that any action, demand, claim or counterclaim
relating to the terms and provisions of this Agreement, or to its breach, shall
be commenced in New York in a court of competent jurisdiction. Both parties
further acknowledge that venue shall exclusively lie in New York and that
material witnesses and documents would be located in New York. Both parties
further agree that any action, demand, claim or counterclaim shall be resolved
by a judge alone, and both parties hereby waive and forever renounce the right
to a trial before a civil jury.
5. MISCELLANEOUS:
<PAGE> 5
(a) You acknowledge and agree that should you transfer between or among
Company affiliates, wherever situated, or otherwise become employed by any
Company affiliate, or be promoted or reassigned to functions other than your
present functions, the terms of this Agreement including, but not limited to,
Sections 1 and 2 hereof, shall continue to apply with full force.
(b) Should any provision or term of this Agreement be held to be invalid,
illegal or unenforceable, in whole or part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
any other provision of this Agreement, and to the extent permissible by law, the
parties agree that a court shall have the power to amend such specific provision
so that it can be enforced to the fullest extent permissible by law.
(c) No amendment, waiver or revocation of this Agreement of any kind shall
be effective unless supported by a written instrument executed by you and an
authorized officer of the Company.
(d) You hereby acknowledge that you have had adequate opportunity to review
these terms and conditions and to reflect upon and consider the terms and
conditions of this Agreement. You further acknowledge that you fully understand
its terms and have voluntarily executed this Agreement and that the restrictions
placed on you by this Agreement are reasonably necessary to protect the
Company's interests and will not preclude you from being gainfully employed in a
suitable capacity following termination of your employment given your general
knowledge and experience.
<PAGE> 6
Kindly acknowledge your acceptance of this Agreement by signing both copies
of this letter where indicated.
ALLOY DESIGNS, INC.
/s/ Samuel A. Gradess
- -------------------------------------
By: Samuel A. Gradess
Its: Director and Corporate Secretary
Dated: February 16, 1999
ACCEPTED AND AGREED
/s/ Neil Vogel
- --------------------------------------
Neil Vogel
Dated: February 22, 1999
<PAGE> 7
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers all of
the rights of the undersigned under the within Warrant, with respect to the
number of shares of common stock (the "Common Stock") covered by such Warrant as
set forth herein below (expressed as a percentage of the total number of shares
of Common Stock purchased by the Original Holder in the Offering), unto
Percentage of Original Holder's
Name of Assignee Address Shares
- ---------------- ------- -------------------------------
Dated: _______________________________
Signature: ___________________________
Address: _____________________________
______________________________________
<PAGE> 1
EXHIBIT 10.26
MASTER LEASE AGREEMENT
This Master Lease Agreement (the "Lease") dated March 11, 1998 is
between Ronald Demer, an individual, with offices at 121 Talleyrand Drive,
Wilmington DE 19810-3947, (the "Lessor"), and Alloy Designs, Inc., a Delaware
Corporation at 115 West 30th Street, New York, NY 10001 (the "Lessee"). The
parties hereto agree as follows:
1. LEASE. This Lease establishes the general terms and conditions
by which Lessor may lease to Lessee the Equipment (the "Equipment") listed on
each Equipment Schedule executed periodically pursuant to this Lease. Each such
Equipment Schedule shall incorporate by reference the terms of this Lease, and
shall be a separate Lease agreement as to the Equipment listed thereon for all
purposes, including default. If the provisions of an Equipment Schedule conflict
with the provisions of this Lease, the provisions of such Equipment Schedule
shall prevail. lessor shall not be obligated to fund more than $250,000 for the
Equipment, to fund after June 30, 1998, or to fund after any material adverse
change in lessee's condition.
2. TERM. All Equipment shall have an Initial Lease Term of 30
full calendar months plus any partial first calendar month.
3. RENT. Lessee agrees to pay Lessor rent monthly in advance for
the full Initial Lease Term in the amount shown on the Equipment Schedule,
beginning the date the Lessor pays for the Equipment, and pro-rated for any
partial first calendar month. Lessor shall not be required to invoice Lessee for
monthly rental payments. lessee will reimburse Lessor for any transportation
expenses incurred by Lessor for delivery of the Equipment to Lessee. If all or
any part of a payment is late, Lessor may charge Lessee a late fee of 10% of the
amount that is late.
4. SECURITY DEPOSIT. To secure Lessee's obligations to Lessor,
Lessee will pay a security deposit equal to 4% of the Equipment's cost with the
first rental payment for each schedule of Equipment. The deposit shall be
returned to lessee only if Lessee elects to purchase all of the Equipment at the
end of the initial lease term, or to extend the Lease through month 35, provided
all other obligations of Lessee to Lessor have been satisfied. If Lessee elects
to deliver all of the Equipment to the Lessor as each Schedule is completed,
Lessor shall retain the deposit as compensation for administrative and
remarketing expenses.
5. DELIVERY. Lessee agrees that Lessor is not responsible for
delivery or Installation of the Equipment. Lessee will not have any claim
against Lessor if the manufacturer or supplier (collectively called "Vendor" in
this lease) delays in delivery or Installation.
6. SELECTION AND PURCHASE OF EQUIPMENT. Lessee understands and
agrees that:
(A) Lessor DID NOT SELECT, MANUFACTURE, SUPPLY OR INSPECT
THE EQUIPMENT AND HAS NO EXPERTISE REGARDING THE
EQUIPMENT.
<PAGE> 2
(B) Lessee SELECTED THE VENDOR AND THE EQUIPMENT BASED ON
Lessee's OWN JUDGEMENT.
(C) Lessor is BUYING THE EQUIPMENT AT Lessee's REQUEST
ONLY FOR THE PURPOSE OF LEASING IT TO Lessee.
7. LESSEE UNDERSTANDS AND AGREES THAT:
(A) THE LEASE CANNOT BE CANCELLED BY lessee AT ANY TIME
FOR ANY REASON except as noted in Section 22.
(B) Lessee's DUTY TO MAKE THE PAYMENTS IS UNCONDITIONAL
DESPITE EQUIPMENT FAILURE, DAMAGE, LOSS OR ANY OTHER
PROBLEM.
(C) Lessor IS LEASING THE EQUIPMENT TO LESSEE "AS IS" AND
Lessor HAS MADE NO REPRESENTATION, GUARANTEE OF
WARRANTY, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE) REGARDING THE EQUIPMENT. Lessor
DISCLAIMS ALL SUCH WARRANTIES OR GUARANTEES OF ANY
KIND. Lessor agrees to transfer to Lessee all
warranties IF ANY made by the Vendor to Lessor.
(D) Lessor WILL NOT BE LIABLE FOR ANY LOSS OR INJURY TO
Lessee OR ANY OTHER PERSON OR PROPERTY (including
lost profits and consequential, incidental or special
damages) CAUSED BY THE EQUIPMENT OR ITS FAILURE TO
OPERATE.
(E) lessee WAIVES ANY RIGHTS WHICH WOULD ALLOW LESSEE TO:
(1) cancel or repudiate the Lease; (2) reject or
revoke acceptance of the Equipment; (3) grant a
security interest in the Equipment; (4) seek specific
performance against Lessor.
(F) Lessee UNDERSTANDS THAT Lessor AND THE VENDOR ARE TWO
SEPARATE AND INDEPENDENT COMPANIES, AND THAT NEITHER
THE VENDOR NOR ANY OTHER PERSON IS Lessor's AGENT.
Lessee AGREES THAT NO REPRESENTATION, GUARANTEE OR
WARRANTY BY THE VENDOR OR OTHER PERSON IS BINDING ON
Lessor, AND NO BREACH BY THE VENDOR OR OTHER PERSON
WILL EXCUSE Lessee's OBLIGATIONS TO Lessor.
(G) IF THE EQUIPMENT DOES NOT WORK AS REPRESENTED BY THE
VENDOR, OR IF THE VENDOR OR ANY OTHER PERSON FAILS TO
PROVIDE ANDY SERVICE, OR IF THE EQUIPMENT IS
2
<PAGE> 3
UNSATISFACTORY FOR ANY OTHER REASON, Lessee WILL MAKE
ANY SUCH CLAIM SOLELY AGAINST THE VENDOR OR OTHER
PERSON AND WILL MAKE NO CLAIM AGAINST Lessor.
8. REPAIRS AND SERVICE. Lessee understands that Lessor is not
responsible for repairs or service to the Equipment. Lessee will keep the
Equipment in good condition and will service the Equipment as and when needed,
ordinary wear and tear excepted. All replacement parts and additions will become
Lessor's property.
9. USE. Lessee CERTIFIES THAT THE EQUIPMENT WILL BE USED SOLELY
FOR BUSINESS OR COMMERCIAL PURPOSES. Lessee will not make any alterations to the
Equipment and will keep it in the possession of Lessee or Lessee's agent,
OneSoft Corporation located at 7010 Little River Turnpike, Suite 410, _______
VA, Fairfax County at all times, except that Lessee may relocate the Equipment
to other US locations with 30 days prior written notice to Lessor. Lessee's
agent will execute a waiver acceptable to Lessor permitting Lessor to take
possession of the Equipment in the event of default hereunder.
10. LOSS; DAMAGE; INSURANCE. Lessee agrees to assume the risk of
loss of the Equipment until it is delivered to Lessor. Lessee will keep the
Equipment insured against all risks of loss in an amount not less than the
replacement cost, and will list Lessor as the loss payee and additional Insured.
The replacement cost shall be at least an amount equal to the remaining payments
and 20% residual value discounted at 6% per annum. Lessee will also carry public
liability Insurance listing Lessor as additional insured. Lessee agrees to
provide Lessor with satisfactory written evidence of all such Insurance. Lessee
AGREES THAT IF Lessee FAILS TO OBTAIN SUCH INSURANCE, Lessor MAY (BUT IS NOT
OBLIGATED TO) OBTAIN IT AND CHARGE Lessee A FEE at the rate of 0.25% per month
of Lessor's original cost of the Equipment until Lessee provides adequate proof
of insurance; however, Lessee agrees Lessee has no right to any insurance
benefits from Lessor, Lessee is still liable for all losses, and such risk
charge is not a substitute for the insurance requirements under this Lease.
Lessee HEREBY GIVES Lessor POWER OF ATTORNEY TO APPLY FOR INSURANCE BENEFITS AND
TO ENDORSE CHECKS RECEIVED IN PAYMENT if Lessee fails to perform its obligations
hereunder.
11. TAXES AND OTHER FEES. Lessee agrees this is a "net" Lease and
agrees to pay Lessor upon demand for all taxes (including sales, use, personal
property, customs, duty, and other taxes) and other fees of any kind which may
be charged regarding the leasing, use or ownership of the Equipment. Lessee will
pay any personal property taxes directly to the appropriate jurisdictions.
12. INDEMNITY. Lessee agrees to defend Lessor against and
indemnify (reimburse) Lessor for all claims, liabilities, costs and legal fees
arising out of Lessee's leasing, use or possession of the Equipment pursuant to
this Lease, including claims for property damage or injury to persons. This
promise will continue after the end of the Lease Term. Excluded from the
foregoing indemnity are any claims caused by Lessor's negligence.
3
<PAGE> 4
13. TITLE. Lessee understands that Lessor will have sole title to
the Equipment during the entire Lease Term, and Lessee agrees this is a "true
Lease" and not one intended as security for purpose of Section 1-201 (37) of the
Uniform Commercial Code. Lessee HEREBY GIVES Lessor POWER OF ATTORNEY TO SIGN
AND FILE FINANCING STATEMENTS, AND Lessee AGREES TO PAY Lessor's FILING FEES. If
this Lease is ever determined to be other than a true Lease, Lessee hereby
grants to Lessor a security interest in the Equipment and agrees that the
financing statements will create a perfected security interest in Lessor's
favor. The Equipment is considered personal property, and Lessee will not permit
it to become a fixture to real estate. Lessee will not allow any liens or
encumbrances to be placed on the Equipment.
14. DEFAULT. Lessee agrees that Lessor may declare Lessee in
default if Lessee
(a) fails to make any payment for a period of 10
days after the due date;
(b) does not comply with any other term of this
Lease or any other agreement Lessee has with
Lessor within 10 days following written
notice;
(c) any action is brought against Lessee causing
the Equipment to be taken or encumbered;
(d) becomes insolvent, makes or consents to an
assignment for the benefit of creditors,
files or has filed against Lessee a
bankruptcy, sells all or substantially all
of Lessee's assets, makes or consents to the
appointment of a receiver of trustee, or
goes out of business. If any of these
defaults occurs, Lessee agrees that Lessor
may take one or both of the following
actions, in addition to other actions
available under law:
(A) Lessor may terminate the Lease and or sue for:
(1) past due rent and all future rent to become
due during the unexpired term,
(2) the residual value placed on the Equipment
by Lessor at the commencement of the Lease
(20% of its cost),
(3) all late fees and any other charges due and
to become due, and
(4) the costs listed in Section 15 below; AND
(B) Enter the Equipment site and repossess the Equipment
or sue for a repossession court order. Following
repossession:
(1) All of Lessee's rights to the Equipment will
end;
4
<PAGE> 5
(2) Lessor may remarket the Equipment without
advance notice to Lessee; and
(3) Lessor may also sue for the amounts listed
in Section "A" above without first
remarketing the Equipment. Lessee agrees
that Lessor is not required to repossess and
remarket the Equipment, and Lessee waives
any rights under any law that provide
otherwise.
15. RECOVERY COSTS. Lessee agrees to pay all of Lessor's actual
and reasonable costs after a default, including: attorney's fees; costs of suit;
Lessor's internal collection overhead; Lessor's internal repossession and
remarketing overhead if an internal repossession is made or attempted; and all
other reasonable out-of-pocket costs.
16. END OF LEASE. At least 90 days before the end of the Initial
Term, Lessee will elect a, b or c below.
(a) Purchase not less than all the Equipment at
its then Fair Market Value which will be not
less than 10% or more than 20% of its
initial cost, plus any taxes applicable at
the time of purchase. The purchase price
shall be paid by Lessee to Lessor at least
ten (10) days before the expiration of the
Initial Term. If, on or before a date which
is sixty (60) days prior to the expiration
of the Initial Term, Lessor and Lessee are
unable to agree upon a determination of the
Fair Market Value of the Equipment, the Fair
Market Value shall be conclusively
established not less than thirty (30) days
prior to the expiration of the initial Term
by an independent appraiser acceptable to
both Lessee and Lessor. The cost of such
appraiser shall be equally shared by Lessee
and Lessor within ten (10) days after
receipt of an invoice therefor; or
(b) Extend the Lease of all Equipment on all
Schedules for 5 months after the end of the
initial term at the same rent with title
passing to Lessee via delivery of a Bill of
Sale and release of Lessor's liens; or
(c) deliver not less than all the Equipment to
Lessor in good order and repair, ordinary
wear and tear excepted, to a United States
location specified by Lessor prior to the
end of the initial Lease term.
17. ASSIGNMENT; SUBLEASE. No assignment or sublease to any entity,
is permitted without the advance written consent of Lessor, not to be
unreasonable withheld. Lessee's obligations hereunder shall remain in full force
and effect in the event of any assignment or sublease.
5
<PAGE> 6
18. PLACE FOR SUIT. Lessee agrees that:
(1) THIS LEASE WILL BE GOVERNED BY THE LAWS OF
Delaware;
(2) Lessee WAIVES TRIAL BY JURY AND CONSENTS TO
PERSONAL JURISDICTION IN STATE AND FEDERAL
COURTS IN Delaware;
(3) ANY LEGAL PAPERS FOR ANY LAW SUIT WILL BE
PROPERLY SERVED IF MAILED BY CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, WITH DELIVERY TO
EITHER Lessee OR Lessee's REGISTERED AGENT;
and
(4) ANY SUIT ARISING OUT OF THIS LEASE,
REGARDLESS OF WHO FILES THE SUIT, MUST BE
BROUGHT ONLY IN THE STATE OR FEDERAL COURTS
IN Delaware, AND NOT ELSEWHERE, UNLESS
Lessor AGREES IN WRITING OR ELECTS
OTHERWISE.
19. LESSEE'S REPRESENTATIONS. Lessee represents to Lessor that
(1) Lessee has complete power and is properly
authorized to enter into this Lease;
(2) The Lease is legal, valid, binding on
Lessee, and enforceable against Lessee in
accordance with its terms;
(3) all information supplied by Lessee or
Lessee's agents to Lessor, including all
financial information, is true, correct and
complete.
20. STOCK WARRANT. Lessor will receive a warrant to purchase
10,000 shares of Lessee's common stock at $3 per share per a separate agreement
of even date.
21. FACILITY FEE. Upon execution of this Lease, Lessee will pay
Lessor a Facility Fee of $2,500.00. Half shall be retained by Lessor for
Lessor's expenses incurred in closing this transaction; the remainder shall be
refunded to Lessee as a rental credit against the first rental payment for each
Schedule at the rate of $.50 for each $100 funded on the Schedule, with any
balance retained by Lessor if the entire line is not funded.
22. PREPAYMENT. Lessee may prepay all outstanding Schedules at the
same time for an amount equal to the remaining payments and 20% residual value
discounted at 6% per annum.
23. NOTICES. During the entire term of this lease, Lessee shall
provide Lessor with the same periodic financial reports Lessee provides to its
investors. Any notice or other communication to be provided under this Lease, or
by operation of law, shall be in writing and shall be mailed to the Lessor
and/or Lessor at the addresses listed on the front page of this Lease.
6
<PAGE> 7
LESSOR: Ronald Demer
by _____________________________________ date: ___________________________
LESSEE: Alloy Designs, Inc.
by _____________________________________
its ____________________________________ date: ___________________________
7
<PAGE> 8
EQUIPMENT SCHEDULE NO. ___ ("EQUIPMENT SCHEDULE") TO MASTER LEASE AGREEMENT
DATED March 10, 1998 ("LEASE") BETWEEN Ronald Demer ("LESSOR") AND Alloy
Designs, Inc. ("LESSEE")
(THERE WILL BE ONE EQUIPMENT SCHEDULE PER FUNDING AND LOCATION)
1. EQUIPMENT: Attach list showing Vendor name, address, manufacturer,
model number, price and serial numbers.
2. EQUIPMENT LOCATION: _______________________(enter complete location).
3. RENTAL COMMENCEMENT DATE shall be the date Lessor pays for the
Equipment.
4. INITIAL TERM: 30 full calendar months plus any partial first calendar
month.
5. MONTHLY RENTAL: 2% of Equipment Cost for months 1-12; 4% of Equipment
Cost for months 13-30.
6. SECURITY DEPOSIT: 4% of cost.
7. END OF LEASE:
(a) Purchase not less than all Equipment for a purchase price
equal to the Fair Market Value thereof as of the end of the Initial Term, but
not less than 10% or more than 20% of its initial cost, plus any taxes
applicable at the time of purchase. The purchase price shall be paid by Lessee
to Lessor at least ten days before the expiration of the Initial Term; or
(b) Extend the Lease for 5 months at 4% per month and take title;
or
(c) Deliver not less than all the Equipment to Lessor in good
order and repair.
8. LEASE AGREEMENT: All of the terms, covenants and conditions set forth
in the Lease are incorporated herein by reference as if the same had been set
forth herein in full.
LESSOR: Ronald Demer LESSEE: Alloy Designs, Inc.
By: _____________________________ By: ________________________________
8
<PAGE> 1
Alloy Online, Inc. has omitted from this Exhibit 10.27 portions of the Agreement
for which Alloy Online, Inc. has requested confidential treatment from the
Securities and Exchange Commission. The portions of the Agreement for which
confidential treatment has been requested have been filed separately with the
Securities and Exchange Commission. Such omitted portions have been marked with
an asterisk.
EXHIBIT 10.27
LADENBURG THALMANN
April 6, 1998
James K. Johnson
Matthew C. Diamond
Samuel A. Gradess
ALLOY Designs, Inc.
115 W. 30th Street
Suite 302
New York, NY 10001
Gentlemen:
We are writing this letter to confirm our agreement ("Agreement") that
Ladenburg Thalmann & Co. Inc. ("Ladenburg") has been engaged by ALLOY Designs,
Inc. (the "Company") as its exclusive agent in connection with the proposed
financing as represented in the attached term sheet (the "Term Sheet") of
approximately $[ ]* million of debt of the Company (the "Financing").
This Agreement shall become effective upon the execution hereof by both the
Company and Ladenburg, and the term of this Agreement and the appointment
provided for herein shall end sixty (60) days after the date of such execution
by the Company (the "Term") subject to the provisions described in Section VII
below.
I. PERFORMANCE OF SERVICES
Ladenburg's services shall be to act as agent in connection with the
Financing and assist in the negotiation and securing of the Financing.
II. COMPENSATION FOR SERVICES
A. If one or more Financings are consummated during the Term or within twelve
months after the end of the Term with an investor or lender introduced to
the Company by Ladenburg ("Covered Person") during the Term, the Company
will pay or cause to be paid to Ladenburg a placement fee (the "Placement
Fee") equal to [ ]*% of the Financing payable upon the closing of each
Financing. In no case shall the aggregate of the Placement Fees exceed
$[ ]*. Prior to contacting any prospective investor or lender, Ladenburg
shall identify such prospects to the Company.
B. Subject to the closing of the Financing, the Company agrees to reimburse
Ladenburg for all reasonable out-of-pocket expenses incurred in carrying
out the terms of this Agreement, including travel, telephone, facsimile,
courier and computer time charges, attorneys' fees and disbursements. Such
out-of-pocket expenses are limited to an
<PAGE> 2
-2-
aggregate of $[ ]* without prior approval from the Company. In the event
that a Financing is not consummated, the Company agrees to reimburse
Ladenburg for [ ]*% of all reasonable out-of-pocket expenses incurred in
carrying out the terms of this Agreement, including travel, telephone,
facsimile, courier and computer time charges, attorneys' fees and
disbursements.
C. If the Company decides to commence an initial public offering of its common
stock within 36 months of the date of the closing of the Financing, the
Company will attempt to negotiate a mutually acceptable agreement with
Ladenburg whereby Ladenburg will act as a manager for such initial public
offering.
The provisions of this section II shall survive the termination and
expiration of this Agreement.
III. INDEMNIFICATION
The Company and Ladenburg hereby agree to the terms and conditions of the
Indemnification Agreement attached hereto as Appendix A with the same force and
effect as if such terms and conditions were set forth at length herein.
IV. COORDINATION OF EFFORTS
In order to coordinate the efforts of both Ladenburg and the Company, and
to maximize the possibility of consummating a Financing during the term of this
Agreement, Ladenburg shall have the sole and exclusive authority to initiate and
conduct discussions with Covered Persons. In the event that the Company, its
directors, officers, employees or shareholders receive any inquiries from or
conduct any discussions with Covered Persons concerning the availability of the
Financing, such inquiries and discussions shall be promptly referred to
Ladenburg.
V. DISCLOSURE
All descriptive memoranda have been provided to Ladenburg by the Company.
All information provided by the Company to Ladenburg will be considered as
confidential information and shall be maintained as such by Ladenburg, except as
required by law until the same becomes known to the public without release
thereof by Ladenburg.
The Company agrees to provide to Ladenburg, among other things, all
reasonable information requested or required by Ladenburg or a Covered Person,
including, but not limited to, information concerning historical and projected
financial results and possible and known litigation and other contingent
liabilities of the Company. The Company also agrees to make available to
Ladenburg such representatives of the Company, including, among others,
directors, officers, employees, outside counsel and independent certified public
accountants, as Ladenburg may reasonably request. The Company will promptly
advise Ladenburg of any material changes in its business or finances. The
Company represents that all information made available to Ladenburg by the
Company, including, without limiting the generality of the foregoing, any
<PAGE> 3
-3-
placement memorandum or other information materials prepared by or approved by
the Company, will be complete and correct in all material respects and will not
contain any untrue statements of a material fact or omit to state a material
fact necessary in order to make the statement therein not misleading in light of
the circumstances under which such statements are made. In rendering its
services hereunder, Ladenburg will be using and relying primarily on such
information without independent verification thereof or independent appraisal of
any of the Company's assets. Ladenburg does not assume responsibility for the
accuracy or completeness of the information. Ladenburg will not initiate contact
with or provide information to prospective purchasers without prior approval
from the Company.
Prior to the closing of an IPO by the Company and subject to the Company's
prior review and approval, the Company authorizes Ladenburg to make public
notice without identifying the Company by name or reference in the form of a
"tombstone," at Ladenburg's expense, of any Financing concluded under this
Agreement. After the closing of an IPO, the Company authorizes Ladenburg to make
public notice in the form of a "tombstone," at Ladenburg's expense, of any
Financing concluded under this Agreement.
VI. TERMINATION
This engagement may be terminated by the Company or by Ladenburg at any
time after 60 days with or without cause upon written notice to that effect to
the other party, but no such termination shall affect Ladenburg's right to
compensation earned on or prior to such termination (including, without
limitation, the Placement Fee described in section IIA hereof) and, subject to
section IIB, Ladenburg shall be entitled to reimbursement of all reasonable
expenses not previously reimbursed.
VII. ENTIRE AGREEMENT, ETC.
This Agreement sets forth the entire understanding of the parties relating
to the subject matter hereof and supersedes and cancels any prior
communications, understandings and agreements between the parties. This
Agreement cannot be changed, nor can any of its provisions be waived, except by
written agreement signed by all parties hereto. This Agreement shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company and Ladenburg. In the event of a dispute between
Ladenburg and the Company with respect to this Agreement, the prevailing party
shall be entitled to recover its cost of reasonable attorney and court fees. A
telecopy of a signed original of this Agreement shall be sufficient to bind the
parties whose signatures appear hereon.
VIII. GOVERNING LAWS AND JURISDICTION
This Agreement shall be governed by and construed to be in accordance with
the laws of the State of New York applicable to contracts made and to be
performed solely within New York State (without applying New York's choice of
laws or conflicts of law provisions). Any dispute arising out of this Agreement
shall be adjudicated in the courts of the State of New York or in the
<PAGE> 4
-4-
federal courts sitting in New York. The parties each agree that service may be
made upon each of them by registered or certified mail (return receipt
requested).
IX. ACCEPTANCE
Please confirm that the foregoing is in accordance with your understanding
by signing on behalf of the Company and returning an executed copy of this
Agreement whereupon after execution by Ladenburg it shall become a binding
agreement between the Company and Ladenburg.
Very truly yours,
LADENBURG THALMANN & CO. INC.
By: /s/ Peter M. Graham
----------------------------
Peter M. Graham
Vice Chairman
Accepted and agreed to:
ALLOY DESIGNS, INC.
By: /s/ Samuel A. Gradess
---------------------------
(Signature)
Date: April 6, 1998
-------------------------
<PAGE> 5
APPENDIX A
INDEMNIFICATION AGREEMENT
Appendix A to Letter Engagement Agreement (the "Agreement"), dated
April 6,1998 by and between ALLOY Designs, Inc. (the "Company") and Ladenburg
Thalmann & Co. Inc. ("Ladenburg").
The Company agrees to indemnify and hold Ladenburg and its affiliates,
control persons, directors, officers, employees and agents (each an "Indemnified
Person") harmless from and against all losses, claims, damages, liabilities,
costs or expenses, including those resulting from any threatened or pending
investigation, action, proceeding or dispute whether or not Ladenburg or any
such other Indemnified Person is a party to such investigation, action,
proceeding or dispute, arising out of Ladenburg's entering into or performing
services under this Agreement, or arising out of any matter referred to in this
Agreement. This indemnity shall also include Ladenburg's and/or any such other
Indemnified Person's reasonable attorneys' and accountants' fees and
out-of-pocket expenses incurred in, and the cost of Ladenburg's personnel whose
time is spent in connection with, such investigations, actions, proceedings or
disputes which fees, expenses and costs shall be periodically reimbursed to
Ladenburg and/or to any such other Indemnified Person by the Company as they are
incurred; provided, however, that the indemnity herein set forth shall not apply
where a court of competent jurisdiction has made a final determination that
Ladenburg acted in a grossly negligent manner or engaged in willful misconduct
in the performance of its services hereunder which gave rise to the loss, claim,
damage, liability, cost or expense sought to be recovered hereunder (but pending
any such final determination the indemnification and reimbursement provisions
hereinabove set forth shall apply and the Company shall perform its obligations
hereunder to reimburse Ladenburg and/or each such other Indemnified Person
periodically for its, his or their fees, expenses and costs as they are
incurred). The Company also agrees that neither Ladenburg nor any other
Indemnified Person shall have any liability (whether direct or indirect, in
contract or tort or otherwise) to the Company for or in connection with any act
or omission to act by Ladenburg as a result of its engagement under this
Agreement except for any such liability for losses, claims, damages, liabilities
or expenses incurred by the Company that is found in a final determination by a
court of competent jurisdiction to have resulted from Ladenburg's gross
negligence or willful misconduct.
If for any reason, the foregoing indemnification is unavailable to
Ladenburg or any such other Indemnified Person or insufficient to hold it
harmless, then the Company shall contribute to the amount paid or payable by
Ladenburg or any such other Indemnified Person as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the Company and its shareholders on the one hand
and Ladenburg or any such other Indemnified Person on the other hand, but also
the relative fault of the Company and Ladenburg or any such other Indemnified
Person, as well as any relevant equitable considerations; provided that in no
event will the aggregate contribution by Ladenburg and any such other
Indemnified Person hereunder exceed the amount of fees actually received by
<PAGE> 6
-2-
Ladenburg pursuant to this Agreement. The reimbursement, indemnity and
contribution obligations of the Company hereinabove set forth shall be in
addition to any liability which the Company may otherwise have and these
obligations and the other provisions hereinabove set forth shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, Ladenburg and any other Indemnified Person.
The terms and conditions hereinabove set forth in this Appendix A shall
survive the termination and expiration of this Agreement and shall continue
indefinitely thereafter.
LADENBURG THALMANN & CO. INC.
By: /s/ Peter M. Graham
--------------------------
ALLOY DESIGNS, INC.
By: /s/ Samuel A. Gredess
--------------------------
Date: April 6, 1998
------------------------
<PAGE> 1
Alloy Online, Inc. has omitted from this Exhibit 10.28 portions of the Agreement
for which Alloy Online, Inc. has requested confidential treatment from the
Securities and Exchange Commission. The portions of the Agreement for which
confidential treatment has been requested have been filed separately with the
Securities and Exchange Commission. Such omitted portions have been marked with
an asterisk.
EXHIBIT 10.28
LADENBURG THALMANN
October 12,1998
James K. Johnson
Matthew C. Diamond
Samuel A. Gradess
ALLOY Designs, Inc.
115 W. 30th Street
Suite 302
New York, NY 10001
Gentlemen:
We are writing this letter to confirm our agreement ("Agreement") that
Ladenburg Thalmann & Co. Inc. ("Ladenburg") has been engaged by ALLOY Designs,
Inc. (the "Company") as its exclusive placement agent in connection with the
proposed offer and private placement (the "Sale") by the Company of equity or
any other securities of the Company in the amount of at least $[ ]* million
(collectively, the "Securities").
This Agreement shall become effective upon the execution hereof by both the
Company and Ladenburg, and the term of this Agreement and the exclusive
appointment provided for herein shall end 180 days from the execution by the
Company unless terminated sooner in accordance with the terms of this Agreement
(the "Term") subject to the provisions described in Section VI below.
I. PERFORMANCE OF SERVICES
Ladenburg's services shall be to act as agent in connection with the Sale
and assist in the negotiation and securing of the Sale.
II. COMPENSATION FOR SERVICES
A. If one or more Sales are consummated during the Term or if one or more
Sales are consummated within twelve months after the end of the Term with
an investor or lender introduced by Ladenburg during the Term, the Company
will pay or cause to be paid to Ladenburg a placement fee (the "Placement
Fee") equal to [ ]*% of the Sale payable upon the closing of each Sale
except if such Sales are consummated with Brand Equity Ventures. If one or
more Sales are consummated during the Term or within twelve months after
the end of the Term with Brand Equity Ventures, the Company will pay or
cause to be paid to Ladenburg a placement fee (the "Placement Fee") equal
to [ ]*% of the
<PAGE> 2
-2-
Sale payable upon the closing of each Sale. Prior to contacting any
prospective investor or lender, Ladenburg shall identify such prospects to
the Company.
B. Subject to the closing of the Sale, the Company agrees to reimburse
Ladenburg for all reasonable out-of-pocket expenses incurred in carrying
out the terms of this Agreement, including travel, telephone, facsimile,
courier and computer time charges, attorneys' fees and disbursements. Such
out-of-pocket expenses are limited to an aggregate of $[ ]* without prior
approval from the Company. In the event that a Sale is not consummated, the
Company agrees to reimburse Ladenburg for [ ]*% of all reasonable
out-of-pocket expenses incurred in carrying out the terms of this
Agreement, including travel, telephone, facsimile, courier and computer
time charges, attorneys' fees and disbursements.
C. If the Company decides to commence an initial public offering of its common
stock within 36 months of the date of the closing of the Sale, the Company
will attempt to negotiate a mutually acceptable agreement with Ladenburg
whereby Ladenburg will act as a manager for such initial public offering.
The provisions of this section II shall survive the termination and
expiration of this Agreement.
III. INDEMNIFICATION
The Company and Ladenburg hereby agree to the terms and conditions of the
Indemnification Agreement attached hereto as Appendix A with the same force and
effect as if such terms and conditions were set forth at length herein.
IV. COORDINATION OF EFFORTS
In order to coordinate the efforts of both Ladenburg and the Company, and
to maximize the possibility of consummating a Sale during the term of this
Agreement, Ladenburg shall have the sole and exclusive authority to initiate and
conduct discussions with potential investors. In the event that the Company, its
directors, officers, employees or shareholders receive any inquiries from or
conduct any discussions with potential investors concerning the availability of
the Sale, such inquiries and discussions shall be promptly referred to
Ladenburg.
V. DISCLOSURE
All descriptive memoranda have been provided to Ladenburg by the Company.
All information provided by the Company to Ladenburg will be considered as
confidential information and shall be maintained as such by Ladenburg, except as
required by law until the same becomes known to the public without release
thereof by Ladenburg.
The Company agrees to provide to Ladenburg, among other things, all
reasonable information requested or required by Ladenburg, including, but not
limited to, information concerning historical and projected financial results
and possible and known litigation and other
<PAGE> 3
-3-
contingent liabilities of the Company. The Company also agrees to make available
to Ladenburg such representatives of the Company, including, among others,
directors, officers, employees, outside counsel and independent certified public
accountants, as Ladenburg may reasonably request. The Company will promptly
advise Ladenburg of any material changes in its business or finances. The
Company represents that all information made available to Ladenburg by the
Company, including, without limiting the generality of the foregoing, any
placement memorandum or other information materials prepared by or approved by
the Company, will be complete and correct in all material respects and will not
contain any untrue statements of a material fact or omit to state a material
fact necessary in order to make the statement therein not misleading in light of
the circumstances under which such statements are made. In rendering its
services hereunder, Ladenburg will be using and relying primarily on such
information without independent verification thereof or independent appraisal of
any of the Company's assets. Ladenburg does not assume responsibility for the
accuracy or completeness of the information. Ladenburg will not initiate contact
with or provide information to prospective purchasers without prior approval
from the Company.
Prior to the closing of an IPO by the Company and subject to the Company's
prior review and approval, the Company authorizes Ladenburg to make public
notice without identifying the Company by name or reference in the form of a
"tombstone," at Ladenburg's expense, of any Sale concluded under this Agreement.
After the closing of an IPO, the Company authorizes Ladenburg to make public
notice in the form of a "tombstone," at Ladenburg's expense, of any Sale
concluded under this Agreement.
VI. TERMINATION
This engagement may be terminated by the Company or by Ladenburg at any
time after 60 days with or without cause upon written notice to that effect to
the other party, but no such termination shall affect Ladenburg's right to
compensation earned on or prior to such termination (including, without
limitation, the Placement Fee described in section IIA hereof) and, subject to
section IIB, Ladenburg shall be entitled to reimbursement of all reasonable
expenses not previously reimbursed.
VII. ENTIRE AGREEMENT, ETC.
This Agreement sets forth the entire understanding of the parties relating
to the subject matter hereof and supersedes and cancels any prior
communications, understandings and agreements between the parties. This
Agreement cannot be changed, nor can any of its provisions be waived, except by
written agreement signed by all parties hereto. This Agreement shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company and Ladenburg. In the event of a dispute between
Ladenburg and the Company with respect to this Agreement, the prevailing party
shall be entitled to recover its cost of reasonable attorney and court fees. A
telecopy of a signed original of this Agreement shall be sufficient to bind the
parties whose signatures appear hereon.
VIII. GOVERNING LAWS AND JURISDICTION
<PAGE> 4
-4-
This Agreement shall be governed by and construed to be in accordance with
the laws of the State of New York applicable to contracts made and to be
performed solely within New York State (without applying New York's choice of
laws or conflicts of law provisions). Any dispute arising out of this Agreement
shall be adjudicated in the courts of the State of New York or in the federal
courts sitting in New York. The parties each agree that service may be made upon
each of them by registered or certified mail (return receipt requested).
IX. ACCEPTANCE
Please confirm that the foregoing is in accordance with your understanding
by signing on behalf of the Company and returning an executed copy of this
Agreement whereupon after execution by Ladenburg it shall become a binding
agreement between the Company and Ladenburg.
Very truly yours,
LADENBURG THALMANN & CO. INC.
By: /s/ Peter M. Graham
-------------------
Peter M. Graham
Vice Chairman
Accepted and agreed to:
ALLOY DESIGNS, INC.
By: /s/ Samuel A. Gradess
---------------------
(Signature)
Date: October 13, 1998
---------------------
<PAGE> 5
APPENDIX A
INDEMNIFICATION AGREEMENT
Appendix A to Letter Engagement Agreement (the "Agreement") dated October
12, 1998 by and between ALLOY Designs, Inc. (the "company") and Ladenburg
Thalmann & Co. Inc. ("Ladenburg").
The company agrees to indemnify and hold Ladenburg and its affiliates,
control persons, directors, officers, employees and agents (each an "Indemnified
Person") harmless from and against all losses, claims, damages, liabilities,
costs or expenses, including those resulting from any threatened or pending
investigation, action, proceeding or dispute whether or not Ladenburg or any
such other Indemnified Person is a party to such investigation, action,
proceeding or dispute, arising out of Ladenburg's entering into or performing
services under this Agreement, or arising out of any matter referred to in this
Agreement. This indemnity shall also include Ladenburg's and/or any such other
Indemnified Person's reasonable attorneys' and accountants' fees and
out-of-pocket expenses incurred in, and the cost of Ladenburg's personnel whose
time is spent in connection with, such investigations, actions, proceedings or
disputes which fees, expenses and costs shall be periodically reimbursed to
Ladenburg and/or to any such other Indemnified Person by the Company as they are
incurred; provided, however, that the indemnity herein set forth shall not apply
where a court of competent jurisdiction has made a final determination that
Ladenburg acted in a grossly negligent manner or engaged in willful misconduct
in the performance of its services hereunder which gave rise to the loss, claim,
damage, liability, cost or expense sought to be recovered hereunder (but pending
any such final determination the indemnification and reimbursement provisions
hereinabove set forth shall apply and the company shall perform its obligations
hereunder to reimburse Ladenburg and/or each such other Indemnified Person
periodically for its, his or their fees, expenses and costs as they are
incurred). The Company also agrees that neither Ladenburg nor any other
Indemnified Person shall have any liability (whether direct or indirect, in
contract or tort or otherwise) to the Company for or in connection with any act
or omission to act by Ladenburg as a result of its engagement under this
Agreement except for any such liability for losses, claims, damages, liabilities
or expenses incurred by the Company that is found in a final determination by a
court of competent jurisdiction to have resulted from Ladenburg's gross
negligence or willful misconduct.
If for any reason, the foregoing indemnification is unavailable to
Ladenburg or any such other Indemnified Person or insufficient to hold it
harmless, then the Company shall contribute to the amount paid or payable by
Ladenburg or any such other Indemnified Person as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the Company and its shareholders on the one hand
and Ladenburg or any such other Indemnified Person on the other hand, but also
the relative fault of the Company and Ladenburg or any such other Indemnified
Person, as well as any relevant equitable considerations; provided that in no
event will the aggregate contribution by Ladenburg and any such other
Indemnified Person hereunder exceed the amount of fees actually received by
Ladenburg pursuant to this Agreement. The reimbursement, indemnity and
contribution
<PAGE> 6
-2-
obligations of the Company hereinabove set forth shall be in addition to any
liability which the Company may otherwise have and these obligations and the
other provisions hereinabove set forth shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, Ladenburg and any other Indemnified Person.
The terms and conditions hereinabove set forth in this Appendix A shall
survive the termination and expiration of this Agreement and shall continue
indefinitely thereafter.
LADENBURG THALMANN & CO. INC.
By: /s/ Peter M. Graham
-------------------
ALLOY DESIGNS, INC.
By: /s/ Samuel A. Gradess
---------------------
Date: October 13, 1998
---------------------
<PAGE> 1
Exhibit 10.34
ALLOY DESIGNS, INC.
STOCK SUBSCRIPTION AGREEMENT
December _______, 1997
<PAGE> 2
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH, OR APPROVED OR
DISAPPROVED BY, THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY, NOR HAVE THE FOREGOING
AUTHORITIES PASSED UPON THE ACCURACY OR ADEQUACY OF THE MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE SECURITIES IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF
RISK. SEE "RISK FACTORS". INVESTORS MUST BE PREPARED TO BEAR THE RISK OF THEIR
INVESTMENT FOR AN INDEFINITE PERIOD AND BE ABLE TO WITHSTAND A TOTAL LOSS OF
THEIR INVESTMENT.
THE SECURITIES ARE OFFERED ONLY TO PERSONS WHOM THE COMPANY BELIEVES TO HAVE THE
QUALIFICATIONS NECESSARY TO PERMIT THE SECURITIES TO BE OFFERED AND SOLD IN
RELIANCE UPON EXEMPTIONS FROM REGISTRATION UNDER THE SECURITIES ACT.
PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THE MEMORANDUM OR ANY
PRIOR OR SUBSEQUENT COMMUNICATION FROM OR WITH THE COMPANY OR ANY PROFESSIONAL
ASSOCIATED WITH THE OFFERING AS LEGAL OR PROFESSIONAL TAX ADVICE. THE OFFEREE
SHOULD CONSULT HIS OR HER OWN COUNSEL, ACCOUNTANT OR BUSINESS ADVISOR AS TO
LEGAL, TAX AND OTHER MATTERS, RESPECTIVELY, CONCERNING HIS OR HER PURCHASE OF
THE SECURITIES OFFERED HEREBY.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME.
<PAGE> 3
FOR FLORIDA RESIDENTS ONLY
PURSUANT TO SECTION 517.061(11)(a)(5) OF THE FLORIDA SECURITIES ACT, YOU HAVE A
RIGHT TO RESCIND YOUR SUBSCRIPTION BY GIVING NOTICE OF SUCH RESCISSION BY
TELEPHONE, TELEGRAPH OR LETTER, WITHIN THREE DAYS AFTER YOU FIRST TENDER
CONSIDERATION, TO THE COMPANY. IF NOTICE IS NOT RECEIVED BY SUCH TIME, THE
FOREGOING RIGHT OF RESCISSION SHALL BE NULL AND VOID.
FOR PENNSYLVANIA RESIDENTS ONLY
EACH PERSON WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED FROM
REGISTRATION BY SECTION 203(d) DIRECTLY FROM AN ISSUER OR AFFILIATE OF AN ISSUER
SHALL HAVE THE RIGHT TO WITHDRAW HIS OR HER ACCEPTANCE WITHOUT INCURRING ANY
LIABILITY TO THE SELLER, UNDERWRITER (IF ANY) OR ANY OTHER PERSON, WITHIN TWO
BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE ISSUER OF HIS OR HER WRITTEN
BINDING CONTRACT OF PURCHASE, OR, IN THE CASE OF A TRANSACTION IN WHICH THERE IS
NO WRITTEN BINDING CONTRACT OF PURCHASE, WITHIN TWO BUSINESS DAYS AFTER HE OR
SHE MAKES THE INITIAL PAYMENT FOR THE SECURITIES BEING OFFERED.
YOUR WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY PERSON. TO
ACCOMPLISH THIS WITHDRAWAL, YOU NEED ONLY SEND A LETTER OR TELEGRAM TO THE
ISSUER INDICATING YOUR INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE
SENT AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED SECOND BUSINESS DAY.
IF YOU ARE SENDING A LETTER, IT IS PRUDENT TO SEND IT BY CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME
WHEN IT WAS MAILED. SHOULD YOU MAKE THE REQUEST ORALLY, YOU SHOULD ASK FOR
WRITTEN CONFIRMATION THAT YOUR REQUEST HAS BEEN RECEIVED.
FOR MASSACHUSETTS RESIDENTS ONLY
THE SECURITIES DIVISION OF THE OFFICE OF THE SECRETARY OF STATE OF THE
COMMONWEALTH OF MASSACHUSETTS HAS STATED IN A WRITTEN POLICY THAT IT VIEWS
FORWARD-LOOKING FINANCIAL INFORMATION AS "HIGHLY SUSPECT" AS A BASIS FOR MAKING
INVESTMENT DECISIONS. THE SECURITIES ARE BEING OFFERED IN MASSACHUSETTS ONLY TO
ACCREDITED INDIVIDUAL INVESTORS AND TO CERTAIN OTHER INSTITUTIONAL ACCREDITED
INVESTORS. EACH MASSACHUSETTS PURCHASER WILL BE REQUIRED TO REPRESENT TO THE
COMPANY THAT SUCH PURCHASER IS, BY REASON OF HIS OR HER INVESTMENT EXPERIENCE
AND SOPHISTICATION,
<PAGE> 4
FULLY CAPABLE OF UNDERSTANDING AND EVALUATING ANY PROJECTED FINANCIAL
INFORMATION PROVIDED TO THE PURCHASER.
<PAGE> 5
ALLOY DESIGNS, INC.
STOCK SUBSCRIPTION AGREEMENT
Alloy Designs, Inc.
79 Franklin Street
Allston, MA 02134
Gentlemen:
Subject to the terms and conditions set forth below, the undersigned
hereby offers to purchase from Alloy Designs, Inc., a Delaware corporation (the
"Company"), _____________ shares of the Company's Common Stock, $0.01 par value
per share ("Common Stock"), for the aggregate purchase price of $_______________
in cash, or $____________ per share. The shares of Common Stock purchased
hereunder are together referred to herein as the "Securities".
In connection with the execution of this Agreement and to induce the
Company to sell the Securities to the undersigned, the undersigned hereby
represents, warrants and agrees as follows:
1. Accredited Investor. I am an "accredited investor" as such term is
defined in Regulation D under the Securities Act of 1933, as amended (the
"Securities Act"), for the following reason [Please initial one or more]:
<PAGE> 6
|_| My individual income was in excess of $200,000 in each of the past
two years, or my joint income with my spouse was in excess of
$300,000 in each of those years, and I reasonably expect my income
to reach the same level in the current year.
|_| My individual net worth or joint net worth with my spouse exceeds
$1,000,000.
|_| The undersigned is a trust, corporation or partnership with total
assets in excess of $5,000,000, not formed for the specific purpose
of acquiring the Securities, whose purchase of the Securities will
be directed by a person whose knowledge and experience in financial
and business matters is such that he or she is capable of evaluating
the merits and risks of the investment in the Securities.
|_| The undersigned is an entity in which all of the equity owners are
accredited investors.
|_| I am a director or executive officer of the Company.
|_| The undersigned is a bank, savings and loan association, broker,
dealer, insurance company, investment company, business development
company, or small business investment company.
|_| The undersigned is an employee benefit plan with assets greater than
$5,000,000 or where the investment decision is made by a bank,
savings and loan association, insurance company, or registered
investment advisor.
|_| The undersigned is a self-directed employee benefit plan where the
investment decisions are made solely by accredited investors.
2. Experience and Suitability. I am qualified by my own knowledge and
experience in financial and business matters, or by such knowledge and
experience on the part of any advisors who are advising in connection herewith,
to evaluate the merits and risks of an investment in the Securities and to make
an informed decision relating thereto. I have the financial capability for
making the investment and protecting my interests, and I can afford a complete
loss of the investment. The investment is a suitable one for me.
3. No Need for Liquidity. I am aware that I will be unable to liquidate my
investment readily in case of an emergency or other exigent instance or on
demand and that the Securities being purchased may have to be held for an
indefinite period of time. My overall commitment to investments which are not
readily marketable is not excessive in view of my net worth and financial
circumstances and the purchase of the Securities will not cause such commitment
to become excessive. In view of such facts, I acknowledge that I have adequate
means of providing for my current needs, anticipated future needs and possible
contingencies and emergencies and have no need for liquidity in the investment
in the Securities. I am able to bear the economic risk of this investment.
2
<PAGE> 7
4. Opportunity to Investigate. Prior to the execution of this Agreement,
my advisors and I have had the opportunity to ask questions of, and receive
answers from, representatives of the Company concerning the terms and conditions
of this transaction, and the finances, operations, business and prospects of the
Company. My advisors and I have also had the opportunity to obtain additional
information necessary to verify the material accuracy and completeness of
information furnished about the Company. Accordingly, I have independently
evaluated the risks of purchasing the Securities, and I am satisfied that I have
received information with respect to all matters which I consider material to my
decision to make this investment.
5. Risk Factors. I have carefully considered the potential risks relating
to the Company and a purchase of the Securities. I fully understand that the
Company has limited financial and operating history and that the Securities are
speculative investments which involve a high degree of risk of loss of my entire
investment. I am familiar with the general risks of investment in companies with
a limited operating history. I understand that the Company is subject to all of
such risks, and to all of the risks inherent in any catalogue, online/Internet
shopping and/or apparel retailing company. I am aware that no public market
exists for the Securities and that the Securities may not be sold without
compliance with applicable federal and state securities laws. I understand that
the Company has made no assurances that a public market will ever exist for the
Securities and that, even if a public market exists in the future, I may not
readily be able to sell the Securities. I have considered each of these risks
regarding an investment in the Company and the Securities. I understand that the
risks described to me by the Company are not a complete list of risks involved
in an investment in the Company. Among others, I have considered each of the
following risks regarding an investment in the Company and the Securities:
A. Limited Operating History. The Company was formed in January 1996 and
has a only limited history of operations from which to evaluate market
acceptance of the Company's concept or the ability of the Company to implement
and manage the concept or on which to base projections as to the future
performance of the Company. Consequently, the Company must be evaluated after
consideration of the potential problems, delays, uncertainties and complications
often connected with a company at this relatively early stage of development. As
a result of the Company's operations thus far, the Company has generated modest
revenues from the sale of products and has incurred significant operating
losses. There can be no assurance that the Company will be able to achieve
market acceptance or achieve or sustain meaningful sales increases or profitable
operations in the future.
B. Capital Needs. The Company has limited capital with which to operate
and must raise substantial funds in order to meet its business goals. For the
past eighteen months, the Company has operated using the proceeds of previous
private placements of stock and warrants to purchase Common Stock which provided
$_____________ in operating capital. The Company anticipates using funds from
the sale of the Securities to continue to fund its operating expenses and for
general working capital purposes. There can be no assurance that the Company
will be able to raise additional capital if and when needed or that such funds
will be available on terms and conditions which will permit a reasonable rate of
return to investors in the Company. The failure to raise needed funds on
sufficiently favorable terms could have a material adverse effect on the
Company's operations, financial condition and future prospects.
3
<PAGE> 8
C. Catalogue Design and Sales; Online/Internet. The Company has produced
and mailed two catalogues thus far and has generated a modest level of sales as
a result of these mailings. Each of these initial catalogues have required, and
any subsequent catatogues will require, significant design and development prior
to printing and mailing or online/Internet availability. There can be no
assurance that the products offered via the Company's catalogues and
online/Internet offerings will be successfully marketed or obtain acceptance
from customers. There can be no assurance that the software to be used by the
Company for online/Internet sales will perform its intended functions, or that
the customers will find these functions satisfactory. Even if such software
performs its intended functions, and customers desire to purchase the Company's
products online or via the Internet, there can be no assurance that such
customers will purchase the Company's products in any particular volume.
D. Changes in Fashion Trends and Industry Risks. The Company's success
depends, in part, on management's ability to anticipate the fashion tastes of
its targeted consumers and to offer merchandise that appeals to their
preferences. The theme of activity-oriented apparel could go out of favor with
the Company's targeted consumers or the activities selected or emphasized by the
Company may not be the ones found most appealing by such consumers at any
particular time. The inability of the Company successfully to anticipate,
identify or react to changes in styles, trends or brand preferences of its
customers could lead to, among other things, excess inventories and price
markdowns, which could have a material adverse effect on the Company. In
addition, misjudgments in apparel selection could adversely affect the Company's
image with its customers, which could have a material adverse effect on the
Company. There can be no assurance the Company will be able to achieve or
maintain a high rate of growth, particularly if the retail environment declines.
A recession in the national or regional economies or uncertainties regarding
future economic prospects, among other things, could affect consumer spending
habits and have a material adverse effect on the Company. The Company's business
is sensitive to consumer spending patterns and preferences. Shifts in the
targeted consumers' discretionary spending away from the Company's products to
other consumer goods also could have a material adverse effect on the Company.
E. Competition. The apparel industry is highly competitive. The Company
expects to compete with general and specialty store retailers, winter sports
destination retailers, as well as catalogue retailers and other direct
marketers. Many of the Company's expected competitors are larger and have
substantially greater financial, distribution and marketing resources than the
Company. Competitors could enter into exclusive distribution arrangements with
the Company's vendors and deny the Company access to their products. Increased
competition could result in pricing pressures, marketing expenditures and loss
of market share, and could have a material adverse effect on the Company. The
Company believes its success will depend, in part, on its ability to adapt to
new marketing and sales technologies (such as online malls and shopping sites
and its own site on the World Wide Web and links with others Websites, including
those of product manufacturers and sponsors or other advertisers) and to respond
to competitors' actions in these areas. Adapting to new technologies could
require significant capital expenditures by the Company, and there can be no
assurance that the Company will remain competitive in response to technological
changes. The Company's success may be dependent in part on its being an early
4
<PAGE> 9
entrant into the market for products of the kind anticipated to be offered. If
multiple entrants precede the Company in the market, the marketing efforts of
the Company and its ability to compete could be severely impaired.
F. Ability to Develop and Maintain Proprietary Customer Lists. The Company
must first develop, and then will mail catalogues to names in, its proprietary
database (which are primarily derived from word-of-mouth inquiries and responses
to the Company's advertising) and to potential customers whose names are
obtained from purchased and rented lists. Names derived from purchased or rented
lists may generate lower response rates than names derived from word-of mouth
requests. The Company must constantly update its mailing lists to identify new,
prospective customers in the target group for the Company's products. Proposed
legislation, or other similar laws or regulations that may be enacted, could
impair the Company's ability to collect customer names or profit from future
plans to sell demographic information relating to the population. Furthermore,
additional legislation or regulations could limit the Company's ability to
continue to compile personal information on customers and customer prospects in
the target group for the Company's products or to use that information in the
course of its business, which could have a material adverse effect on the
Company.
G. Risks of Growth Strategy. The Company intends to pursue an aggressive
growth strategy and its future operating results will largely depend on its
ability to manage a growing business. Managing its growth will require the
Company to implement and improve its operations and financial and management
information systems and to build, expand, motivate and effectively manage its
workforce. The Company may maintain high inventory levels in certain categories
in an effort to maintain satisfactory fulfillment rates for its catalogue
customers. This may expose the Company to risk of excess inventories and
inventory obsolescence, which could have a material adverse effect on the
Company.
H. Attraction of and Dependence on Key Vendors; Mix of Products. The
Company's business depends, in part, on the Company's ability to purchase
current-season brand-name apparel at competitive prices, in sufficient
quantities and of acceptable quality. The Company does not have long-term
contracts with any vendors and may experience reluctance on the part of leading
apparel vendors to do business with the Company, or to do so on terms acceptable
to the Company. Such vendors may avoid or limit doing business with the Company
out of concern that they will harm other channels of distribution of their
products. The failure of key vendors to expand with the Company, the loss of one
or more key vendors, a material change in the Company's current purchase terms
or a limitation on the Company's ability to procure products could have a
material adverse effect on the Company.
I. Need to Attract and Dependence on Key Personnel. The success of the
Company will largely depend upon the Company's ability to attract and retain
additional senior management, especially in the areas of merchandising and
catalogue design and production. An inability to attract, or the loss of, key
employees could have a material adverse effect on the Company. There can be no
assurance that the Company will be successful in attracting or retaining
additional qualified personnel.
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<PAGE> 10
J. Fluctuations in Postage and Paper Expenses. Postage and paper expenses
will be a significant expense, upwards of 10% of the Company's anticipated net
sales,. Material increases in paper or catalogue delivery costs could have a
material adverse effect on the Company.
K. Reliance on Information Systems. The Company's success will depend, in
part, on its ability to provide prompt, accurate and complete service to its
customers on a competitive basis, and to purchase and promote products, manage
inventory, ship products, manage sales and marketing, and maintain efficient
operations through its telephone and management information systems. A
significant disruption in its telephone and management information systems could
adversely affect the Company's relations with its customers and vendors and its
ability to manage its operations. Furthermore, there can be no assurance that
extended or repeated reliance on back-up computer and telephone systems, which
need to be developed in the first instance, would not have a material adverse
effect on the Company.
L. Reliance on Third-Party Fulfillment and Parcel Services. All the
Company's orders for merchandise will be handled initially by third-party
fulfillment companies. Any disruption in fulfillment operations could have a
material adverse effect on the Company and its reputation with customers. In
addition, strikes or other service interruptions by the Company's shippers or
parcel services could have a material adverse effect on the Company's ability to
deliver merchandise on a timely basis. The Company will attempt to deliver its
catalogues to its customers at timely seasonal intervals. The failure of the
Company to deliver catalogues at appropriate times or postal delays or
disruptions in the mailing of catalogues, could affect the demand for the
Company's products and could have a material adverse effect on the Company.
M. Seasonal and Quarterly Fluctuations. The Company expects to be subject
to seasonal fluctuations in its merchandise sales and results of operations. The
Company expects its sales and operating results generally to be lower in the
second and third quarters than in the first and fourth quarters of each fiscal
year (which include the back-to-school and winter holiday season and also orient
toward the period of peak winter sports activity which will be emphasized
initially by the Company). Adaptation of the Company's concept to temperate
climates and around-the-year activities, such as inline skating, biking and
beach/water activities, represents a challenge and an opportunity for the
Company. The Company's quarterly results may fluctuate as a result of numerous
factors, including the timing, quantity and cost of catalog mailings (including
sale circulars); the response rates to such mailings; the timing of merchandise
deliveries; market acceptance of the Company's merchandise; the mix, pricing and
presentation of products offered and sold; the hiring and training of additional
personnel; the timing of inventory writedowns; and the incurrence of other
operating costs and factors beyond the Company's control, such as general
economic conditions and actions of competitors. Accordingly, the results of
operations in any quarter will not necessarily be indicative of the results that
may be achieved for a full fiscal year or any future quarter.
N. International Business Risks. The Company expects to distribute its
catalogues in Japan and intends to have distribution there and to explore
distribution opportunities in other international markets. The Company's
anticipated international business is subject to a number of risks generally
associated with doing business internationally. Furthermore, expansion into new
6
<PAGE> 11
international markets may present competitive and merchandising challenges
different from those the Company currently faces, including, but not limited to,
certain vendors that may not want their products distributed overseas outside of
exclusive distribution channels. There can be no assurance the Company will
expand internationally or that such expansion will result in profitable
operations.
O. Risk that the Company May Be Required to Collect Sales Tax. The Company
does not expect to collect sales or other similar taxes in respect of shipments
of goods into most states. However, various states have sought to impose state
sales tax collection obligations on out-of-state mail-order companies, such as
the Company. A successful assertion by one or more states that the Company
should have collected or be collecting sales taxes on the sale of products could
have a material adverse effect on the Company.
P. Unspecified Use of Proceeds. The Company expects to use the net
proceeds from this placement primarily for working capital and general corporate
purposes. The Company has no current specific plan for a significant portion of
the proceeds of this offering other than to build up its organization and to
focus on catalogue development and marketing, and, as a consequence, management
will have discretion over the use of the proceeds.
Q. Control by Principal Stockholders. After the close of this financing,
the Company's founders, Matt Diamond, Jim Johnson and Sam Gradess, will control
______ % of the Company's Common Stock. In addition, pursuant to a certain
Stockholders and Voting Agreement among all of the existing stockholders of the
Company and the founders, the founders have the right to vote all of the
stockholders' shares in the founders' sole discretion. Accordingly, the founders
can control the election of directors of the Company and the outcome of all
issues submitted to a vote for stockholders of the Company.
R. Intellectual Property Rights. There can be no assurance that the
Company will be able to obtain adequate protection for its name, logos and other
intellectual property. Without such protection, other persons and entities may
be able to emulate or derive promotional benefit from the Company's products
more successfully. Even if the Company is successful in obtaining protection,
there can be no assurance that competing products will not be developed and
marketed.
S. Offering Price and Dilution. The price of the Securities has been
established by the Company. Such price is not based upon such established value
criteria as assets, earnings, net worth or book value. There can be no assurance
that the purchase price of the Securities reflects the true value of the
business opportunities presented by the Company's assets. Investors will suffer
immediate and substantial dilution upon the purchase of the Securities. In
addition, the Company reserves the right in its discretion to issue additional
securities from time to time in such amounts and for such consideration as it
deems appropriate and desirable at such time. Such additional securities may
have preferential rights over those of the Company's Common Stock. There can be
no assurance that any such future offering will not be at a price less than the
price paid by the undersigned for the Securities or will not cause dilution to
the Company's stockholders. Further, management reserves the right to offer,
from time to time in its discretion, equity participation in the Company to key
employees, consultants and directors in order to obtain or retain the services
of such persons. Any such subsequent issue of shares of capital stock in the
Company may have the
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<PAGE> 12
effect of further diluting the value of the securities owned by the then
securities holders of the Company.
T. Use of Financial Forecasts. The financial forecasts, if any, provided
to the undersigned, are based upon various assumptions made by the Company in
the preparation of such forecasts, and are provided for illustrative purposes
only. The validity and accuracy of the assumptions underlying the forecasts
depend in large part on future events over which the Company has limited
control. Consequently, there can be no assurance that the actual operating
results of the Company will correspond to any of the financial forecasts. The
Company can give no assurance that the assumptions will prove to be valid and
therefore can give no assurance that the projected results will be realized.
Accordingly, an investment in the Company should not be made in reliance on any
such financial forecasts provided by the Company.
U. No Dividends. The Company has not paid any dividends since its
formation. It is highly unlikely that any dividends will be declared or paid in
the foreseeable future.
6. Investment Purpose. I am acquiring the Securities for my own account
for the purpose of investment and not with a view to, or for resale in
connection with, the distribution thereof, nor with any present intention of
distributing or selling the Securities. I understand that the Securities have
not been registered under the Securities Act or the securities laws of any
state, and I hereby agree not to make any sale, transfer or other disposition of
any such Securities unless either (i) the Securities first shall have been
registered under the Securities Act and all applicable state securities laws, or
(ii) an exemption from such registration is available, and the Company has
received such documents and agreements from me and the transferee as the Company
requests at such time. If I am a resident of the State of Pennsylvania, I agree
that I will not sell the Securities for a period of 12 (twelve) months from the
date hereof except in accordance with Regulation 204.011 promulgated under the
Pennsylvania Securities Act of 1972.
7. Legends. I understand that until the Securities have been registered
under the Securities Act and applicable state securities laws each certificate
representing such securities shall bear a legend substantially similar to the
following:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
or any state securities laws, have been acquired for investment, and
may not be sold, pledged, hypothecated or otherwise transferred
unless a registration statement under the Act and applicable state
law is in effect with regard thereto or unless an exemption from
such registration is available.
8. No Regulatory Approval of Merits. I understand that neither the
Securities and Exchange Commission nor the commissioner or department of
securities or attorney general of any state has passed upon the merits or
qualifications of, nor recommended nor approved, the Securities. Any
representation to the contrary is a criminal offense.
9. Miscellaneous.
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<PAGE> 13
(a) Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a
party may designate by notice hereunder, and shall be either (i) delivered
by hand, (ii) made by telex, telecopy or facsimile transmission, (iii)
sent by overnight courier, or (iv) sent by registered mail, return receipt
requested, postage prepaid.
If to the undersigned:
To the address designated in Section 10 hereof.
If to the Company:
To the address set forth at the top of this Agreement.
All notices, requests, consents and other communications hereunder shall
be deemed to have been given either (i) if by hand, at the time of the
delivery thereof to the receiving party at the address of such party set
forth above, (ii) if made by telex, telecopy or facsimile transmission, at
the time that receipt thereof has been acknowledged by electronic
confirmation or otherwise, (iii) if sent by overnight courier, on the next
business day following the day such notice is delivered to the courier
service, or (iv) if sent by mail, on the 3rd business day following the
day such mailing is made.
(b) Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties hereto with respect to the subject
matter hereof and supersedes all prior oral or written agreements and
understandings relating to the subject matter hereof. No statement,
representation, warranty, covenant or agreement of any kind not expressly
set forth in this Agreement shall affect, or be used to interpret, change
or restrict, the express terms and provisions of this Agreement.
(c) Modifications and Amendments. The terms and provisions of this
Agreement may be modified or amended only by written agreement executed by
the parties hereto.
(d) Waivers and Consents. The terms and provisions of this Agreement
may be waived, or consent for the departure therefrom granted, only by
written document executed by the party entitled to the benefits of such
terms or provisions. No such waiver or consent shall be deemed to be or
shall constitute a waiver or consent with respect to any other terms or
provisions of this Agreement, whether or not similar. Each such waiver or
consent shall be effective only in the specific instance and for the
purpose for which it was given, and shall not constitute a continuing
waiver or consent.
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<PAGE> 14
(e) Assignment. This Agreement may not be transferred or assigned
without the prior written consent of the Company and any such transfer or
assignment shall be made only in accordance with applicable laws and any
such consent.
(f) Benefit. All statements, representations, warranties, covenants
and agreements in this Agreement shall be binding on the parties hereto
and shall inure to the benefit of the respective heirs, executors,
administrators, successors and permitted assigns of each party hereto.
Nothing in this Agreement shall be construed to create any rights or
obligations except among the parties hereto, and no person or entity shall
be regarded as a third-party beneficiary of this Agreement.
(g) Governing Law. This Agreement and the rights and obligations of
the parties hereunder shall be construed in accordance with and governed
by the law of the State of Delaware, without giving effect to the conflict
of law principles thereof.
(h) Jurisdiction and Service of Process. Any legal action or
proceeding with respect to this Agreement shall be brought in the courts
of the [State of New York] or [the United States District Court for the
Southern District of New York]. By execution and delivery of this
Agreement, each of the parties hereto accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Each of the parties hereto irrevocably consents to the
service of process of any of the aforementioned courts in any such action
or proceeding by the mailing of copies thereof by certified mail, postage
prepaid, to the party at its address set forth in Section 9(a) hereof.
(i) Severability. In the event that any court of competent
jurisdiction shall determine that any provision, or any portion thereof,
contained in this Agreement shall be unenforceable in any respect, then
such provision shall be deemed limited to the extent that such court deems
it enforceable, and as so limited shall remain in full force and effect.
In the event that such court shall deem any such provision, or portion
thereof, wholly unenforceable, the remaining provisions of this Agreement
shall nevertheless remain in full force and effect.
(j) Interpretation. Each of the parties hereto acknowledge and agree
that: (i) such party and its or his counsel have reviewed the terms and
provisions of this Agreement; (ii) the rule of construction to the effect
that any ambiguities are resolved against the drafting party shall not be
employed in the interpretation of this Agreement; and (iii) the terms and
provisions of this Agreement shall be construed fairly as to the parties
hereto and not in favor of or against any party, regardless of which party
was generally responsible for the preparation of this Agreement. Whenever
used herein, the singular number shall include the plural, the plural
shall include the singular, the use of any gender shall include all
persons.
(k) Headings and Captions. The headings and captions of the various
subdivisions of this Agreement are for convenience of reference only and
shall in no way modify, or affect the meaning or construction of any of
the terms or provisions hereof.
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<PAGE> 15
(l) Survival of Representations and Warranties. All representations
and warranties made by the parties hereto in this Agreement or in any
other agreement, certificate or instrument provided for or contemplated
hereby, shall survive (i) the execution and delivery hereof, (ii) any
investigations made by or on behalf of the parties and (iii) the closing
of the transaction contemplated hereby, and shall remain in full force and
effect for a period of one year following the date of such closing.
(m) Expenses. Each of the parties hereto shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or
others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby whether or not the transactions
contemplated hereby are consummated.
(n) Counterparts. This Agreement may be executed in one or more
counterparts, and by different parties hereto on separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
10. I am purchasing the Securities as follows (please check as
appropriate):
|_| individually |_| in trust
|_| joint tenants |_| as a partnership
|_| tenants in common |_| other:
Name:________________________________________________________________
Telephone:___________________________________________________________
Home Address:________________________________________________________
City: ______________________________________State:___________________
Zip:_________________________________________________________________
Business:____________________________________________________________
Bus. Address:________________________________________________________
City: ______________________________________State:___________________
Zip:_________________________________________________________________
Business Telephone:__________________________________________________
Communications should be sent to: (check one) business ____or
home address ____
Social Security Number_______________________________________________
11. Under penalties of perjury, I certify that:
A. The number shown above is my correct Social Security Number; and
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<PAGE> 16
B. I am not subject to backup withholding either because I have not
been notified by the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or dividends, or the
IRS has notified me that I am no longer subject to backup withholding.
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<PAGE> 17
IN WITNESS WHEREOF, the undersigned has executed this Agreement as a
sealed instrument on this day of , 1997.
(For Co-owners, if applicable)
- ------------------------ - -------------------- -
Signature Signature
- ------------------------ - -------------------- -
Print Name Print Name
(For Entities, if applicable)
Entity name:
---------------------------------
By:
------------------------------
Name:
Title:
**********************************************************
The foregoing subscription for Securities of Alloy Designs, Inc. is hereby
accepted.
ALLOY DESIGNS, INC.
By:
---------------------------
Date:
--------------------------
13
<PAGE> 1
Exhibit 10.35
OFFERING OF
UNITS
OF
ALLOY DESIGNS, INC.
-------------------------------
SUBSCRIPTION INSTRUCTIONS
-------------------------------
Alloy Designs, Inc. (the "Company") is offering units (the "Units"), each
Unit consisting of one 10% Promissory Note in the principal amount of $100,000
and one three-year Warrant to purchase 11,185 shares of Common Stock, par value
$.01 per share (the "Common Stock"), of the Company, at an initial exercise
price per share equal to $6.165 (subject to adjustment upon the occurrence of
certain events). Each subscription must be for a minimum of one Unit ($100,000)
unless the Company and Ladenburg Thalmann & Co. Inc. (the "Placement Agent"), in
their joint discretion, permit subscriptions for a lesser amount.
In order to subscribe for the Units, a prospective purchaser must complete
and execute the enclosed subscription documents in accordance with the
instructions set forth herein. The subscription documents should then be
returned to Ladenburg Thalmann & Co. Inc. 590 Madison Avenue, New York, New York
10022, Attention: Neil Vogel on or before Wednesday, May 13, 1998, for a closing
on the same date, unless such closing date is extended by agreement of the
Placement Agent and the Company. Payment for the Units should accompany such
documents. Such payment is to be made by certified check payable to Alloy
Designs, Inc. or via wire funds to the Company's account at Fleet Bank (Routing
No. 021000322) Account Number 9401306052. A representative from the Placement
Agent will confirm the details of your payment prior to the anticipated May 13th
closing date. Please be sure that your name appears in exactly the same way in
each signature and in each place where it is inserted in the documents.
Subscriptions from suitable prospective investors will be accepted at the
sole discretion of the Company after receipt of all subscription documents
(properly completed and executed) with the appropriate payment.
FOR ALL PURCHASERS
Subscription Agreement: READ, complete, date and sign one (1)
copy. Each co-subscriber must complete
and sign an executed signature page as
well.
Corporations, partnerships, trusts and
retirement plans must attach
appropriate
<PAGE> 2
authorizing instruments (corporate
resolution or by-laws, partnership
agreement, trust instrument or
retirement plan). Additional
documentation may be required for
non-individual subscribers.
Signature Pages: Complete and sign one (1) copy. Each
co-subscriber must complete and sign
one (1) signature page.
IRS Form W-8 or W-9: Complete, date and sign appropriate
IRS Form.
Payment: Unless otherwise directed by a
representative of the Placement Agent,
payment for the Units should be made
on Wednesday morning, May 13, 1998, by
certified check payable to the Company
or wire transfer to the Company=s
account at Fleet Bank (Routing No.
021000322) Account Number 9401306052.
You will be called by a representative
of the Placement Agent prior to the
date subscriptions for Units are
accepted (anticipated to be May 13,
1998) to confirm the instructions
regarding payment for the Units.
IF YOU HAVE ANY QUESTIONS CONCERNING THE COMPLETION OF THE SUBSCRIPTION
DOCUMENTS, PLEASE CONTACT NEIL VOGEL AT LADENBURG THALMANN & CO. INC., 590
MADISON AVENUE, NEW YORK, NEW YORK 10022 (212-409-2000).
<PAGE> 3
SUBSCRIPTION AGREEMENT
------------------------------------------------
Alloy Designs, Inc.
------------------------------------------------
A Maximum of 50 Units
Each Unit Consisting of one
10% Promissory Note in the
principal amount of $100,000 and
one Three-Year Warrant for the purchase of
11,185 shares of Common Stock at $6.165 per share
of
Alloy Designs, Inc.
--------------------
To: Alloy Designs, Inc.
This Subscription Agreement is made between Alloy Designs, Inc., a
Delaware corporation (the "Company"), and the undersigned prospective purchaser
who is subscribing hereby for units, or, at the discretion of the Company and
the Placement Agent, a fraction thereof (the "Units"), each Unit consisting of
one 10% promissory note in the principal amount of $100,000 (the "Notes") and
one three-year warrant (the "Warrants") for the purchase of 11,185 shares of
Common Stock, par value $.01 per share (the "Common Stock"), of the Company at
an exercise price per share equal to $6.165 (subject to adjustment upon the
occurrence of certain events). The purchase price per Unit (the "Purchase
Price") is $100,000. This subscription is submitted to you in accordance with
and subject to the terms and conditions described in this Subscription
Agreement. The Note and the Warrant to be issued in connection with this
Subscription Agreement will be substantially in the form attached hereto as
Exhibit A and Exhibit B, respectively.
In consideration of the Company's agreement to sell Units to the
undersigned upon the terms and conditions set forth herein and the Exhibits
hereto, the undersigned agrees and represents as follows:
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<PAGE> 4
A. SUBSCRIPTION.
(1) The Company is offering, pursuant to Section 4(2) under
the Securities Act of 1933, as amended (the "Securities Act"), up to 50
Units at a price of $100,000 per Unit, for an aggregate consideration of
up to $5,000,000. There is no assurance that any or all of the Units will
be sold. The undersigned acknowledges and agrees that the Company will
have the right to determine the amount of financing it wishes to accept.
(2) The offering will expire at 5:00 P.M. New York City Time
on May 20, 1998, unless extended by the Company, as determined in its sole
discretion.
(3) The undersigned hereby irrevocably subscribes for and
agrees to purchase the number of Units indicated on the signature page
hereto at a purchase price of $100,000 per Unit. The undersigned encloses
herewith a completed and executed copy of this Subscription Agreement and
a Form W-8 or W-9, as applicable. The Company will notify the undersigned
prior to the date subscriptions of Units are accepted (the "Closing") as
to where to send payment in the full amount of the purchase price of the
Units for which the undersigned is subscribing (the "Payment"). On or
before the Closing all corporate action necessary to authorize the sale
and issuance of up to 50 Units under the terms and conditions set forth
herein, including the Exhibits hereto, will have been taken.
(4) Upon receipt by the Company of the requisite payment for
all Units to be purchased by the undersigned, the Warrants underlying the
Units so purchased will be issued in the name of the undersigned, and the
name of the undersigned will be registered on the books of the Company as
the record owner of such Warrants.
(5) The undersigned hereby agrees to be bound hereby upon the
(i) execution and delivery to the Company, in care of the Placement Agent,
of the signature page to the undersigned's completed Subscription
Agreement, and (ii) acceptance by the Company of the undersigned's
subscription (the "Subscription").
(6) The undersigned agrees that Ladenburg Thalmann & Co. Inc.,
the Company's placement agent in connection with this offering (the
"Placement Agent"), may, in its sole and absolute discretion, reduce the
undersigned's Subscription to any number of Units that in the aggregate do
not exceed the number of Units hereby applied for without any prior notice
to or further consent by the undersigned. The undersigned hereby
irrevocably constitutes and appoints the Placement Agent and each officer
of the Placement Agent, each of the foregoing acting singly, in each case
with full power of substitution, the true and lawful agent and
attorney-in-fact of the undersigned, with full power and authority in the
undersigned's name, place and stead, to amend this Subscription Agreement
to effect any of the foregoing provisions of this paragraph 6.
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<PAGE> 5
B. REPRESENTATIONS AND WARRANTIES.
The undersigned hereby represents and warrants to, and agrees with, the
Company and the Placement Agent as follows:
(1) The undersigned and/or the undersigned's advisor(s)
has/have the knowledge and experience in financial and business matters
necessary to evaluate an investment in the Company, and have carefully
reviewed, evaluated and understand the risks of, and other considerations
relating to the purchase of the Units. With respect to individual tax and
other economic considerations involved in this investment, the undersigned
is not relying on the Company or the Placement Agent (or any agent or
representative of either of them). The undersigned has carefully
considered and has, to the extent the undersigned believes such discussion
necessary, discussed with the undersigned's professional legal, tax,
accounting and financial advisors the suitability of an investment in the
Units for the undersigned's particular tax and financial situation and has
determined that the Units being subscribed for by the undersigned are a
suitable investment for the undersigned;
(2) The undersigned acknowledges that (i) the undersigned has
had the right to request copies of any documents, records and books
pertaining to this investment and (ii) such documents, records and books
which the undersigned requested have been made available for inspection by
the undersigned, the undersigned's attorney, accountant or adviser(s);
(3) The undersigned and/or the undersigned's adviser(s)
has/have had a reasonable opportunity to ask questions of and receive
answers from a person or persons acting on behalf of the Company
concerning the offering of the Units and all such questions have been
answered to the full satisfaction of the undersigned;
(4) In making the decision to purchase the Units herein
subscribed for, the undersigned has relied solely upon independent
investigations made by the undersigned or his advisors, including
information supplied in the Confidential Private Placement Memorandum
dated April 1998 and in the subscription documents. The undersigned is not
relying on the Company or the Placement Agent with respect to economic
considerations involved in this investment;
(5) The undersigned is not subscribing for Units as a result
of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or presented at any seminar or
meeting, or any solicitation of a subscription by a person not previously
known to the undersigned in connection with investments in securities
generally;
(6) If the undersigned is a natural person, the undersigned
has reached the age of majority in the state in which the undersigned
resides, has adequate means of providing for the undersigned's current
financial needs and contingencies, is able to bear
5
<PAGE> 6
the substantial economic risks of an investment in the Units for an
indefinite period of time, has no need for liquidity in such investment,
and, at the present time, could afford a complete loss of such investment;
(7) The undersigned or the undersigned's purchaser
representative, as the case may be, has such knowledge and experience in
financial, tax and business matters so as to enable the undersigned to
utilize the information made available to the undersigned in connection
with the offering of the Units to evaluate the merits and risks of an
investment in the Units and to make an informed investment decision with
respect thereto;
(8) The undersigned will not sell or otherwise transfer the
Units or the Notes or the Warrants underlying the Units without
registration under the Securities Act and applicable state securities laws
or an exemption therefrom. Neither the Units nor the securities underlying
the Units have been registered under the Securities Act or under the
securities laws of any state. The undersigned represents that the
undersigned is purchasing the Units for the undersigned's own account, for
investment and not with a view to resale or distribution thereof except in
compliance with the Securities Act. The undersigned has not offered or
sold any portion of the Units being acquired nor does the undersigned have
any present intention of dividing Units with others or of selling,
distributing or otherwise disposing of any portion of such Units currently
or after the passage of a fixed or determinable period of time or upon the
occurrence or non-occurrence of any predetermined event or circumstance in
violation of the Securities Act. The undersigned is aware that there is
currently no market for the Units or the securities included in or
underlying the Units. The undersigned is aware that an exemption from the
registration requirements of the Securities Act pursuant to Rule 144
promulgated thereunder is not presently available; and, except as provided
in the Warrants, the Company has no obligation to register the Units or
the securities included in or underlying the Units subscribed for
hereunder or to make available an exemption from the registration
requirements pursuant to such Rule 144 or any successor rule for resale of
such securities. The undersigned recognizes and understands that the Note
and Warrant issued hereunder are not detachable and may not be separately
transferred without the prior written consent of the Company;
(9) The undersigned recognizes that an investment in the Units
involves substantial risks, including loss of the entire amount of such
investment, and has taken full cognizance of and understands all of the
risks related to the purchase of the Units;
(10) The undersigned acknowledges that the Notes and each
certificate representing the Warrants included in the Units and, upon
exercise of the Warrants, the shares of Common Stock issuable upon
exercise of the Warrants shall be stamped or otherwise imprinted with a
legend substantially in the following form, among others:
6
<PAGE> 7
"The securities represented hereby have not been
registered under the Securities Act of 1933, as amended, or
any state securities laws and neither the securities nor any
interest therein may be offered, sold, transferred, pledged or
otherwise disposed of except pursuant to an effective
registration statement under such act or such laws or an
exemption from registration under said act and such laws,
which, in the opinion of counsel for the holder, which counsel
and opinion are reasonably satisfactory to counsel for this
corporation, is available";
(11) If the undersigned is a retirement plan or is investing
on behalf of a retirement plan, the undersigned acknowledges that
investment in the Units poses additional risks including the inability to
use losses generated by an investment in the Units to offset taxable
income; and
(12) Subscriber hereby represents and affirms that (i)
Subscriber has a net worth alone or with spouse exceeding ten (10) times
Subscriber's investment or (ii) Subscriber has either alone or with
Subscriber's professional advisor the capacity to protect Subscriber's
interests in connection with this transaction or (iii) Subscriber is able
to bear the economic risk of the investment.
(13) The undersigned shall indemnify and hold harmless the
Company, the Placement Agent and each officer, director or control person
of any such entity, who is or may be a party or is or may be threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by
reason of or arising from any actual or alleged misrepresentation or
misstatement of facts or omission to represent or state facts made or
alleged to have been made by the undersigned to the Company or the
Placement Agent (or any agent or representative of either of them), or
omitted or alleged to have been omitted by the undersigned, concerning the
undersigned or the undersigned's authority to invest or financial position
in connection with the offering or sale of the Units, including, without
limitation, any such misrepresentation, misstatement or omission contained
in this Subscription Agreement or any other document submitted by the
undersigned, against losses, liabilities and expenses for which the
Company, the Placement Agent or any officer, director or control person of
any such entity has not otherwise been reimbursed (including attorneys'
fees, judgments, fines and amounts paid in settlement) actually and
reasonably incurred by the Company, the Placement Agent or such officer,
director or control person in connection with such action, suit or
proceeding.
C. UNDERSTANDINGS.
The undersigned understands, acknowledges and agrees with the Company and
the Placement Agent as follows:
7
<PAGE> 8
(1) This Subscription may be rejected, in whole or in part, by
the Company or the Placement Agent, in the sole and absolute discretion of
any of them, and, in the event the offering of Units is oversubscribed or,
in the event the Company elects to accept a lesser number of Units than
that subscribed for, the Company and the Placement Agent may, in their
sole discretion, reject certain subscriptions or allocate Units among
Subscribers, or a combination thereof;
(2) The undersigned hereby acknowledges and agrees that the
subscription hereunder is irrevocable by the undersigned, that, except as
required by law, the undersigned is not entitled to cancel, terminate or
revoke this Subscription Agreement or any agreements of the undersigned
hereunder, and that this Subscription Agreement and such other agreements
shall survive the death or disability of the undersigned and shall be
binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and permitted
assigns. If the undersigned is more than one person, the obligations of
the undersigned hereunder shall be joint and several and the agreements,
representations, warranties and acknowledgments herein contained shall be
deemed to be made by and be binding upon each such person and his/her
heirs, executors, administrators, successors, legal representatives and
permitted assigns;
(3) No Federal or state agency has made any finding or
determination as to the fairness or wisdom of the terms of this offering
for investment, nor any recommendation or endorsement of the Units;
(4) The offering and sale of the Units is intended to be
exempt from registration under the Securities Act by virtue of Section
4(2) of the Securities Act which is in part dependent upon the truth,
completeness and accuracy of the statements made by the undersigned
herein;
(5) There is no public or other market for the Units, the
Notes, the Warrants or the Common Stock underlying the Warrants and no
such public or other market may ever develop. There can be no assurance
that the undersigned will be able to sell or dispose of such securities.
It is understood that in order not to jeopardize the offering's exempt
status under Section 4(2) of the Securities Act, any transferee may, at a
minimum, be required to fulfill the investor suitability requirements
thereunder;
(6) The Company and the undersigned, having adverse interests
and as a result of arm's length bargaining, agree that (i) neither the
undersigned nor any of its partners has rendered or has agreed to render
any services to the Company in connection with this Subscription Agreement
or the issuance of a Unit to the undersigned, (ii) the Warrant is not
being issued to the undersigned as compensation and (iii) the assumed
issue price of the Note issued to the undersigned apart from the related
Warrant is 99.5% of the original principal amount thereof. The Company and
the undersigned recognize that this Subscription Agreement determines the
original issue discount to be taken into
8
<PAGE> 9
account by the Company and the purchasers for federal income tax purposes
on the Notes and they agree to adhere to this Subscription Agreement for
such purposes.
(7) The Placement Agent will receive compensation in the
amount of 3.23% of the total dollar amount of the Units issued pursuant to
this Agreement, plus warrants to purchase 0.225% of the outstanding equity
of the Company (on a fully diluted basis) on the same terms and conditions
as the Warrants being offered hereby, but is not guaranteeing or assuming
responsibility for the operation or possible liability of the Company,
including but not limited to compliance by the Company with the agreements
entered into in connection with the investment;
(8) The undersigned acknowledges that the information made
available to the undersigned (including the Confidential Private Placement
Memorandum dated April 1998, which the undersigned acknowledges was
prepared by the Company) is confidential and non-public and agrees that
all such information shall be kept in confidence by the undersigned and
neither used by the undersigned for the undersigned's personal benefit
(other than in connection with this Subscription) nor disclosed to any
third party for any reason; provided, however, that this obligation shall
not apply to any such information that (i) is part of the public knowledge
or literature and readily accessible at the date hereof, (ii) becomes part
of the public knowledge or literature and readily accessible by
publication (except as a result of a breach of this provision), or (iii)
is received from third parties (except third parties who disclose such
information in violation of any confidentiality agreements or obligations,
including, without limitation, any Subscription Agreement entered into
with the Company);
(9) The Company may require other documentation in addition to
this Subscription Agreement, and the Company reserves the right to request
such documentation prior to deciding whether or not to accept this
subscription;
(10) The representations, warranties and agreements of the
undersigned contained herein and in any other writing delivered in
connection with the transactions contemplated hereby shall be true and
correct in all respects on and as of the date of the sale of the Units as
if made on and as of such date and shall survive the execution and
delivery of this Subscription Agreement and the purchase of the Units;
(11) IN MAKING AN INVESTMENT DECISION PURCHASERS MUST RELY ON
THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. THE UNITS HAVE NOT BEEN
RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE;
9
<PAGE> 10
(12) THE UNITS MAY NOT BE TRANSFERRED, RESOLD OR OTHERWISE
DISPOSED OF EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
PURCHASERS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME;
D. MISCELLANEOUS.
(1) All pronouns and any variations thereof used herein shall
be deemed to refer to the masculine, feminine, impersonal, singular or
plural, as the identity of the person or persons may require.
(2) Except as set forth in Section A(4) herein, neither this
Subscription Agreement nor any provision hereof shall be waived, modified,
changed, discharged, terminated, revoked or canceled except by an
instrument in writing signed by the party effecting the same, and by any
party against whom any change, discharge or termination is sought.
(3) Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered or sent by registered mail, return receipt requested, addressed:
(i) if to the Company, at Alloy Designs, Inc., 115 West 30th Street, Suite
304, New York, New York 10001, Attention: Executive Vice President,
Finance, or (ii) if to the undersigned, at the address for correspondence
set forth in this Subscription Agreement, at such other address as may
have been specified by written notice given in accordance with this
paragraph 3.
(4) Failure of the Company to exercise any right or remedy
under this Subscription Agreement or any other agreement between the
Company and the undersigned, or otherwise, or delay by the Company in
exercising such right or remedy, will not operate as a waiver thereof. No
waiver by the Company will be effective unless and until it is in writing
and signed by the Company.
(5) This Subscription Agreement shall be enforced, governed
and construed in all respects in accordance with the laws of the State of
New York, as such laws are applied by New York courts to agreements
entered into and to be performed in New York by and between residents of
New York, and shall be binding upon the undersigned, the undersigned's
heirs, estate, legal representatives, successors and assigns and shall
inure to the benefit of the Company, its successors and assigns. If any
provision of this Subscription Agreement is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be
deemed modified to conform with such statute or rule of law. Any provision
hereof that may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision hereof.
10
<PAGE> 11
(6) This Subscription Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties
hereto.
E. SIGNATURE.
The signature of this Subscription Agreement is contained as part of the
applicable Subscription Signature Page.
11
<PAGE> 12
INDIVIDUAL SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned represent(s) that the foregoing
statements are true and correct and that he or she has (they have) executed this
Subscription Agreement this ___th day of May, 1998.
- ------------------------------------ ------------------------------------
Name of Subscriber Name of Co-Subscriber
- ------------------------------------ ------------------------------------
Signature of Subscriber Signature of Co-Subscriber
- ------------------------------------ ------------------------------------
Residence Address-Street Residence Address-Street
- ------------------------------------ -----------------------------------
City, State, Zip Code City, State, Zip Code
- ------------------------------------ ------------------------------------
Residence Telephone Number Residence Telephone Number
- ------------------------------------ ------------------------------------
Address for Correspondence Address for Correspondence
(if different): (if different):
- ------------------------------------ ------------------------------------
Social Security Number Social Security Number
- ------------------------------------
Number of Units Subscribed For
If you are purchasing Units with your spouse or another person not your
spouse, you must each sign the signature page and indicate whether you are
purchasing shares as joint tenants (rights of survivorship) or tenants in common
(no rights of survivorship).
* * * * *
<PAGE> 13
CORPORATE/PARTNERSHIP SIGNATURE PAGE
Attached hereto are resolutions or bylaws of the undersigned corporation
or provisions of the partnership agreement of the undersigned partnership
evidencing such authorizations, which authorizations have not been revoked and
are still in full force and effect.
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Subscription
Agreement to be duly executed on its behalf this ___th day of May, 1998.
By:
- ------------------------------------ -----------------------------------
Name of Subscriber Signature of Authorized Person
- ------------------------------------ ------------------------------------
Business Address - Street Print Name and Title
- ------------------------------------
City, State, Zip Code
- ------------------------------------
Business Telephone Number
- ------------------------------------
Address for Correspondence (if different):
- ------------------------------------
Federal Tax Identification Number
- ------------------------------------
Number of Units Subscribed For
* * * * *
<PAGE> 14
TRUST SIGNATURE PAGE
Attached hereto are the relevant provisions of the trust instrument
evidencing such authorizations, which provisions have not been revoked and are
still in full force and effect.
IN WITNESS WHEREOF, the undersigned represent(s) that the foregoing
statements are true and correct and that he, she or it has (they have) executed
this Subscription Agreement this ___th day of May, 1998.
- ------------------------------------
Name of Subscriber
For Individual Trustee(s): For Corporate Trustee:
By:
-------------------------------- ---------------------------------
Signature, as Trustee Name of Corporate Trustee
By:
-------------------------------- ---------------------------------
Print Name Signature of Authorized Officer
By:
-------------------------------- ---------------------------------
Signature of Co-Trustee Print Name and Title
(If required by trust instrument)
- ------------------------------------ ---------------------------------
Residence Address-Street Business Address-Street
- ------------------------------------ ---------------------------------
City, State, Zip Code City, State, Zip Code
- ------------------------------------ ---------------------------------
Residence Telephone Number Business Telephone Number
- ------------------------------------ ---------------------------------
Address for Correspondence Address for Correspondence
(if different): (if different):
- ------------------------------------ ---------------------------------
Number of Units Subscribed For Trust Tax Identification Number
<PAGE> 15
RETIREMENT PLAN SIGNATURE PAGE
Attached hereto are the relevant provisions of the retirement plan
evidencing such authorizations, which provisions have not been revoked and are
still in full force and effect.
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Subscription
Agreement to be duly executed on its behalf this ___th day of May, 1998.
By:
- ------------------------------------ --------------------------------
Name of Subscriber Signature of Authorized Person
- ------------------------------------ -----------------------------------
Account Number of Individual Print Name and Title
Participant, if Applicable
- ------------------------------------
Business Address - Street
- ------------------------------------
City, State, Zip Code
- ------------------------------------
Business Telephone Number
- ------------------------------------
Address for Correspondence (if different):
- ------------------------------------
Federal Tax Identification Number
- ------------------------------------
Number of Units Subscribed For
* * * * *
<PAGE> 1
Exhibit 10.36
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER THIS NOTE NOR ANY INTEREST
THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS
(1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN OPINION OF
COUNSEL TO THE HOLDER OF THIS NOTE, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT THIS NOTE MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
ALLOY DESIGNS, INC.
Promissory Note
No. 4 May 13, 1998
$250,000 New York, New York
(or such greater
amount as provided
for herein)
ALLOY DESIGNS, INC., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to Peter M. Graham , with an address at 15
Harrison Street, New York, NY 10013 , or registered assigns (the "Holder"), the
principal amount of Two Hundred Fifty Thousand ($250,000) Dollars on the
Maturity Date (as defined below), and to pay interest on the unpaid principal
balance hereof at the rate (calculated on the basis of a 360-day year consisting
of twelve 30-day months) of 10% per annum from the date hereof until the
Maturity Date. Interest on the unpaid principal balance hereof shall accrue and
be compounded quarterly, and shall be payable on the Maturity Date. In no event
shall any interest to be paid hereunder exceed the maximum rate permitted by
law. In any such event, this Note shall automatically be deemed amended to
permit interest charges at an amount equal to, but no greater than, the maximum
rate permitted by law.
1. Offering, Subscription Agreement and Security.
This Note is one of the notes issued by the Company in an offering (the
"Offering") of a maximum of Fifty (50) units (the "Units"), each Unit
consisting of (i) one 10% Promissory Note in the initial principal amount of
$100,000, plus accrued and compounded interest (collectively, the "Notes") and
(ii) one three-year Warrant (collectively, the "Warrants") to purchase 11,185
shares of common stock, par value $.01 per share, of the Company (the
<PAGE> 2
"Common Stock") at an initial exercise price per share equal to $6.165 (subject
to adjustment upon the occurrence of certain events). In connection with the
Offering, each purchaser of Units (collectively, the "Holders") has executed and
delivered a Subscription Agreement (each a "Subscription Agreement" and
collectively, the "Subscription Agreements") to the Company.
2. Payments.
(a) Principal of, and accrued interest on, this Note shall be due
and payable in full on the Maturity Date. The "Maturity Date" shall be the date
which is the earlier of (i) May 13, 2001, (ii) the date of the closing of an
initial public offering by the Company, (iii) a consolidation or merger of the
Corporation with or into any other corporation or corporations, (iv) a sale,
lease or transfer of all or substantially all of the assets of the Corporation,
(v) the sale of at least 51% of the outstanding equity of the Company or (vi)
the date on which James Johnson, Matthew Diamond and Sam Gradess shall fail to
collectively control the Company, or the occurrence of any other event which
constitutes a change of control of the Company (any of the events referred to in
clauses (iii) through (vi) being a "Change of Control").
(b) Interest on this Note shall accrue from the date of issuance
hereof, to, but excluding the Maturity Date and shall be compounded quarterly.
(c) If the Maturity Date would fall on a day that is not a Business
Day (as defined below), the payment due on the Maturity Date will be made on the
next succeeding Business Day with the same force and effect as if made on the
Maturity Date. "Business Day" means any day which is not a Saturday or Sunday
and is not a day on which banking institutions are generally authorized or
obligated to close in the City of New York, New York.
(d) The Company may, at its option, prepay all or any part of the
principal of this Note, without payment of any premium or penalty. All payments
on this Note shall be applied first to accrued interest hereon and the balance
to the payment of principal hereof.
(e) Payments of principal and interest on this Note shall be made by
check sent to the Holder's address set forth above or to such other address as
the Holder may designate for such purpose from time to time by written notice to
the Company, in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and private
debts.
(f) The obligations to make the payments provided for in this Note
are absolute and unconditional and not subject to any defense, set-off,
counterclaim, rescission, recoupment or adjustment whatsoever. The Company
hereby expressly waives demand and presentment for payment, notice of
non-payment, notice of dishonor, protest, notice of protest, bringing of suit
and diligence in taking any action to collect any amount called for hereunder,
and shall be directly and primarily liable for the payment of all sums owing and
to be owing
<PAGE> 3
hereon, regardless of and without any notice, diligence, act or omission with
respect to the collection of any amount called for hereunder.
(g) If (i) the Company has not consummated an initial public
offering or entered into an agreement resulting in the consolidation or merger
of the Company with another corporation, or the sale of all or substantially all
of its assets to another corporation on or before May 13, 2001 and (ii) no part
of Warrant No. 4 issued to the initial purchaser of this Note has been
exercised, the interest rate on the unpaid principal balance hereof shall be 15%
(the "Adjusted Interest Rate"). The Adjusted Interest Rate shall be applied
retroactively over the term of the Note, commencing on the date hereof. In no
event shall any interest to be paid hereunder exceed the maximum rate permitted
by law. In such event, this Note shall automatically be deemed amended to permit
interest charges at an amount equal to, but no greater than, the maximum rate
permitted by law.
3. Ranking of Note. The Company, for itself, its successors and assigns,
covenants and agrees that the payment of the principal of and interest on this
Note is unsecured in all respects, and shall rank senior to all indebtedness
outstanding on the date hereof (with the exception of leases outstanding on the
date hereof) or hereafter created, incurred, assumed or guaranteed by the
Company, provided, however, that the Company may create, incur, assume, or
guarantee indebtedness for money borrowed which is (i) secured by the
receivables or inventory of the Company, (ii) borrowed for a period of no more
than 90 days for working capital purposes or (iii) lease obligations or purchase
money liens.
4. Covenants.
(a) The Company covenants and agrees with the Holder that, so long
as any amount remains unpaid on the Notes, unless the consent of the majority of
all of the Holders is obtained, the Company shall deliver to each Holder:
(i) as soon as practicable after the end of each fiscal year, and in
any event within 90 days thereafter, audited annual financial statements
and as soon as practicable after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Company, and in
any event, within 45 days thereafter, quarterly unaudited financial
statements of the Company and its subsidiaries and such other information
as is customarily made available to the Company's shareholders;
(ii) promptly after the Company shall obtain knowledge of
such, written notice of all legal or arbitral proceedings, and of
all proceedings by or before any governmental or regulatory
authority or agency, and each material development in respect of
such legal or other proceedings, affecting the Company and its
subsidiaries, except proceedings which, if adversely determined,
would not have a material adverse effect on the Company and its
subsidiaries taken as a whole; and
<PAGE> 4
(iii) promptly after the Company shall obtain knowledge of the
occurrence of any Event of Default (as hereinafter defined) or any
event which with notice or lapse of time or both would become an
Event of Default (an Event of Default or such other event being a
"Default"), a notice specifying that such notice is a "Notice of
Default" and describing such Default in reasonable detail, and, in
such Notice of Default or as soon thereafter as practicable, a
description of the action the Company has taken or proposes to take
with respect thereto.
(b) The Company further covenants and agrees with the Holders that, so long as
any amount remains unpaid on the Notes, without the consent of Ladenburg
Thalmann & Co. Inc., as representative of the Holders of the Notes (which shall
not be unreasonably withheld or delayed), the Company shall not enter into any
transaction with a value greater than $100,000 with any officer, director,
employee or 5% shareholder of the Company, or any person that, directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, the Company; provided, however, that such consent
shall no longer be required once the Company has elected and constituted a
committee of independent directors of the Board of Directors who will be
required to provide such consent.
5. Events of Default.
The occurrence of any of the following events shall constitute an event of
default (an "Event of Default"):
(a) A default in the payment of the principal on any Note, when and
as the same shall become due and payable.
(b) A default in the payment of any interest on any Note, when and
as the same shall become due and payable, which default shall continue for ten
business days after the date fixed for the making of such interest payment.
(c) A default in the performance, or a breach, of any other covenant
or agreement of the Company in this Note and continuance of such default or
breach for a period of 15 days after receipt of notice from the Holder as to
such breach or after the Company had or should have had knowledge of such
breach.
(d) Any representation, warranty or certification made by the
Company pursuant to this Note or the Subscription Agreements shall prove to have
been false or misleading as of the date made in any material respect.
<PAGE> 5
(e) A default by the Company shall be declared under any
indebtedness which gives the holder thereof the right to declare such
indebtedness due prior to its stated maturity and such indebtedness is in fact
declared due prior to its stated maturity.
(f) A final judgment or judgments for the payment of money in excess
of $500,000 in the aggregate shall be rendered by one or more courts,
administrative or arbitral tribunals or other bodies having jurisdiction against
the Company and the same shall not be discharged (or provision shall not be made
for such discharge), or a stay of execution thereof shall not be procured,
within 60 days from the date of entry thereof and the Company shall not, within
such 60-day period, or such longer period during which execution of the same
shall have been stayed, appeal therefrom and cause the execution thereof to be
stayed during such appeal.
(g) The entry of a decree or order by a court having jurisdiction
adjudging the Company bankrupt or insolvent, or approving a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of the
Company, under federal bankruptcy law, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
and the continuance of any such decree or order unstayed and in effect for a
period of 60 days; or the commencement by the Company of a voluntary case under
federal bankruptcy law, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency, or other similar law, or the consent by
it to the institution of bankruptcy or insolvency proceedings against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief
under federal bankruptcy law or any other applicable federal or state law, or
the consent by it to the filing of such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator or similar official for
the Company or for any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by the Company in furtherance of any such action.
6. Remedies Upon Default.
Upon the occurrence of an Event of Default referred to in Section 5 (other
than an Event of Default pursuant to Section 5(g), upon which the Notes shall
immediately become due and payable together with interest accrued thereon,
without action of the part of the Holder), the Holders of this Note may, at his,
her or its option, by notice in writing to the Company, declare such Note to be
due and payable together with interest accrued thereon, without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company. The Holder may institute such actions or proceedings in law or equity
as it shall deem expedient for the protection of its rights hereunder.
7. Transfer.
(a) Any Notes issued upon the transfer of this Note shall be
numbered and shall be registered in a Note Register as they are issued. The
Company shall be entitled to treat the registered holder of any Note on the Note
Register as the owner in fact thereof for all
<PAGE> 6
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Note on the part of any other person, and shall not be liable
for any registration or transfer of Notes which are registered or to be
registered in the name of a fiduciary or the nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration or transfer, or with the knowledge of such
facts that its participation therein amounts to bad faith. This Note shall be
transferable only on the books of the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment, or authority to
transfer. In all cases of transfer by an attorney, executor, administrator,
guardian, or other legal representative, duly authenticated evidence of his or
its authority shall be produced. Upon any registration of transfer, the Company
shall deliver a new Note or Notes to the person entitled thereto. This Note may
be exchanged, at the option of the Holder thereof, for another Note, or other
Notes of different denominations, of like tenor and representing in the
aggregate a like principal amount, upon surrender to the Company or its duly
authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Notes to be transferred on its books to any person if, in
the opinion of counsel to the Company, such transfer does not comply with the
provisions of the Act and the rules and regulations thereunder. This Note is
issued in connection with and will not be detachable from a Warrant No. 4 to
purchase 27,962 shares of the Company's Common Stock without the prior written
consent of the Company.
(b) The Holder acknowledges that he has been advised by the Company
that this Note has not been registered under the Act, that this Note is being
issued on the basis of the statutory exemption provided by Section 4(2) of the
Act or Regulation D promulgated thereunder, or both, relating to transactions by
an issuer not involving any public offering, and that the Company's reliance
thereon is based in part upon the representations made by the original Holder in
the original Holder's Subscription Agreement executed and delivered in
accordance with the terms of the Offering. The Holder acknowledges that he has
been informed by the Company of, or is otherwise familiar with, the nature of
the limitations imposed by the Act and the rules and regulations thereunder on
the transfer of securities. In particular, the Holder agrees that no sale,
assignment or transfer of this Note shall be valid or effective, and the Company
shall not be required to give any effect to any such sale, assignment or
transfer, unless (i) the sale, assignment or transfer of this Note is registered
under the Act, it being understood that this Note is not currently registered
for sale and that the Company has no obligation or intention to so register the
Notes, or (ii) this Note is sold, assigned or transferred in accordance with all
the requirements and limitations of Rule 144 under the Act, it being understood
that Rule 144 is not available at the time of the original issuance of this Note
for the sale of this Note and that there can be no assurance that Rule 144 sales
will be available at any subsequent time, or (iii) such sale, assignment, or
transfer is otherwise exempt from registration under the Act.
8. Disclosure. No document or written information furnished to the
Placement Agent or its representatives by or on behalf of the Company in
connection with the issuance of this Note, including but not limited to
information provided by the Company in the Confidential Private Placement
Memorandum dated April 1998, and any supplement thereto, includes any
<PAGE> 7
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements made herein and therein not
misleading. Any financial projections provided by the Company shall not be
considered "facts" for purposes of this representation.
9. Additional Representations and Covenants
(a) The Company hereby represents and warrants as follows:
(i) The execution, delivery and performance by the Company of
this Note and Warrant issued in connection herewith will not (A)
conflict with or result in a breach or violation of any of the terms
or provisions of, constitute a default or result in the acceleration
of any obligation under, result in the acceleration of any
obligation under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the
Company or its subsidiaries pursuant to, the terms of any indenture,
mortgage, loan agreement, note or other evidence of indebtedness or
any other contract, agreement or instrument to which the Company or
its subsidiaries (if any) is a party or by which the Company or any
of its properties or assets are bound or affected, or (B) violate
any applicable statute, law, rule, code, administrative regulation,
ordinance, judgment, order or decree of any government, governmental
instrumentality, court, arbitration panel or other body having
jurisdiction over the Company or its subsidiaries (if any) or any of
their respective properties or obligations which, in any such case,
would have a material adverse effect on the Company or its financial
condition.
(ii) No consent, approval, authorization, license or order of
or from, or registration, qualification, declaration or filing with,
any federal, state, local, foreign or other governmental authority,
court administrative agency, tribunal or other body is required for
the consummation of the transactions contemplated by this Note and
the Warrant issued in connection herewith, except as may have been
made or obtained under any federal or state securities laws.
(iii) the Company has outstanding (A) 6,886,688 shares of
Common Stock, (B) warrants, rights or options to subscribe for or
purchase from the Company 858,774 shares of Common Stock and (C) no
other obligations to issue any shares of Common Stock or securities
convertible or exchangeable into shares of Common Stock. The Company
has no contracts, agreements or understandings with any person
granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities
being registered pursuant to any other registration statement filed
by the Company under the Securities Act.
<PAGE> 8
(iv) There is no action, suit or proceeding pending or, to the
Company's knowledge, threatened before or by any federal or state
court, commission, regulatory body, administrative agency or other
governmental body, domestic or foreign, to which the Company is or
may become a party or of which any property of the Company is
subject or affected that, if adversely determined against the
Company, might individually or in the aggregate result in a material
adverse effect to the Company or its financial condition.
(v) The Company is not (A) in violation of its Charter or
By-laws, (B) in violation of any statute, law, rule, code,
administrative regulation, ordinance, judgment, order or decree of
any government, governmental instrumentality, court, domestic or
foreign, or arbitration panel or other body applicable to it where
such violation would have a material adverse effect on the Company
or its financial condition or (C) in default in the performance or
observance of any contract where such defaults, singly or in the
aggregate, would have a material adverse effect on the Company or
its financial condition.
(vi) Except with respect to the State of New York, the Company
is duly qualified to do business in all jurisdictions where required
for the conduct of its business except where the failure to so
qualify would not have a material adverse affect on the Company or
its ability to so conduct such business.
(b) The Company hereby agrees, as promptly as practicable, to take
all necessary actions in order to become qualified to do business in the State
of New York.
10. Miscellaneous.
(a) Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party to
whom it is to be given, (i) if to the Company, at its address at 115 West 30th
Street, Suite 304, New York, New York 10001, Attention: Executive Vice
President, Finance (ii) if to the Holder, at its address set forth on the first
page hereof, or (iii) in either case, to such other address as the party shall
have furnished in writing in accordance with the provisions of this Section
10(a). Notice to the estate of any party shall be sufficient if addressed to the
party as provided in this Section 10(a). Any notice or other communication given
by certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof. Any notice given by other means permitted by this
Section 10(a) shall be deemed given at the time of receipt thereof.
<PAGE> 9
(b) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of this Note (and upon surrender of this
Note if mutilated), the Company shall execute and deliver to the Holder a new
Note of like date, tenor and denomination.
(c) No course of dealing and no delay or omission on the part of the
Holder in exercising any right or remedy shall operate as a waiver thereof or
otherwise prejudice the Holder's rights, powers or remedies. No right, power or
remedy conferred by this Note upon the Holder shall be exclusive of any other
right, power or remedy referred to herein or now or hereafter available at law,
in equity, by statute or otherwise, and all such remedies may be exercised
singly or concurrently.
(d) This Note may be amended only by a written instrument executed
by the Company and the Holder hereof. Any amendment shall be endorsed upon this
Note, and all future Holders shall be bound thereby.
(e) This Note has been negotiated and consummated in the State of
New York and shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to principles governing conflicts
of law.
(f) The Company irrevocably consents to the jurisdiction of the
courts of the State of New York and of any federal court located in such State
in connection with any action or proceeding arising out of or relating to this
Note, any document or instrument delivered pursuant to, in connection with or
simultaneously with this Note, or a breach of this Note or any such document or
instrument. In any such action or proceeding, the Company waives personal
service of any summons, complaint or other process and agrees that service
thereof may be made in accordance with Section 10(a). Within 30 days after such
service, or such other time as may be mutually agreed upon in writing by the
attorneys for the parties to such action or proceeding, the Company shall appear
or answer such summons, complaint, or other process. Should the Company fail to
appear or answer within such 30-day period or such extended period, as the case
may be, the Company shall be deemed in default and judgment may be entered
against the Company for the amount as demanded in any summons, complaint or
other process so served.
<PAGE> 10
IN WITNESS WHEREOF, the Company has caused this Note to be executed and
dated the day and year first above written.
ALLOY DESIGNS, INC.
By:
--------------------------------
<PAGE> 11
SCHEDULE A TO EXHIBIT 10.36
Alloy issued promissory notes to the following persons which were substantially
identical in all material respects to Exhibit 10.36 except for the information
set forth beside such persons name in the following table:
<TABLE>
<CAPTION>
PROMISSORY NOTE ORIGINAL PRINCIPAL
HOLDER NUMBER AMOUNT
- ----------------------------------- --------------- ------------------
<S> <C> <C>
Peter M. Graham Purchase Money Plan No.5 $250,000
Neil I. Vogel No.7 $ 35,000
</TABLE>
<PAGE> 1
Exhibit 10.37
ALLOY DESIGNS, INC.
Warrant for the Purchase of Shares of Common Stock
No. LT-1 22,429 Shares
FOR VALUE RECEIVED, ALLOY DESIGNS, INC., a Delaware corporation (the
"Company"), hereby certifies that Ladenburg Thalmann & Co. Inc. or its permitted
assigns, is entitled to purchase from the Company, at any time or from time to
time commencing on July 1, 1998 and prior to 5:00 P.M., New York City time, on
May 12, 2001, Twenty-two Thousand Four Hundred Twenty-nine (22,429) fully paid
and non-assessable shares of the common stock, $.01 par value per share, of the
Company for a purchase price of the lesser of (i) $6.165 per share and (ii) a
purchase price equal to 70% of the per share value of the equity of the Company,
valued at either (a) the price to the public of shares issued pursuant to an
initial public offering or (b) in the event of a Change of Control (as defined
in the 10% Promissory Notes issued concurrently herewith (the "Promissory
Notes")), the value of the Company as determined in connection with such
transaction divided by the total number of shares outstanding, including shares
issuable upon the exercise of (i) the Warrants (as defined below) and (ii) other
warrants and options exercisable at the time of such Change of Control.
(Hereinafter, (i) said common stock, together with any other equity securities
which may be issued by the Company with respect thereto or in substitution
therefor, is referred to as the "Common Stock," (ii) the shares of the Common
Stock purchasable hereunder or under any other Warrant (as hereinafter defined)
are referred to individually as a "Warrant Share" and collectively as the
"Warrant Shares," (iii) the aggregate purchase price payable for the Warrant
Shares hereunder is referred to as the "Aggregate Warrant Price," (iv) the price
payable for each of the Warrant Shares hereunder is referred to as the "Per
Share Warrant Price," (v) this Warrant, all similar Warrants issued on the date
hereof and all Warrants hereafter issued in exchange or substitution for this
Warrant or such similar Warrants are referred to as the "Warrants" and (vi) the
holder of this Warrant is referred to as the "Holder" and the holder of this
Warrant and all other Warrants or Warrant Shares issued upon the exercise of any
Warrant are referred to as the "Holders.") If the Company has not consummated an
initial public offering or been subject to a Change of Control prior to November
13, 1999 or the Company has not repaid the principal balance of and accrued
interest on the Promissory Notes, the Per Share Warrant Price shall be adjusted
to equal the lesser of $4.624 per share, as further adjusted by the aggregate
percentage decrease in the Per Share Warrant Price due to the application of the
anti-dilution provisions of this Warrant as effected prior to November 13, 1999,
if any, and (ii) an aggregate purchase price equal to 70% of the per share value
of the equity of the Company valued at (a) the price to the public of shares
issued pursuant to an initial public offering or (b) in the event of a Change of
Control (as defined in the Promissory Notes), the value of the Company as
determined in connection with such transaction divided by the total number of
shares outstanding, including shares issuable upon the exercise of (i) the
Warrants and
<PAGE> 2
(ii) other warrants and options exercisable at the time of such Change of
Control. The Per Share Warrant Price is subject to adjustment as hereinafter
provided.
1. Exercise of Warrant. (a) The Holder may exercise this Warrant, in
whole or in part, as follows:
(i) By presentation and surrender of this Warrant to the Company at
the address set forth in Subsection 9(a) hereof, with the Subscription
Form annexed hereto (or a reasonable facsimile thereof) duly executed and
accompanied by payment of the Per Share Warrant Price for each Warrant
Share to be purchased. Payment for Warrant Shares shall be made by
certified or official bank check payable to the order of the Company; or
(ii) By presentation and surrender of this Warrant to the Company at
the address set forth in Subsection 9(a) hereof, with a Cashless Exercise
Form annexed hereto (or a reasonable facsimile thereof) duly executed (a
"Cashless Exercise"). Such presentation and surrender shall be deemed a
waiver of the Holder's obligation to pay all or any portion of the
Aggregate Warrant Price. In the event of a Cashless Exercise, the Holder
shall exchange its Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares being exercised by
a fraction, the numerator of which shall be the difference between the
then current market price per share of the Common Stock and the Per Share
Warrant Price, and the denominator of which shall be the then current
market price per share of Common Stock. For purposes of any computation
under this Section 1(a)(ii), the then current market price per share of
Common Stock at any date shall be deemed to be the average for the five
consecutive business days immediately prior to the Cashless Exercise of
the daily closing prices of the Common Stock on the principal national
securities exchange on which the Common Stock is admitted to trading or
listed, or if not listed or admitted to trading on any such exchange, the
closing prices as reported by the Nasdaq SmallCap Market, or if not then
listed on the Nasdaq SmallCap Market, the average of the highest reported
bid and lowest reported asked prices as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or if not then publicly traded, the fair market price of the
Common Stock as determined by the Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be
exercised for a number of whole shares of the Common Stock, and the Holder is
entitled to receive a new Warrant covering the Warrant Shares which have not
been exercised and setting forth the proportionate part of the Aggregate Warrant
Price applicable to such Warrant Shares. Upon such surrender of this Warrant,
the Company will (i) issue a certificate or certificates, in such denominations
as are requested for delivery by the Holder, in the name of the Holder for the
largest number of whole shares of the Common Stock to which the Holder shall be
entitled and, if this Warrant is exercised in whole, in lieu of any fractional
share of the Common Stock to which the Holder shall be entitled, pay to the
Holder cash in an amount equal to the fair value of such fractional share
(determined in such reasonable manner as the Board of Directors of the Company
shall determine), and (ii) deliver the other securities and properties
receivable upon the exercise of this Warrant, or the proportionate part thereof
if this Warrant is exercisable in part,
<PAGE> 3
pursuant to the provisions of this Warrant. The Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be actually delivered to the Holder.
2. Reservation of Warrant Shares; Listing. The Company agrees that,
prior to the expiration of this Warrant, the Company will at all times (a) have
authorized and in reserve, and will keep available, solely for issuance or
delivery upon the exercise of this Warrant, the shares of the Common Stock and
other securities and properties as from time to time shall be receivable upon
the exercise of this Warrant, free and clear of all restrictions on sale or
transfer and free and clear of all preemptive rights and rights of first refusal
and (b) if the Company hereafter lists its Common Stock on any national
securities exchange, keep the shares of the Common Stock receivable upon the
exercise of this Warrant authorized for listing on such exchange upon notice of
issuance.
3. Protection Against Dilution. (a) In case the Company shall
hereafter (i) pay a dividend or make a distribution on its capital stock in
shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock
into a greater number of shares, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares or (iv) issue by reclassification of its
Common Stock any shares of capital stock of the Company, the Per Share Warrant
Price shall be adjusted so that the Holder upon the exercise hereof shall be
entitled to receive the number of shares of Common Stock or other capital stock
of the Company which he would have owned immediately following such action had
such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this Subsection 3(a) shall become effective immediately after the
record date in the case of a dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.
(b) If, at any time or from time to time after the date of this
Warrant, the Company shall issue or distribute to the holders of shares of
Common Stock evidences of its indebtedness, any other securities of the Company
or any cash, property or other assets (excluding a subdivision, combination or
reclassification, or dividend or distribution payable in shares of Common Stock,
referred to in Subsection 3(a), and also excluding cash dividends or cash
distributions paid out of net profits legally available therefor if the full
amount thereof, together with the value of other dividends and distributions
made substantially concurrently therewith or pursuant to a plan which includes
payment thereof, is equivalent to not more than 5% of the Company's net worth)
(any such nonexcluded event being herein called a "Special Dividend"), the Per
Share Warrant Price shall be adjusted by multiplying the Per Share Warrant Price
then in effect by a fraction, the numerator of which shall be the then current
market price of the Common Stock (defined as the average for the five
consecutive business days immediately prior to the record date of the daily
closing price of the Common Stock as reported by the national securities
exchange upon which the Common Stock is then listed or if not listed on any such
exchange, the average of the closing prices as reported by the Nasdaq SmallCap
Market, or
<PAGE> 4
if not then listed on the Nasdaq SmallCap Market, the average of the highest
reported bid and lowest reported asked prices as reported by NASDAQ, or if not
then publicly traded, the fair market price as determined by the Company's Board
of Directors) less the fair market value (as determined by the Company's Board
of Directors) of the evidences of indebtedness, cash, securities or property, or
other assets issued or distributed in such Special Dividend applicable to one
share of Common Stock and the denominator of which shall be such then current
market price per share of Common Stock. An adjustment made pursuant to this
Subsection 3(b) shall become effective immediately after the record date of any
such Special Dividend.
(c) Except as provided in Subsection 3(e), in case the Company shall
hereafter issue or sell any shares of Common Stock for a consideration per share
less than the Per Share Warrant Price on the date of such issuance or sale, the
Per Share Warrant Price shall be adjusted as of the date of such issuance or
sale so that the same shall equal the price determined by dividing (i) the sum
of (A) the number of shares of Common Stock outstanding immediately prior to
such issuance or sale, including shares of Common Stock issuable upon the
exercise of options and warrants then exercisable, multiplied by the Per Share
Warrant Price plus (B) the consideration received by the Company upon such
issuance or sale by (ii) the total number of shares of Common Stock outstanding
after such issuance or sale including shares of Common Stock issuable upon the
exercise of options and warrants then exercisable. If the consideration received
consists of property other than cash, the value of such consideration shall be
computed at the fair market value thereof at the time of issue, as determined in
good faith by a committee comprised of the independent directors of the Board of
Directors or, if no such committee has been appointed, in consultation with
Ladenburg Thalmann & Co. Inc. as representative of the Holders of the Warrants
and holders of a majority of the outstanding shares of the Common Stock who are
not officers, directors or otherwise employees of the Company.
(d) Except as provided in Subsections 3(b) and 3(e), in case the
Company shall hereafter issue or sell any rights, options, warrants or
securities convertible into Common Stock entitling the holders thereof to
purchase Common Stock or to convert such securities into Common Stock at a price
per share (determined by dividing (i) the total amount, if any, received or
receivable by the Company in consideration of the issuance or sale of such
rights, options, warrants or convertible securities plus the total
consideration, if any, payable to the Company upon exercise or conversion
thereof (the "Total Consideration") by (ii) the number of additional shares of
Common Stock issuable upon exercise or conversion of such securities) less than
the then current Per Share Warrant Price in effect on the date of such issuance
or sale, the Per Share Warrant Price shall be adjusted as of the date of such
issuance or sale so that the same shall equal the price determined by dividing
(i) the sum of (A) the number of shares of Common Stock outstanding on the date
of such issuance or sale multiplied by the Per Share Warrant Price plus (B) the
Total Consideration by (ii) the number of shares of Common Stock outstanding on
the date of such issuance or sale plus the maximum number of additional shares
of Common Stock issuable upon exercise or conversion of such securities.
<PAGE> 5
(e) No adjustment in the Per Share Warrant Price shall be required
in the case of (i) the issuance or sale by the Company of up to 600,000 shares
of the Common Stock, or the grant of options or warrants exercisable therefor to
directors, officers, employees and consultants of the Company or any subsidiary
under the Company's 1997 Employee, Director and Consultant Stock Option Plan or
any subsequent plan, which number shall include the 217,934 options to purchase
shares of Common Stock already outstanding or approved but not yet issued, (ii)
the issuance by the Company of up to 640,840 shares of the Common Stock pursuant
to the exercise of warrants outstanding on the date hereof, (iii) the issuance
by the Company of shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock in connection with any equipment leasing
arrangements, provided that any shares issued in any such arrangement shall be
counted as part of the number of shares available for issuance under clause (i)
hereof, or (iv) the issuance by the Company of shares of the Common Stock
pursuant to the exercise of the Warrants. The number of shares of Common Stock
set forth in this Subsection 3(e) is subject to adjustment in accordance with
any anti-dilution provisions existing on the date hereof under the terms of the
instruments governing their issuance.
(f) If the Company issues shares of Common Stock or securities
convertible or exchangeable for shares of Common Stock in connection with (a) a
strategic alliance or licensing agreement or (b) the acquisition (by merger or
otherwise) of all or substantially all of the capital stock or assets of another
entity or business organization, the issuance of shares of Common Stock in
connection with any such transaction shall require the adjustment of the Per
Share Warrant Price unless the value of the Company at the time of such
transaction, as determined in good faith by a committee comprised of the
independent directors of the Board of Directors or, if no such committee has
been appointed, in consultation with Ladenburg Thalmann & Co. Inc. as
representative of the Holders of the Warrants and a majority of the shares held
by shareholders who are not officers, directors or otherwise employees of the
Company, is $50 million or greater.
(g) In case of any capital reorganization or reclassification, or
any consolidation or merger to which the Company is a party other than a merger
or consolidation in which the Company is the continuing corporation, or in case
of any sale or conveyance to another entity of the property of the Company as an
entirety or substantially as an entirety, or in the case of any statutory
exchange of securities with another corporation (including any exchange effected
in connection with a merger of a third corporation into the Company), the Holder
of this Warrant shall have the right thereafter to receive on the exercise of
this Warrant the kind and amount of securities, cash or other property which the
Holder would have owned or have been entitled to receive immediately after such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance had this Warrant been exercised immediately prior to the
effective date of such reorganization, reclassification, consolidation, merger,
statutory exchange, sale or conveyance and in any such case, if necessary,
appropriate adjustment shall be made in the application of the provisions set
forth in this Section 3 with respect to the rights and interests thereafter of
the Holder of this Warrant to the end that the provisions set forth in this
Section 3 shall thereafter correspondingly be made applicable, as nearly as may
reasonably be, in relation
<PAGE> 6
to any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant. The above provisions of this Subsection 3(f) shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, statutory exchanges, sales or conveyances. The issuer
of any shares of stock or other securities or property thereafter deliverable on
the exercise of this Warrant shall be responsible for all of the agreements and
obligations of the Company hereunder. Notice of any such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
and of said provisions so proposed to be made, shall be mailed to the Holders of
the Warrants not less than 15 days prior to such event. A sale of all or
substantially all of the assets of the Company for a consideration consisting
primarily of securities shall be deemed a consolidation or merger for the
foregoing purposes.
(h) In case any event shall occur as to which the other provisions
of this Section 3 are not strictly applicable but as to which the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles hereof then,
in each such case, the Holders of Warrants representing the right to purchase a
majority of the Warrant Shares subject to all outstanding Warrants may appoint a
firm of independent public accountants of recognized national standing
reasonably acceptable to the Company, which shall give their opinion as to the
adjustment, if any, on a basis consistent with the essential intent and
principles established herein, necessary to preserve the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holder of this Warrant and shall make the
adjustments described therein. The fees and expenses of such independent public
accountants shall be borne by the Company only if the opinion resulted in an
adjustment in favor of the Warrant Holders.
(i) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease of at least $0.05
per share of Common Stock; provided, however, that any adjustments which by
reason of this Subsection 3(h) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment; provided further,
however, that adjustments shall be required and made in accordance with the
provisions of this Section 3 (other than this Subsection 3(h)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock issuable upon
exercise hereof. All calculations under this Section 3 shall be made to the
nearest cent or to the nearest 1/l00th of a share, as the case may be. Anything
in this Section 3 to the contrary notwithstanding, the Company shall be entitled
to make such reductions in the Per Share Warrant Price, in addition to those
required by this Section 3, as it in its discretion shall deem to be advisable
in order that any stock dividend, subdivision of shares or distribution of
rights to purchase stock or securities convertible or exchangeable for stock
hereafter made by the Company to its stockholders shall not be taxable.
(j) Whenever the Per Share Warrant Price is adjusted as provided in
this Section 3 and upon any modification of the rights of a Holder of Warrants
in accordance with this Section 3, the Company shall promptly obtain, at its
expense, a certificate of a firm of
<PAGE> 7
independent public accountants of recognized standing selected by the Board of
Directors (who may be the regular auditors of the Company) setting forth the Per
Share Warrant Price and the number of Warrant Shares after such adjustment or
the effect of such modification, a brief statement of the facts requiring such
adjustment or modification and the manner of computing the same and cause copies
of such certificate to be mailed to the Holders of the Warrants.
(k) If the Board of Directors of the Company shall (i) declare any
dividend or other distribution with respect to the Common Stock, other than a
cash dividend subject to the first parenthetical in Subsection 3(b), (ii) offer
to the holders of shares of Common Stock any additional shares of Common Stock,
any securities convertible into or exercisable for shares of Common Stock or any
rights to subscribe thereto, or (iii) propose a dissolution, liquidation or
winding up of the Company, the Company shall mail notice thereof to the Holders
of the Warrants not less than 15 days prior to the record date fixed for
determining stockholders entitled to participate in such dividend, distribution,
offer or subscription right or to vote on such dissolution, liquidation or
winding up.
(l) If, as a result of an adjustment made pursuant to this Section
3, the Holder of any Warrant thereafter surrendered for exercise shall become
entitled to receive shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board of Directors
(whose determination shall be conclusive and shall be described in a written
notice to the Holder of any Warrant promptly after such adjustment) shall
determine the allocation of the adjusted Per Share Warrant Price between or
among shares or such classes of capital stock or shares of Common Stock and
other capital stock.
4. Tag Along Rights. For so long as the Holder holds Warrants, in
the event that the Company shall issue shares of Common Stock or securities
convertible into shares of Common Stock for the purpose of raising capital in a
private placement to third party investors at a price per share based upon a
valuation of the Company of greater than $50 million, the Holders of the
Warrants shall have the right (subject to pragmatic adjustments to avoid the
issuance of fractional securities) to purchase such shares of Common Stock or
other securities of the Company (whether or not authorized on the date of this
Warrant), to maintain the ratio that the number of Warrant Shares as to which
the Warrants held by such Holder are exercisable immediately prior to such
issuance bears to the total number of shares of Common Stock outstanding
immediately prior to such issuance (including any shares of Common Stock that
may be issuable pursuant to any exercisable option or warrants to purchase
Common Stock or securities convertible or exchangeable into Common Stock). This
right shall be deemed waived by any Holder who does not exercise such right and
pay for the securities offered by the Company within thirty (30) days of receipt
of notice in writing from the Company inviting him, her or it to exercise the
right.
5. Fully Paid Stock; Taxes. The Company agrees that the shares of
the Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding,
<PAGE> 8
fully paid and nonassessable, and not subject to preemptive rights or rights of
first refusal, and the Company will take all such actions as may be necessary to
assure that the par value or stated value, if any, per share of the Common Stock
is at all times equal to or less than the then Per Share Warrant Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all Federal and state stamp, original issue or similar taxes which may be
payable in respect of the issue of any Warrant Share or certificate therefor.
6. Registration Under Securities Act of 1933
(a) The Company agrees that if, at any time during the period
commencing on the first day of trading of the Company's Common Stock pursuant to
an initial public offering and ending on May 13, 2003, the Holder and/or the
Holders of any other Warrants and/or Warrant Shares who or which shall hold not
less than 51% of the Warrants and/or Warrant Shares outstanding at such time and
not previously sold pursuant to this Section 6 shall request that the Company
file, under the Securities Act of 1933 (the "Act"), a registration statement
under the Act covering not less than 51% of the Warrant Shares issued or
issuable upon the exercise of the Warrants and not so previously sold, the
Company will (i) promptly notify each Holder of the Warrants and each holder of
Warrant Shares not so previously sold that such registration statement will be
filed and that the Warrant Shares which are then held, and/or may be acquired
upon exercise of the Warrants by the Holder and such Holders, will be included
in such registration statement, (ii) cause such registration statement to be
filed with the Securities and Exchange Commission within sixty days of such
request and to cover all Warrant Shares which it has been so requested to
include, (iii) use its best efforts to cause such registration statement to
become effective as soon as practicable and (iv) take all other action necessary
under any Federal or state law or regulation of any governmental authority to
permit all Warrant Shares which it has been so requested to include in such
registration statement to be sold or otherwise disposed of, and will maintain
such compliance with each such Federal and state law and regulation of any
governmental authority for the period necessary for such Holders to effect the
proposed sale or other disposition. The Company shall be required to effect a
registration or qualification pursuant to this Subsection 6(a) on one occasion
only. If so requested by the Managing Underwriter of the Company's initial
public offering the Holders hereby agree not to make a demand pursuant to this
Section 6(a) for 120 days following the first day of trading of the Company's
Common Stock pursuant to such offering. Notwithstanding any provision of this
Agreement to the contrary, the Corporation may delay filing a registration
statement to be filed pursuant this Section 6(a) and may withhold efforts to
cause such registration statement to become effective for no more than 90 days
following the receipt of a request for registration pursuant to this Section
6(a), if the Corporation (a) determines in good faith that such registration
might interfere with or affect the negotiation or completion of any transaction
that is being contemplated by the Corporation (whether or not a final decision
has been made to undertake such transaction) at the time the right to delay is
exercised or (b) the Company has filed or is in the process of preparing a
registration statement relating to the Company's Common Stock; provided,
however, that the Company may not delay filing a registration statement pursuant
to clause (a) hereof more than once. The Company shall not be obligated to
effect, or to take any
<PAGE> 9
action to effect, any registration if all the Warrant Shares requested to be
registered could be disposed of at the time of such request under Rule 144(k)
under the Securities Act or some other similar exemption thereunder on the same
terms as if such Warrant Shares had been registered hereunder.
(b) The Company agrees that if, at any time and from time to time
during the period commencing on July 1, 1998 and ending on May 13, 2003, the
Board of Directors of the Company shall authorize the filing of a registration
statement (any such registration statement being hereinafter called a
"Subsequent Registration Statement") under the Act (otherwise than pursuant to
Subsection 6(a) hereof, or other than a registration statement on Form S-8 or
other form which does not include substantially the same information as would be
required in a form for the general registration of securities) in connection
with the proposed offer of any of its securities by it or any of its
stockholders other than an initial public offering of its securities, the
Company will (i) promptly notify the Holder and each of the Holders, if any, of
other Warrants and/or Warrant Shares not previously sold pursuant to this
Section 6 that such Subsequent Registration Statement will be filed and that the
Warrant Shares which are then held, and/or which may be acquired upon the
exercise of the Warrants, by the Holder and such Holders, will, at the Holder's
and such Holders' request, be included in such Subsequent Registration
Statement, (ii) upon the written request of a Holder made within 20 days after
the giving of such notice by the Company, include in the securities covered by
such Subsequent Registration Statement all Warrant Shares which it has been so
requested to include, (iii) use its commercially reasonable efforts to cause
such Subsequent Registration Statement to become effective as soon as
practicable and (iv) take all other action necessary under any Federal or state
law or regulation of any governmental authority to permit all Warrant Shares
which it has been so requested to include in such Subsequent Registration
Statement to be sold or otherwise disposed of, and will maintain such compliance
with each such Federal and state law and regulation of any governmental
authority for the period necessary for the Holder and such Holders to effect the
proposed sale or other disposition.
(c) The Company agrees that within one year after an initial public
offering of the Company's Common Stock, the Company shall, using its reasonable
commercial judgment, file a registration statement (any such registration
statement being hereinafter called a "Post-IPO Registration Statement") under
the Act covering all of the Warrant Shares issued or issuable upon the exercise
of the Warrants and not previously sold, and the Company will (i) promptly
notify each Holder of the Warrants and each holder of Warrant Shares not so
previously sold that such registration statement will be filed and that the
Warrant Shares which are then held, and/or may be acquired upon exercise of the
Warrants by the Holder and such Holders, will be included in such registration
statement at the Holder's and such Holders' request, (ii) cause such
registration statement to be filed with the Securities and Exchange Commission
and to cover all Warrant Shares which have not been previously sold, (iii) use
its best efforts to cause such registration statement to become effective as
soon as practicable and (iv) take all other action necessary under any Federal
or state law or regulation of any governmental authority to permit all Warrant
Shares which have not previously been sold to be
<PAGE> 10
sold or otherwise disposed of, and will maintain such compliance with each such
Federal and state law and regulation of any governmental authority for the
period necessary for such Holders to effect the proposed sale or other
disposition.
(d) Whenever the Company is required pursuant to the provisions of
this Section 6 to include Warrant Shares in a registration statement, the
Company shall (i) furnish each Holder of any such Warrant Shares and each
underwriter of such Warrant Shares with such copies of the prospectus, including
the preliminary prospectus, conforming to the Act (and such other documents as
each such Holder or each such underwriter may reasonably request) in order to
facilitate the sale or distribution of the Warrant Shares, (ii) use its best
efforts to register or qualify such Warrant Shares under the blue sky laws (to
the extent applicable) of such jurisdiction or laws (to the extent applicable)
of such jurisdiction or jurisdictions as the Holders of any such Warrant Shares
and each underwriter of Warrant Shares being sold by such Holders shall
reasonably request and (iii) take such other actions as may be reasonably
necessary or advisable to enable such Holders and such underwriters to
consummate the sale or distribution in such jurisdiction or jurisdictions in
which such Holders shall have reasonably requested that the Warrant Shares be
sold. Nothing contained in this Warrant shall be construed as requiring a Holder
to exercise its Warrant prior to the closing of an offering pursuant to a
registration statement referred to in Subsection 6(a), 6(b) or 6(c).
(e) The Company shall furnish to each Holder participating in an
offering pursuant to a registration statement under this Section 6 and to each
underwriter, if any, a signed counterpart, addressed to such Holder or
underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement), and (ii) a "comfort" letter dated the effective date of
such registration statement (and, if such registration includes an underwritten
public offering, a letter dated the date of the closing under the underwriting
agreement) signed by the independent public accountants who have issued a report
on the Company's financial statements included in such registration statement,
in each case covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to underwriters in underwritten public
offerings of securities.
(f) The Company shall enter into an underwriting agreement with the
managing underwriters selected by Holders holding at least 51% of the Warrant
Shares requested to be included in a registration statement filed pursuant to
Section 6(a). Such agreement shall be reasonably satisfactory in form and
substance to the Company, each Holder and such managing underwriters, and shall
contain such representations, warranties and covenants by the Company and such
other terms as are customarily contained in agreements of that type used by the
managing underwriter. The Holders shall be parties to any underwriting agreement
relating to an underwritten sale of their Warrant Shares and may, at their
option, require that any or all the
<PAGE> 11
representations, warranties and covenants of the Company to or for the benefit
of such underwriters shall also be made to and for the benefit of such Holders.
Such Holders shall not be required to make any representations or warranties to
or agreements with the Company or the underwriters except as they may relate to
such Holders and their intended methods of distribution.
(g) If the Managing Underwriter of a proposed offering advises the
Company that the number of securities proposed to be sold in such offering is
greater than the number of securities which the Managing Underwriter believes
feasible to sell at that time, at the price and upon the terms approved by the
Company and, in the case of a registration pursuant to Section 6(a), the persons
making the demand, then the number of securities to be sold in such offering
shall be reduced, provided that such reduction shall be pro rata and shall be
allocated first to those securities held by persons other than those who
initiated such registration.
(h) The Company shall pay all expenses incurred in connection with
any registration statement or other action pursuant to the provisions of this
Section 6, including the reasonable fees and expenses of one counsel
representing the Holders of Warrant Shares included in any such registration
statement, other than underwriting discounts and applicable transfer taxes
relating to the Warrant Shares.
(i) The Company agrees to indemnify and hold harmless each selling
Holder of Warrant Shares and each person who controls any such selling Holder
within the meaning of Section 15 of the Act, and each and all of them, from and
against any and all losses, claims, damages, liabilities or actions, joint or
several, to which any selling Holder of Warrant Shares or they or any of them
may become subject under the Act or otherwise and to reimburse the persons
indemnified as above for any reasonable legal or other expenses (including the
cost of any investigation and preparation) incurred by them in connection with
any litigation or threatened litigation, whether or not resulting in any
liability, but only insofar as such losses, claims, damages, liabilities or
actions arise out of, or are based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any registration statement
pursuant to which Warrant Shares were registered under the Act (hereinafter
called a "registration Statement"), any preliminary prospectus, the final
prospectus or any amendment or supplement thereto (or in any application or
document filed in connection therewith) or document executed by the Company
based upon written information furnished by or on behalf of the Company filed in
any jurisdiction in order to register or qualify the Warrant Shares under the
securities laws thereof or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or (ii) the employment by the Company of any device, scheme or
artifice to defraud, or the engaging by the Company in any act, practice or
course of business which operates or would operate as a fraud or deceit, or any
conspiracy with respect thereto, in which the Company shall participate, in
connection with the issuance and sale of any of the Warrant Shares; provided,
however, that the indemnity agreement contained in this Section 6(i) shall not
extend to any selling Holder of Warrant Shares if any such losses, claims,
damages, liabilities or
<PAGE> 12
actions arising out of, or based upon, any such untrue statement or alleged
untrue statement, or any such omission or alleged omission, if such statement or
omission was based upon and made in conformity with information furnished in
writing to the Company by a selling Holder of Warrant Shares specifically for
use in connection with the preparation of such Registration Statement, any final
prospectus, any preliminary prospectus or any such amendment or supplement
thereto. The Company agrees to pay any legal and other expenses for which it is
liable under this Section 6(i) from time to time (but not more frequently than
monthly) within 30 days after its receipt of a bill therefor.
(j) Each selling Holder of Warrant Shares, severally and not
jointly, will indemnify and hold harmless the Company, its directors, its
officers who shall have signed the Registration Statement and each person, if
any, who controls the Company within the meaning of Section 15 of the Act to the
same extent as the foregoing indemnity from the Company set forth in Section
6(i) hereof, but in each case to the extent, and only to the extent, that any
statement in or omission from or alleged omission from such Registration
Statement, any final prospectus, any preliminary prospectus or any amendment or
supplement thereto was made in reliance upon information furnished in writing to
the Company by such selling Holder specifically for use in connection with the
preparation of the Registration Statement, any final prospectus or the
preliminary prospectus or any such amendment or supplement thereto; provided,
however, that the obligation of any Holder of Warrant Shares to indemnify the
Company under the provision of this Section 6(j) shall be limited to the excess
of (1) the product of (A) the number of Warrant Shares being sold by the selling
Holder and (B) the price at which such Warrant Shares are sold over (2) the
aggregate amount paid to the Company by such Holder in connection with the
issuance of such Warrant Shares. Each selling Holder of Warrant Shares agrees to
pay any legal and other expenses for which it is liable under this Section 6(j)
from time to time (but not more frequently than monthly) within 30 days after
receipt of a bill therefor.
(k) If any action is brought against a person entitled to
indemnification pursuant to the foregoing Sections 6(i) or (j) (an "indemnified
party") in respect of which indemnity may be sought against a person granting
indemnification (an "indemnifying party") pursuant to such Sections, such
indemnified party shall promptly notify such indemnifying party in writing of
the commencement thereof; but the omission so to notify the indemnifying party
of any such action shall not release the indemnifying party from any liability
it may have to such indemnified party otherwise than on account of the indemnity
agreement contained in Section 6(i) or (j) hereof. In case any such action is
brought against an indemnified party and it notifies an indemnifying party of
the commencement thereof, the indemnifying party against which a claim is to be
made will be entitled to participate therein at its own expense and, to the
extent that it may wish, to assume at its own expense the defense thereof, with
counsel reasonably satisfactory to such indemnified party; provided, however,
that (i) if the defendants in any such action include both the indemnified party
and the indemnifying party, and the indemnified party shall have reasonably
concluded based upon advice of counsel that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified party
shall have the right to select separate
<PAGE> 13
counsel to assume such legal defenses and otherwise to participate in the
defense of such action on behalf of such indemnified party or parties and (ii)
in any event, the indemnified party shall be entitled to have counsel chosen by
such indemnified party participate in, but not conduct, the defense at the
expense of the indemnifying party. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under the indemnification
provisions of this Section 6 for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof unless
(x) the indemnified party shall have employed such counsel in connection with
the assumption of legal defenses in accordance with proviso (i) to the next
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel), (y) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action or (z) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. An indemnified party shall not be liable for
any settlement of any action or proceeding effected without its written consent.
(l) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreements provided for in Section 6(i) or
(j) hereof are unavailable in accordance with their respective terms, the
Company and any selling Holder of Warrant Shares shall contribute to the
aggregate losses, claims, damages and liabilities, of the nature contemplated by
said indemnity agreements, incurred by the Company and such selling Holder of
Warrant Shares, in such proportions as is appropriate to reflect the relative
fault of the Company on the one hand and of such selling Holder of Warrant
Shares on the other hand, in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company and such
selling Holder of Warrant Shares shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relate to
information supplied by the Company or such selling Holder of Warrant Shares and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, however, that the
obligation of any Holder of Warrant Shares to contribute to the Company under
the provisions of this Section 6(l) shall be limited to the excess of (1) the
product of (A) the number of Warrant Shares being sold by the selling Holder and
(B) the price at which such Warrant Shares are sold over (2) the aggregate
amount paid to the Company by such Holder in connection with the issuance of
such Warrant Shares.
(m) The respective indemnity and contribution agreements by the
Company and the selling Holder of Warrant Shares in this Section 6 shall remain
operative and in full force and effect regardless of (i) any investigation made
by any selling Holder of Warrant Shares or by or on behalf of any person who
controls such selling Holder or by the Company or any controlling person of the
Company or the director or any officer of the Company, (ii) payment
<PAGE> 14
for any of the Warrant Shares or (iii) any termination of this Agreement, and
shall survive the delivery of the Warrant Shares, and any successor of the
Company, or of any selling Holder of Warrant Shares, or of any person who
controls the Company or of any selling Holder of Warrant Shares, as the case may
be, shall be entitled to the benefit of such respective indemnity and
contribution agreements. The respective indemnity and contribution agreements by
the Company and the selling Holder of Warrant Shares contained in this Section 6
shall be in addition to any liability which the company and the selling Holder
of Warrant Shares may otherwise have.
7. Limited Transferability. This Warrant may not be sold,
transferred, assigned or hypothecated by the Holder except with the consent of
the Company and otherwise in compliance with the provisions of the Act. The
Company may treat the registered Holder of this Warrant as he or it appears on
the Company's books at any time as the Holder for all purposes. The Company
shall permit any Holder of a Warrant or his duly authorized attorney, upon
written request during ordinary business hours, to inspect and copy or make
extracts from its books showing the registered holders of Warrants. All Warrants
issued upon the transfer or assignment of this Warrant will be dated the same
date as this Warrant, and all rights of the Holder thereof shall be identical to
those of the Holder.
8. Loss, etc., of Warrant. Upon receipt of evidence satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant, and
of indemnity reasonably satisfactory to the Company, if lost, stolen or
destroyed, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver to the Holder a new Warrant of like date,
tenor and denomination.
9. Warrant Holder Not Shareholder. Except as otherwise provided
herein, this Warrant does not confer upon the Holder any right to vote or to
consent to or receive notice as a stockholder of the Company, as such, in
respect of any matters whatsoever, or any other rights or liabilities as a
stockholder, prior to the exercise hereof.
10. Notices. All notices and other communications required or
permitted to be given under this Warrant shall be in writing and shall be deemed
to have been duly given if delivered personally or by facsimile transmission, or
sent by recognized overnight courier or by certified mail, return receipt
requested, postage paid, to the parties hereto as follows:
(a) if to the Company at 115 West 30th Street, Suite 304, New
York, New York 10001, Att.: Executive Vice President, Finance,
facsimile no. (212) 244-4311, or such other address as the Company
has designated in writing to the Holder, or
(b) if to the Holder at 590 Madison Avenue, 35th Floor, New
York, New York 10022, Att.: Peter M. Graham, facsimile no. (212)
409-2171 or such other address or facsimile number as the Holder has
designated in writing to the Company.
<PAGE> 15
11. Headings. The headings of this Warrant have been inserted as a
matter of convenience and shall not affect the construction hereof.
12. Applicable Law. This Warrant shall be governed by and construed
in accordance with the law of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
<PAGE> 16
IN WITNESS WHEREOF, Alloy Designs, Inc. has caused this Warrant to
be signed by its President and its corporate seal to be hereunto affixed and
attested by its Secretary this ___th day of May, 1998.
ALLOY DESIGNS, INC.
By:
-------------------------
President
ATTEST:
- -------------------------
Secretary
[Corporate Seal]
<PAGE> 17
ASSIGNMENT
FOR VALUE RECEIVED ____________________________ hereby sells,
assigns and transfers unto __________________________ the foregoing Warrant and
all rights evidenced thereby, and does irrevocably constitute and appoint
_______________________, attorney, to transfer said Warrant on the books of
_________________________.
Dated: _____________________________ Signature:___________________________
Address:__________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED __________________________ hereby assigns and
transfers unto ____________________________ the right to purchase ______________
shares of the Common Stock of _________________________ covered by the foregoing
Warrant, and a proportionate part of said Warrant and the rights evidenced
thereby, and does irrevocably constitute and appoint _____________________,
attorney, to transfer that part of said Warrant on the books of
______________________________.
Dated: _____________________________ Signature:___________________________
Address:__________________________
<PAGE> 18
SUBSCRIPTION FORM
(To be executed upon exercise of Warrant pursuant to Section 1 (a)(i))
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
______________ shares of Common Stock, as provided for in Section 1(a)(i), and
tenders herewith payment of the purchase price in full in the form of cash or a
certified or official bank check in the amount of $_______________.
Please issue a certificate or certificates for such Common Stock in
the name of, and pay any cash for any fractional share to:
Name __________________
(Please Print Name, Address and Social
Security No.)
Address _______________
_______________
Social _______________
Security Number
Signature___________________
NOTE: The above signature should
correspond exactly with the name
on the first page of this
Warrant or with the name of the
assignee appearing in the
assignment form below.
Date___________________
And if said number of shares shall not be all the shares purchasable
under the within Warrant, a new Warrant is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder.
<PAGE> 19
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant
pursuant to Section 1(a)(ii))
The undersigned hereby irrevocably elects to surrender _________
shares purchasable under this Warrant for such shares of Common Stock issuable
in exchange therefor pursuant to the Cashless Exercise provisions of the within
Warrant, as provided for in Section 1(a)(ii) of such Warrant.
Please issue a certificate or certificates for such Common Stock in
the name of, and pay cash for fractional shares to:
Name __________________
(Please Print Name, Address and Social
Security No.)
Address _______________
_______________
Social _______________
Security Number
Signature___________________
NOTE: The above signature should
correspond exactly with the name
on the first page of this
Warrant or with the name of the
assignee appearing in the
assignment form below.
Date___________________
And if said number of shares shall not be all the shares
exchangeable or purchasable under the within Warrant, a new Warrant is to be
issued in the name of the undersigned for the balance remaining of the shares
purchasable thereunder.
<PAGE> 20
SCHEDULE A TO EXHIBIT 10.37
Alloy issued warrants to the following persons which were substantially
identical in all material respects to Exhibit 10.37 except for the information
set forth beside such persons name in the following table:
<TABLE>
<CAPTION>
NUMBER OF SHARES
HOLDER WARRANT NUMBER UNDERLYING WARRANTS
- ----------------------------------- -------------- -------------------
<S> <C> <C>
Peter M. Graham No.4 27,962
Peter M. Graham Purchase Money Plan No.5 27,963
Neil I. Vogel No.7 3,915
</TABLE>
<PAGE> 1
EXHIBIT 10.40
Flexible Standardized 401(k) Profit Sharing Plan
ADOPTION AGREEMENT
SECTION 1. EMPLOYER INFORMATION
Name of Employer: Alloy Designs, Inc.
Address: 115W. 30th Street, Room #201
City: New York; State: NY; Zip: 10001
Telephone: 212-244-4307; Employer's Federal Tax Identification Number:
04-3310676
Type of Business (Check only one)
[ ] Sole Proprietorship
[ ] Partnership
[X] C Corporation
[ ] S Corporation
[ ] Other (Specify)
[ ] Check here if Related Employers may participate in this Plan and attach a
Related Employer Participation Agreement for each Related Employer who will
participate in this Plan.
Business Code:
Name of Plan: Alloy, Inc. 401(k) Savings Plan
Name of Trust (if different from Plan name):
Plan Sequence Number: 001 (Enter 001 if this is the first qualified plan the
Employer has ever maintained, enter 002 , if it is the second, etc.)
Trust Identification Number (if applicable): ; Account Number (Optional): 43281
SECTION 2. EFFECTIVE DATES Complete Parts A and B
Part A. General Effective Dates (Check and Complete Option 1 or 2):
Option 1: [X] This is the initial adoption of a profit sharing plan by the
Employer. The Effective Date of this Plan is 01/01/1999.
NOTE: The effective date is usually the first day of the Plan Year in which this
Adoption Agreement is signed.
Option 2: [ ] This is an amendment and restatement of an existing profit sharing
plan (a Prior Plan).
The Prior Plan was initially effective on: The Effective Date of this amendment
and restatement is:
NOTE: The effective date is usually the first day of the Plan Year in which this
Adoption Agreement is signed.
Part B. Commencement of Elective Deferrals:
Elective Deferrals may commence on: 04/01/1999.
NOTE: This date may be no earlier than the date this Adoption Agreement is
signed because Elective Deferrals cannot be made retroactively.
SECTION 3. RELEVANT TIME PERIODS Complete Parts A through C
Part A. Employer's Fiscal Year:
The Employer's fiscal year ends (Specify month and date):
Part B. Plan Year Means:
Option 1: [ ] The 12-consecutive month period which coincides with the
Employer's fiscal year.
Option 2: [X] The calendar year.
Option 3: [ ] Other 12-consecutive month period (Specify):
NOTE: If no option is selected, Option 1 will be deemed to be selected. If the
initial Plan Year is less than 12 months (a short Plan Year) specify such
Plan Year's beginning and ending dates
Page 2
Part C. Limitation Year Means:
<PAGE> 2
Option 1: [X] The Plan Year.
Option 2: [ ] The calendar year.
Option 3: [ ] Other 12-consecutive month period (Specify): .
NOTE: If no option is selected, Option 1 will be deemed to be selected.
SECTION 4. ELIGIBILITY REQUIREMENTS Complete Parts A through F
Part A. Years of Eligibility Service Requirement:
1. Elective Deferrals.
An Employee will be eligible to become a Contributing Participant in the Plan
(and thus be eligible to make Elective Deferrals) and receive Matching
Contributions (including Qualified Matching Contributions, if applicable) after
completing: [ ] (enter 0, 1 or any fraction less than 1) Years of Eligibility
Service.
2. Employer Profit Sharing Contributions.
An Employee will be eligible to become a Participant in the Plan for purposes of
receiving an allocation of any Employer Profit Sharing Contribution made
pursuant to Section 10 of the Adoption Agreement after completing: [ ] (enter 0,
1, 2 or any fraction less than 2) Years of Eligibility Service. NOTE: If more
than 1 year is selected for Item 2, the immediate 100% vesting schedule of
Section 12 will automatically apply for contributions described in such item. If
either item is left blank, the Years of Eligibility Service required for such
item will be deemed to be 0. If a fraction is selected, an Employee will not be
required to complete any specified number of Hours of Service to receive credit
for a fractional year. If a single Entry Date is selected in Section 4, Part F
for an item, the Years of Eligibility Service required for such item cannot
exceed 1.5 (.5 for Elective Deferrals).
Part B. Age Requirement:
1. Elective Deferrals.
An Employee will be eligible to become a Contributing Participant (and thus be
eligible to make Elective Deferrals) and receive Matching Contributions
(including Qualified Matching Contributions, if applicable) after attaining age
21 (no more than 21).
2. Employer Profit Sharing Contributions.
An Employee will be eligible to become a Participant in the Plan for purposes of
receiving an allocation of any Employer Profit Sharing Contribution made
pursuant to Section 10 of the Adoption Agreement after attaining age [ ] (no
more than 21). NOTE: If either of the above items in this Section 4, Part B is
left blank, it will be deemed there is no age requirement for such item. If a
single Entry Date is selected in Section 4, Part F for an item, no age
requirement can exceed 20.5 for such item.
Part C. Employees Employed As Of Effective Date:
Will all Employees employed as of the Effective Date of this Plan who have not
otherwise met the requirements of Part A or Part B above be considered to have
met those requirements as of the Effective Date? [ ] Yes [X] No
NOTE: If a box is not checked for any item in this Section 4, Part C, "No" will
be deemed to be selected.
Part D. Exclusion of Certain Classes of Employees:
All Employees will be eligible to become Participants in the Plan except:
a. [X] Those Employees included in a unit of Employees covered by a collective
bargaining agreement between the Employer and Employee representatives, if
retirement benefits were the
<PAGE> 3
subject of good faith bargaining and if two percent or less of the Employees who
are covered pursuant to that agreement are professionals as defined in Section
1.4l0(b)-9 of the regulations. For this purpose, the term "employee
representatives" does not include any organization more than half of whose
members are Employees who are owners, officers, or executives of the Employer.
b. [X] Those Employees who are non-resident aliens (within the meaning of
Section 7701(b)(l)(B) of the Code) and who received no earned income (within the
meaning of Section 911(d)(2) of the Code) from the Employer which constitutes
income from sources within the United States (within the meaning of Section
861(a)(3) of the Code).
Page 3
Part E. Hours Required For Eligibility Purposes:
_____1. Hours of Service (no more than 1,000) shall be required to constitute a
Year of Eligibility Service.
_____2. Hours of Service (no more than 500 but less than the number specified in
Section 4, Part E, Item 1, above) must be exceeded to avoid a Break in
Eligibility Service.
3. For purposes of determining Years of Eligibility Service, Employees shall
be given credit for Hours of Service with the following predecessor employer(s):
(Complete if applicable)
Part F. Entry Dates:
The Entry Dates for participation shall be (Choose one):
Option 1: [ ] The first day of the Plan Year and the first day of the seventh
month of the Plan Year.
Option 2: [X] Other (Specify): the first day of each month
NOTE: If no option is selected, Option 1 will be deemed to be selected. Option 2
can be selected for an item only if the eligibility requirements and Entry Dates
are coordinated such that each Employee will become a Participant in the Plan no
later than the earlier of: (1) the first day of the Plan Year beginning after
the date the Employee satisfies the age and service requirements of Section
410(a) of the Code; or (2) 6 months after the date the Employee satisfies such
requirements.
SECTION 5. METHOD OF DETERMINING SERVICE Complete Part A or B
Part A. Hours of Service Equivalencies:
Service will be determined on the basis of the method selected below. Only one
method may be selected. The method selected will be applied to all Employees
covered under the Plan. (Choose one):
Option 1: [X] On the basis of actual hours for which an Employee is paid or
entitled to payment.
Option 2: [ ] On the basis of days worked. An Employee will be credited with 10
Hours of Service if under Section 1.24 of the Plan such Employee would be
credited with at least 1 Hour of Service during the day.
Option 3: [ ] On the basis of weeks worked. An Employee will be credited with 45
Hours of Service if under Section 1.24 of the Plan such Employee would be
credited with at least 1 Hour of Service during the week.
Option 4: [ ] On the basis of months worked. An Employee will be credited with
190 Hours of Service if under Section 1.24 of the Plan such Employee would be
credited with at least 1 Hour of Service during the month.
NOTE: If no option is selected, Option 1 will be deemed to be selected. This
Section 5, Part A will not apply if the Elapsed Time Method of Section 5, Part B
is selected.
<PAGE> 4
Part B. Elapsed Time Method:
In lieu of tracking Hours of Service of Employees, will the elapsed time method
described in Section 2.07 of the Plan be used? (Choose one)
Option 1: [ ] No.
Option 2: [ ] Yes.
NOTE: If no option is selected, Option 1 will be deemed to be selected.
SECTION 6. ELECTIVE DEFERRALS
Part A. Authorization of Elective Deferrals:
Will Elective Deferrals be permitted under this Plan? (Choose one)
Option 1: [X] Yes.
Option 2: [ ] No.
NOTE: If no option is selected, Option 1 will be deemed to be selected. Complete
the remainder of Section 6 only if Option 1 is selected.
Part B. Limits on Elective Deferrals:
If Elective Deferrals are permitted under the Plan, a Contributing Participant
may elect under a salary reduction agreement to have his or her Compensation
reduced by an amount as described below (Choose one):
Option 1: [X] An amount equal to a percentage of the Contributing Participant's
Compensation from 1 % to 15% in increments of 1%.
Option 2: [ ] An amount of the Contributing Participant's Compensation not less
than __ and not more than __.
The amount of such reduction shall be contributed to the Plan by the Employer on
behalf of the Contributing Participant. For any taxable year, a Contributing
Participant's Elective Deferrals shall not exceed the limit contained in Section
402(g) of the Code in effect at the beginning of such taxable year.
Page 4
Part C. Elective Deferrals Based on Bonuses:
Instead of or in addition to making Elective Deferrals through payroll
deduction, may a Contributing Participant elect to contribute to the Plan, as an
Elective Deferral, part or all of a bonus rather than receive such bonus in
cash? (Choose one)
Option 1: [ ] Yes.
Option 2: [X] No.
NOTE: If no option is selected, Option 2 will be deemed to be selected.
Part D. Return As A Contributing Participant After Ceasing Elective Deferrals:
A Participant who ceases Elective Deferrals by revoking a salary reduction
agreement may return as a Contributing Participant as of such times established
by the Plan Administrator in a uniform and nondiscriminatory manner.
Part E. Changing Elective Deferral Amounts:
A Contributing Participant may modify a salary reduction agreement to
prospectively increase or decrease the amount of his or her Elective Deferrals
as of such times established by the Plan Administrator in a uniform and
nondiscriminatory manner.
Part F. Claiming Excess Elective Deferrals:
Participants who claim Excess Elective Deferrals for the preceding calendar year
must submit their claims in writing to the Plan Administrator by (Choose one):
Option l: [X] March 1.
<PAGE> 5
Option 2: [ ] Other (Specify a date not later than April 15)
NOTE: If no option is selected, Option I will be deemed to be selected.
SECTION 7. MATCHING CONTRIBUTIONS
Part A. Authorization of Matching Contributions:
Will the Employer make Matching Contributions to the Plan on behalf of
Qualifying Contributing Participants?
(Choose one)
Option 1: [ ] Yes, but only with respect to a Contributing Participant's
Elective Deferrals.
Option 2: [ ] Yes, but only with respect to a Participant's Nondeductible
Employee Contributions.
Option 3: [ ] Yes, with respect to both Elective Deferrals and Nondeductible
Employee Contributions.
Option 4: [X] No.
NOTE: If no option is selected, Option 4 will be deemed to be selected. Complete
the remainder of Section 7 only if Option 1, 2 or 3 is selected.
Part B. Matching Contribution Formula:
If the Employer will make Matching Contributions, then the amount of such
Matching Contributions made on behalf of a Qualifying Contributing Participant
each Plan Year shall be (Choose one):
Option 1: [ ] An amount equal to ____% of such Contributing Participant's
Elective Deferral (and/or Nondeductible Employee Contribution, if applicable).
Option 2: [ ] An amount equal to the sum of __% of the portion of such
Contributing Participant's Elective Deferral (and/or Nondeductible Employee
Contribution, if applicable) which does not exceed __% of the Contributing
Participant's Compensation plus __% of the portion of such Contributing
Participant's Elective Deferral (and/or Nondeductible Employee Contribution, if
applicable) which exceeds __% of the Contributing Participant's Compensation.
Option 3: [ ] Such amount, if any, equal to that percentage of each Contributing
Participant's Elective Deferral (and/or Nondeductible Employee Contribution, if
applicable) which the Employer, in its sole discretion, determines from year to
year.
Option 4: [ ] Other Formula. (Specify)
NOTE: If Option 4 is selected, the formula specified can only allow Matching
Contributions to be made with respect to a Contributing Participant's Elective
Deferrals (and/or Nondeductible Employee Contribution, if applicable).
Page 5
Part C. Limit on Matching Contributions:
Notwithstanding the Matching Contribution formula specified above, no Matching
Contribution will be made with respect to a Contributing Participant's Elective
Deferrals (and/or Nondeductible Employee Contributions, if applicable) in excess
of __ or __% of such Contributing Participant's Compensation.
Part D. Qualifying Contributing Participants:
A Contributing Participant who satisfies the eligibility requirements described
in Section 4 will be a Qualifying Contributing Participant and thus entitled to
share in Matching Contributions for any Plan Year only if the Participant is a
Contributing Participant and satisfies the following additional conditions
(Check one or more Options):
Option 1: [ ] No Additional Conditions.
<PAGE> 6
Option 2: [ ] Hours of Service Requirement. The Contributing Participant
completes at least (not more than 500) Hours of Service during the Plan Year.
However, this condition will be waived for the following reasons (Check at least
one):
[ ] The Contributing Participant's Death.
[ ] The Contributing Participant's Termination of Employment after having
incurred a Disability.
[ ] The Contributing Participant's Termination of Employment after having
reached Normal Retirement Age.
[ ] This condition will not be waived.
NOTE: If no option is selected, Option 1 will be deemed to be selected.
SECTION 8. QUALIFIED NONELECTIVE CONTRIBUTIONS
Part A. Authorization of Qualified Nonelective Contributions:
Will the Employer make Qualified Nonelective Contributions to the Plan? (Choose
One)
Option 1: [ ] Yes.
Option 2: [X] No.
If the Employer elects to make Qualified Nonelective Contributions, then the
amount, if any, of such contribution to the Plan for each Plan Year shall be an
amount determined by the Employer.
NOTE: If no option is selected, Option 1 will be deemed to be selected. Complete
the remainder of Section 8 only if Option 1 is selected.
Part B. Participants Entitled to Qualified Nonelective Contributions:
Allocation of Qualified Nonelective Contributions shall be made to the
Individual Accounts of (Choose one):
Option 1: [ ] Only Participants who are not Highly Compensated Employees.
Option 2: [ ] All Participants.
NOTE: If no option is selected, Option 1 will be deemed to be selected.
Part C. Allocation of Qualified Nonelective Contributions:
Allocation of Qualified Nonelective Contributions to Participants entitled
thereto shall be made (Choose one):
Option 1: [ ] In the ratio which each Participant's Compensation for the Plan
Year bears to the total Compensation of all Participants for such Plan Year.
Option 2: [ ] In the ratio which each Participant's Compensation not in excess
of __for the Plan Year bears to the total Compensation of all Participants not
in excess of __ for such Plan Year.
NOTE: If no option is selected, Option 1 will be deemed to be selected.
Page 6
SECTION 9. QUALIFIED MATCHING CONTRIBUTIONS
Part A. Authorization of Qualified Matching Contributions:
Will the Employer make Qualified Matching Contributions to the Plan on behalf of
Qualifying Contributing Participants? (Choose One)
Option 1: [ ] Yes, but only with respect to a Contributing Participant's
Elective Deferrals.
Option 2: [ ] Yes, but only with respect to a Participant's Nondeductible
Employee Contributions.
Option 3: [ ] Yes, with respect to both Elective Deferrals and Nondeductible
Employee Contributions.
Option 4: [X] No.
NOTE: If no option is selected, Option 3 will be deemed to be selected. Complete
the remainder
<PAGE> 7
of Section 9 only if Option 1, 2 or 3 is selected.
Part B. Qualified Matching Contribution Formula:
If the Employer will make Qualified Matching Contributions, then the amount of
such Qualified Matching Contributions made on behalf of a Qualifying
Contributing Participant each Plan Year shall be (Choose one):
Option 1: [ ] An amount equal to __% of such Contributing Participant's Elective
Deferral (and/or Nondeductible Employee Contribution, if applicable).
Option 2: [ ] An amount equal to the sum of __% of the portion of such
Contributing Participant's Elective Deferral (and/or Nondeductible Employee
Contribution, if applicable) which does not exceed ____% of the Contributing
Participant's Compensation plus __% of the portion of such Contributing
Participant's Elective Deferral (and/or Nondeductible Employee Contribution, if
applicable) which exceeds __% of the Contributing Participant's Compensation.
Option 3: [ ] Such amount, if any, as determined by the Employer in its sole
discretion, equal to that percentage of the Elective Deferrals (and/or
Nondeductible Employee Contribution, if applicable) of each Contributing
Participant entitled thereto which would be sufficient to cause the Plan to
satisfy the Actual Contribution Percentage tests (described in Section 11.402 of
the Plan) for the Plan Year.
Option 4: [ ] Other Formula. (Specify):
NOTE: If no option is selected, Option 3 will be deemed to be selected.
Part C. Participants Entitled to Qualified Matching Contributions: Qualified
Matching Contributions, if made to the Plan, will be made on behalf of (Choose
one):
Option 1: [ ] Only Contributing Participants who make Elective Deferrals who are
not Highly Compensated Employees.
Option 2: [ ] All Contributing Participants who make Elective Deferrals.
NOTE: If no option is selected, Option 1 will be deemed to be selected.
Part D. Limit On Qualified Matching Contributions:
Notwithstanding the Qualified Matching Contribution formula specified above, the
Employer will not match a Contributing Participant's Elective Deferrals (and/or
Nondeductible Employee Contribution, if applicable) in excess of __ or __% of
such Contributing Participant's Compensation.
SECTION 10. EMPLOYER PROFIT SHARING CONTRIBUTIONS Complete Parts A, B and C
Part A. Contribution Formula:
For each Plan Year the Employer will contribute an Amount to be determined from
year to year.
Page 7
Part B. Allocation Formula (Choose one):
Option 1: [ ] Pro Rata Formula. Employer Profit Sharing Contributions shall be
allocated to the Individual Accounts of Qualifying Participants in the ratio
that each Qualifying Participant's Compensation for the Plan Year bears to the
total Compensation of all Qualifying Participants for the Plan Year.
Option 2: [ ] Integrated Formula. Employer Profit Sharing Contributions shall be
allocated as follows (Start with Step 3 if this Plan is not a Top-Heavy Plan):
Step 1. Employer Profit Sharing Contributions shall first be allocated pro rata
to Qualifying Participants in the manner described in Section 10, Part B, Option
1. The percent so allocated shall not exceed 3% of each Qualifying Participant's
Compensation.
<PAGE> 8
Step 2. Any Employer Profit Sharing Contributions remaining after the allocation
in Step 1 shall be allocated to each Qualifying Participant's Individual Account
in the ratio that each Qualifying Participant's Compensation for the Plan Year
in excess of the integration level bears to all Qualifying Participants'
Compensation in excess of the integration level, but not in excess of 3%.
Step 3. Any Employer Profit Sharing Contributions remaining after the allocation
in Step 2 shall be allocated to each Qualifying Participant's Individual Account
in the ratio that the sum of each Qualifying Participant's total Compensation
and Compensation in excess of the integration level bears to the sum of all
Qualifying Participants' total Compensation and Compensation in excess of the
integration level, but not in excess of the profit sharing maximum disparity
rate as described in Section 3.01 (B)(3) of the Plan.
Step 4. Any Employer Profit Sharing Contributions remaining after the allocation
in Step 3 shall be allocated pro rata to Qualifying Participants in the manner
described in Section 10, Part B, Option 1.
The integration level shall be (Choose one):
Suboption (a): [ ] The Taxable Wage Base.
Suboption (b): [ ] __________ (a dollar amount less than the Taxable Wage Base).
Suboption (c): [ ] ______% (not more than 100%) of the Taxable Wage Base.
NOTE: If no option is selected, Suboption (a) will be deemed to be selected.
NOTE: If no option is selected, Option 1 will be deemed to be selected.
Part C. Qualifying Participants:
A Participant will be a Qualifying Participant and thus entitled to share in the
Employer Profit Sharing Contribution for any Plan Year only if the Participant
is a Participant on at least one day of such Plan Year and satisfies the
following additional conditions (Check one or more Options):
Option 1: [ ] No Additional Conditions.
Option 2: [ ] Hours of Service Requirement. The Participant completes at least
__ (not more than 500) Hours of Service during the Plan Year. However, this
condition will be waived for the following reasons (Check at lease one):
[ ] Participant's Death.
[ ] The Participant's Termination of Employment after having incurred a
Disability.
[ ] The Participant's Termination of Employment after having reached Normal
Retirement Age.
[ ] This condition will not be waived.
NOTE: If no option is selected, Option 1 will be deemed to be selected.
SECTION 11. COMPENSATION Complete Parts A through D
Part A. Basic Definition:
Compensation will mean all of each Participant's (Choose one):
Option 1: [X] W-2 wages.
Option 2: [ ] Section 3401(a) wages.
Option 3: [ ] 415 safe-harbor compensation.
NOTE: If no option is selected, Option 1 will be deemed to be selected.
Page 8
Part B. Measuring Period for Compensation:
Compensation shall be determined over the following applicable period (Choose
one):
Option 1: [X] The Plan Year.
Option 2: [ ] The calendar year ending with or within the Plan Year.
NOTE: If no option is selected, Option 1 will be deemed to be selected.
<PAGE> 9
Part C. Inclusion of Elective Deferrals:
Does Compensation include Employer Contributions made pursuant to a salary
reduction agreement which are not includible in the gross income of the Employee
under Sections 125, 402(e)(3), 402(h)(1)(B), and 403(b) of the Code?
[X] Yes [ ] No
NOTE: If neither box is checked. "Yes" will be deemed to be selected.
Part D. Pre-Entry Date Compensation:
For the Plan Year in which an Employee enters the Plan, the Employee's
Compensation which shall be taken into account for purposes of the Plan shall be
(Choose one):
Option 1: [ ] The Employee's Compensation only from the time the Employee became
a Participant in the Plan.
Option 2: [X] The Employee's Compensation for the whole of such Plan Year. NOTE:
If no option is selected, Option 1 will be deemed to be selected.
SECTION 12. VESTING AND FORFEITURES Complete Parts A through G
Part A. Vesting Schedule For Employer Profit Sharing Contributions. A
Participant shall become Vested in his or her Individual Account derived from
Profit Sharing Contributions made pursuant to Section 10 of the Adoption
Agreement as follows (Choose one):
YEARS OF VESTING SERVICE VESTED PERCENTAGE
Option 1 [ ] Option 2 [ ] Option 3 [ ] Option 4 [ ] Option 5 [ ] (Complete if
Chosen)
1 0% 0% 100% 0% ___%
2 0% 20% 100% 0% ___%
3 0% 40% 100% 20% ___% (not less than 20%)
4 0% 60% 100% 40% ___% (not less than 40%)
5 100% 80% 100% 60% ___% (not less than 60%)
6 100% 100% 100% 80% ___% (not less than 80%)
7 100% 100% 100% 100% ___% (not less than 100%)
NOTE: If no option is selected, Option 3 will be deemed to be selected.
Part B. Vesting Schedule For Matching Contributions. A Participant shall become
Vested in his or her individual Account derived from Matching Contributions made
pursuant to Section 7 of the Adoption Agreement as follows (Choose one):
YEARS OF VESTING SERVICE VESTED PERCENTAGE
Option 1 [ ] Option 2 [ ] Option 3 [ ] Option 4 [ ] Option 5 [ ] (Complete if
Chosen)
1 0% 0% 100% 0% __%
2 0% 20% 100% 0% __%
3 0% 40% 100% 20% __% (not less than 20%)
4 0% 60% 100% 40% __% (not less than 40%)
5 100% 80% 100% 60% __% (not less than 60%)
6 100% 100% 100% 80% __% (not less than 80%)
7 100% 100% 100% 100% __% (not less than 100%)
NOTE: If no option is selected, Option 3 will be deemed to be selected.
Page 9
Part C. Hours Required For Vesting Purposes:
1. __ Hours of Service (no more than 1,000) shall be required to constitute a
Year of Vesting Service.
2. __ Hours of Service (no more than 500 but less than the number specified in
Section 12, Part
<PAGE> 10
C, Item 1, above) must be exceeded to avoid a Break in Vesting Service.
3. For purposes of determining Years of Vesting Service, Employees shall be
given credit for Hours of Service with the following predecessor employer(s):
(Complete if applicable)
Part D. Exclusion of Certain Years of Vesting Service:
All of an Employee's Years of Vesting Service with the Employer are counted to
determine the vesting percentage in the Participant's Individual Account except
(Check any that apply):
[ ] Years of Vesting Service before the Employee reaches age 18.
[ ] Years of Vesting Service before the Employer maintained this Plan or a
predecessor plan.
Part E. Allocation of Forfeitures of Employer Profit Sharing Contributions:
Forfeitures of Employer Profit Sharing Contributions shall be (Choose one):
Option 1: [ ] Allocated to the Individual Accounts of the Participants specified
below in the manner as described in Section 10, Part B (for Employer Profit
Sharing Contributions). The Participants entitled to receive allocations of such
Forfeitures shall be (Choose one):
Suboption (a): [ ] Only Qualifying Participants.
Suboption (b): [ ] All Participants.
Option 2: [ ] Applied to reduce Employer Profit Sharing Contributions (Choose
one):
Suboption (a): [ ] For the Plan Year for which the Forfeiture arises.
Suboption (b): [ ] For any Plan Year subsequent to the Plan Year for which the
Forfeiture arises.
Option 3: [ ] Applied first to the payment of the Plan's administrative expenses
and any excess applied to reduce Employer Profit Sharing Contributions (Choose
one):
Suboption (a): [ ] For the Plan Year for which the Forfeiture arises.
Suboption (b): [ ] For any Plan Year subsequent to the Plan Year for which the
Forfeitures arises.
NOTE: if no option is selected, Option 1 and Suboption (a) will be deemed to be
selected.
Part F. Allocation of Forfeitures of Matching Contributions:
Forfeitures of Matching Contributions shall be (Choose one):
Option 1: [ ] Allocated, after all other Forfeitures under the Plan, to each
Participant's Individual Account in the ratio which each Participant's
Compensation for the Plan Year bears to the total Compensation of all
Participants for such Plan Year.
The Participants entitled to receive allocations of such Forfeitures shall be
(Choose one):
Suboption (a): [ ] Only Qualifying Contributing Participants.
Suboption (b): [ ] Only Qualifying Participants.
Suboption (c): [ ] All Participants.
Option 2: [ ] Applied to reduce Matching Contributions (Choose one):
Suboption (a): [ ] For the Plan Year for which the Forfeiture arises.
Suboption (b): [ ] For any Plan Year subsequent to the Plan Year for which the
Forfeiture arises.
Option 3: [ ] Applied first to the payment of the Plan's administrative expenses
and any excess applied to reduce Matching Contributions (Choose one):
Suboption (a): [ ] For the Plan Year for which the Forfeiture arises.
Suboption (b): [ ] For any Plan Year subsequent to the Plan Year for which the
Forfeitures arises.
NOTE: If no option is selected, Option 1 and Suboption (a) will be deemed to be
selected.
Page 10
Part G. Allocation of Forfeitures of Excess Aggregate Contributions:
Forfeitures of Excess Aggregate Contributions shall be (Choose one):
<PAGE> 11
Option 1: [ ] Allocated, after all other Forfeitures under the Plan, to each
Contributing Participant's Matching Contribution account in the ratio which each
Contributing Participant's Compensation for the Plan Year bears to the total
Compensation of all Contributing Participants for such Plan Year. Such
Forfeitures will not be allocated to the account of any Highly Compensated
Employee.
Option 2: [ ] Applied to reduce Matching Contributions (Choose one):
Suboption (a): [ ] For the Plan Year for which the Forfeiture arises.
Suboption (b): [ ] For any Plan Year subsequent to the Plan Year for which the
Forfeiture arises.
Option 3: [ ] Applied first to the payment of the Plan's administrative expenses
and any excess applied to reduce Matching Contributions (Choose one):
Suboption (a): [ ] For the Plan Year for which the Forfeiture arises.
Suboption (b): [ ] For any Plan Year subsequent to the Plan Year for which the
Forfeitures arises.
NOTE: If no option is selected, Option 2 and Suboption (a) will be deemed to be
selected.
SECTION 13. NORMAL RETIREMENT AGE AND EARLY RETIREMENT AGE
Part A. The Normal Retirement Age under the Plan shall be (Check and complete
one option):
Option 1: [X] Age 65.
Option 2: [ ] Age __ (not to exceed 65).
Option 3: [ ] The later of age __ (not to exceed 65) or the __ (not to exceed
5th) anniversary of the first day of the first Plan Year in which the
Participant commenced participation in the Plan.
NOTE: If no option is selected, Option 1 will be deemed to be selected.
Part B. Early Retirement Age (Choose one option):
Option 1: [X] An Early Retirement Age is not applicable under the Plan.
Option 2: [ ] Age______ (not less than 55 nor more than 65).
Option 3: [ ] A Participant satisfies the Plan's Early Retirement Age conditions
by attaining age __ (not less than 55) and completing __ Years of Vesting
Service.
NOTE: If no option is selected, Option 1 will be deemed to be selected.
SECTION 14. DISTRIBUTIONS
Distributable Events. Answer each of the following items.
A. Termination of Employment Before Normal Retirement Age. May a Participant
who has not reached Normal Retirement Age request a distribution from the Plan
upon Termination of Employment? [X] Yes [ ] No
B. Disability. May a Participant who has incurred a Disability request a
distribution from the Plan? [X] Yes [ ] No
C. Attainment of Normal Retirement Age. May a Participant who has attained
Normal Retirement Age but has not incurred a Termination of Employment request a
distribution from the Plan? [X] Yes [ ] No
D. Attainment of Age 59 1/2. Will Participants who have attained age 59 1/2 be
permitted to withdraw Elective Deferrals while still employed by the Employer?
[X] Yes [ ] No
E. Hardship Withdrawals of Elective Deferrals. Will Participants be permitted
to withdraw Elective Deferrals on account of hardship pursuant to Section 11.503
of the Plan? [X] Yes [ ] No
F. In-Service Withdrawals. Will Participants be permitted to request a
distribution during service pursuant to Section 6.01(A)(3) of the Plan? [ ] Yes
[X] No
G. Hardship Withdrawals. Will Participants be permitted to make hardship
withdrawals pursuant to Section 6.0l(A)(4) of the Plan? [ ] Yes [X] No
<PAGE> 12
H. Withdrawals of Rollover or Transfer Contributions. Will Employees be
permitted to withdraw their Rollover or Transfer Contributions at any time? [X]
Yes [ ] No
NOTE: If a box is not checked for an item, "Yes" will be deemed to be selected
for that item. Section 411(d)(6) of the Code prohibits the elimination of
protected benefits. In general, protected benefits include the forms and timing
of payout options. If the Plan is being adopted to amend and replace a Prior
Plan that permitted a distribution option described above, you must answer "Yes"
to that item.
Page 11
SECTION 15. JOINT AND SURVIVOR ANNUITY
Part A. Retirement Equity Act Safe Harbor:
Will the safe harbor provisions of Section 6.05(F) of the Plan apply? (Choose
only one option)
Option 1: [ ] Yes.
Option 2: [X] No.
NOTE: You must select "No" if you are adopting this Plan as an amendment and
restatement of a Prior Plan that was subject to the joint and survivor annuity
requirements.
Part B. Survivor Annuity Percentage: (Complete only if your answer in Section
15, Part A is "No.")
The survivor annuity portion of the Joint and Survivor Annuity shall be a
percentage equal to __ 50% (at least 50% but no more than 100%) of the amount
paid to the Participant prior to his or her death.
SECTION 16. OTHER OPTIONS
Answer "Yes" or "No" to each of the following questions by checking the
appropriate box.
If a box is not checked for a question, the answer will be deemed to be "No."
A. Loans: Will loans to Participants pursuant to Section 6.08 of the Plan be
permitted? [X] Yes [ ] No
B. Insurance: Will the Plan allow for the investment in insurance policies
pursuant to Section 5.13 of the Plan? [ ] Yes [X] No
C. Employer Securities: Will the Plan allow for the investment in qualifying
Employer securities or qualifying Employer real property? [ ] Yes [X] No
D. Rollover Contributions: Will Employees be permitted to make rollover
contributions to the Plan pursuant to Section 3.03 of the Plan? [X] Yes [ ] No
[ ] Yes, but only after becoming a Participant.
E. Transfer Contributions: Will Employees be permitted to make transfer
contributions to the Plan pursuant to Section 3.04 of the Plan? [ ] Yes [X] No
[ ] Yes, but only after becoming a Participant.
F. Nondeductible Employee Contributions: Will Employees be permitted to make
Nondeductible Employee Contributions pursuant to Section 11.305 of the Plan?
[ ] Yes [X] No
Check here if such contributions will be mandatory. [ ]
G. Will Participants be permitted to direct the investment of their Plan
assets pursuant to Section 5.14 of the Plan? [X] Yes [ ] No
SECTION 17. LIMITATION ON ALLOCATIONS
More Than One Plan
If you maintain or ever maintained another qualified plan (other than a paired
standardized money purchase pension plan using the same Basic Plan Document as
this Plan) in which any Participant in this Plan is (or was) a Participant or
could become a Participant, you must
<PAGE> 13
complete this section. You must also complete this section if you maintain a
welfare benefit fund, as defined in Section 419(e) of the Code, or an individual
medical account, as defined in Section 415(l)(2) of the Code, under which
amounts are treated as annual additions with respect to any Participant in this
Plan.
Part A. Individually Designed Defined Contribution Plan:
If the Participant is covered under another qualified defined contribution plan
maintained by the Employer, other than a master or prototype plan:
1. [X] The provisions of Section 3.05(B)(l) through 3.05(B)(6) of the Plan
will apply as if the other plan were a master or prototype plan.
2. [ ] Other method. (Provide the method under which the plans will limit
total annual additions to the maximum permissible amount, and will properly
reduce any excess amounts, in a manner that precludes Employer discretion.)
Page 12
Part B. Defined Benefit Plan:
If the Participant is or has ever been a participant in a defined benefit plan
maintained by the Employer, the Employer will provide below the language which
will satisfy the 1.0 limitation of Section 415(e) of the Code.
1. [X] If the projected annual addition to this Plan to the account of a
Participant for any limitation year would cause the 1.0 limitation of Section
415(e) of the Code to be exceeded, the annual benefit of the defined benefit
plan for such limitation year shall be reduced so that the 1.0 limitation shall
be satisfied.
If it is not possible to reduce the annual benefit of the defined benefit plan
and the projected annual addition to this Plan to the account of a Participant
for a limitation year would cause the 1.0 limitation to be exceeded, the
Employer shall reduce the Employer Contribution which is to be allocated to this
Plan on behalf of such Participant so that the 1.0 limitation will be satisfied.
(The provisions of Section 4 15(e) of the Code are incorporated herein by
reference under the authority of Section 1106(h) of the Tax Reform Act of 1986.)
2. [ ] Other method. (Provide language describing another method. Such
language must preclude Employer discretion.)
SECTION 18. TOP-HEAVY MINIMUM
Complete Parts A and B
Part A. Minimum Allocation or Benefit:
For any Plan Year with respect to which this Plan is a Top-Heavy Plan, any
minimum allocation required pursuant to Section 3.0 1(E) of the Plan shall be
made (Choose one):
Option 1: [X] To this Plan.
Option 2: [ ] To the following other plan maintained by the Employer (Specify
name and plan number of plan)
Option 3: [ ] In accordance with the method described on an attachment to this
Adoption Agreement. (Attach language describing the method that will be used to
satisfy Section 416 of the Code. Such method must preclude Employer discretion.)
NOTE: If no option is selected, Option 1 will be deemed to be selected.
Part B. Top-Heavy Vesting Schedule:
Pursuant to Section 6.01(C) of the Plan, the vesting schedule that will apply
when this Plan is a Top-Heavy Plan (unless the Plan's regular vesting schedule
provides for more rapid vesting) shall be (Choose one):
<PAGE> 14
Option 1: [ ] 6 Year Graded.
Option 2: [ ] 3 Year Cliff.
NOTE: If no option is selected, Option 1 will be deemed to be selected.
SECTION 19. PROTOTYPE SPONSOR
Name of Prototype Sponsor Travelers Insurance Company
Address One Tower Square, Hartford CT 06183
Telephone Number 888-822-4710
Permissible investments
The assets of the Plan shall be invested only in those investments described
below (To be completed by the Prototype Sponsor):
Variable Annuity Contract
Page 13
SECTION 20. TRUSTEE OR CUSTODIAN
Option A: [ ] Financial Organization as Trustee or Custodian
Check One: [ ] Custodian, [ ] Trustee without full trust powers, or [ ] Trustee
with full trust powers
Financial Organization
Signature
Type Name
Collective or Commingled Funds
List any collective or commingled funds maintained by the financial organization
Trustee in which assets of the Plan may be invested
(Complete if applicable).
Option B: [ ] Individual Trustee(s)
Signature Signature
Type Name Type Name
Signature Signature
Type Name Type Name
SECTION 21. RELIANCE
An Employer who has ever maintained or who later adopts any plan (including a
welfare benefit fund, as defined in Section 419(e) of the Code, which provides
post-retirement medical benefits allocated to separate accounts for key
employees, as defined in Section 9A(d)(3) of the Code, or an individual medical
account, as defined in Section 415(l)(2) of the Code) in addition to this Plan
(other a paired standardized money purchase pension plan using the same
Basic Plan Document as this Plan) may not rely on the opinion letter issued by
the National Office of the Internal Revenue Service as evidence that this Plan
is qualified under Section 401 of the Internal Revenue Code. If the Employer who
adopts or maintains multiple plans wishes to obtain reliance that his or her
plan(s) are qualified, application for a determination letter should be made to
the appropriate Key District Director of Internal Revenue.
The Employer may not rely on the opinion letter issued by the National Office of
the Internal Revenue Service as evidence that this Plan is qualified under
Section 401 of the Code unless the terms of the Plan, as herein adopted or
amended, that pertain to the requirements of Sections 401(a)(4), 401(a)(17),
401(1), 40l(a)(5), 410(b) and 414(s) of the Code, as amended by the Tax Reform
Act of 1986, or later laws, (a) are made effective retroactively to the first
day of the first Plan Year beginning after December 31, 1988 (or such later date
on which these requirements
<PAGE> 15
first become effective with respect to this Plan); or (b) are made effective no
later than the first day on which the Employer is no longer entitled, under
regulations, to rely on a reasonable, good faith interpretation of these
requirements, and the prior provisions of the Plan constitute such an
interpretation.
This Adoption Agreement may be used only in conjunction with Basic Plan Document
No. 04.
SECTION 22. EMPLOYER SIGNATURE
Important: Please read before signing
I am an authorized representative of the Employer named above and I state the
following:
1. 1 acknowledge that I have relied upon my own advisors regarding the
completion of this Adoption Agreement and the legal tax implications of adopting
this Plan.
2. I understand that my failure to properly complete this Adoption Agreement
may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any amendments
made to the Plan and will notify me should it discontinue or abandon the Plan.
I have received a copy of this Adoption Agreement and the corresponding Basic
Plan Document.
Signature for Employer Date Signed
Type Name Samuel A. Gradess Title
BOARD RESOLUTION
Meeting of the Board of Directors of Alloy Designs, Inc. herein referred to as
"Corporation," was held on the day of , , in accordance with the Corporation's
bylaws. The Directors approved the establishment of the Alloy, Inc. 401(k)
Savings Plan for the benefit of the Corporation's employees.
The following resolutions were offered, seconded and unanimously adopted.
BE IT RESOLVED that the Corporation established the Alloy, Inc. 401(k) Savings
Plan (the "Plan") to cover the employee to be effective 01-01-1999. Employees
may commence elective deferrals into the Plan on or about 04-01-1999.
BE IT FURTHER RESOLVED, that the officers of the Corporation be authorized and
directed to execute any and all documents and do any and all acts which may be
necessary in connection with the adoption, maintenance and ongoing funding of
the Plan.
BE IT FURTHER RESOLVED, that the trustee(s) under the Plan are the following:
BE IT FURTHER RESOLVED, that the officers of the Corporation be authorized and
directed to retain any service providers they believe necessary or desirable in
connection with the Plan.
CERTIFICATION
I, the undersigned, Secretary of the Corporation do certify that the foregoing
is a true, exact, and correct copy of a resolution adopted at lawfully held
meeting of the Corporation's Board of Directors on the day of , .
(Signed)
Secretary
Page 2
LOAN PRINCIPAL LIMITATIONS
Loans from this plan shall be in a minimum amount of: $500.00 (may not exceed
$1,000.) maximum amount of all loans outstanding cannot exceed: [X] one-half of
your vested account
<PAGE> 16
balance or $50,000
[ ] other (specify)
NOTE: If the "other" option is selected, the amount entered cannot exceed the
vested balance or $50,000.
INTEREST CALCULATION
Interest on loans from this plan will be computed on the following basis:
[ ] prime rate (as specified in the Wall Street Journal)
[ ] prime rate (as specified in the Wall Street Journal) plus percent
[X] other (specify) the prime rate as of the first day of each month plus 2%
NOTE: The interest rate must be comparable to that charged by commercial lenders
in a similar transaction. Any loan renewals are subject to interest rate
modification.
COLLATERAL PLEDGE
A percentage of your vested account balance equal to the amount borrowed divided
by your vested account balance is pledged as security for repayment of loans
under this program.
DEFAULT PROVISIONS
The following are deemed to be acts of default under your qualified plan/403(b)
loan program:
* failure to remit payment in a timely manner as required under the Loan
Agreement
* breach of any of your obligations or duties under the Loan Agreement
* termination of employment
* other (specify)
Upon default, your loan program administrator is entitled to foreclose its
security interest in your vested account balance pledged for repayment upon the
occurrence of an event which triggers a distribution of your benefits.
In addition, the loan program administrator will report as taxable any amounts
which are deemed distributed as a result of failing to make loan payments.
Qualified Retirement Plan/403(b)
LOAN DISCLOSURE
participant in the qualified retirement plan/403(b) adopted by your
employer, you may be able to borrow a portion of your vested account balance.
The loan program adopted by your employer is available on a uniform basis to all
parties in interest to the plan who meet loan qualification requirements. For
additional information about the loan program available under your employer's
plan, contact the loan program administrator listed below.
NOTE: This Loan Disclosure constitutes part of the Summary Plan Description
(SPD) of your Qualified Retirement Plan and should be kept with your other SPD
documents.
PLAN LOAN INFORMATION
Plan Name Alloy, Inc. 401(k) Saving Plan
Plan Number 001 Plan Year-End 12/31
EFFECTIVE DATE
The effective date of the plan loan program is 01-01-1999
LOAN PROGRAM ADMINISTRATOR
The person responsible for administering your loan program is Samuel A. Gradess
Your loan program administrator may be reached at the following address and/or
telephone number:
212-244-4307
LOAN APPLICATION PROCEDURE
<PAGE> 17
To apply for a loan under this plan, you must complete and return to the loan
program administrator a Loan Application Form, furnishing all information
requested and pay any required loan application processing fees. In addition,
you must follow the procedures described below. (specify)
LIMITATIONS ON TYPES OF LOANS
Loans from this plan may be used for the following purposes:
[X] all
[ ] purchase of your principal residence
[ ] post-secondary tuition for you or your immediate family
[ ] medical expenses for you or your immediate family
[ ] rent or mortgage payments to prevent eviction or foreclosure from your
principal residence
[ ] other (specify)
LOAN APPROVAL STANDARDS
Decisions approving or denying loans from this Plan will be based on the
following criteria:
[X] the value of your vested individual account balance
[ ] other (specify)
NOTE: Loan approval basis selected must not cause loans to be made available on
a discriminatory basis.
