STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the 11th
day of November, 1997 (the "Effective Date"), among Universal International,
Inc., a Minnesota corporation (the "Company") and 99 Cents Only Stores, a
California corporation (the "Investor"). An index of defined terms used
herein is included as Section 13 hereto.
In consideration for the agreements contained herein, intending to be
legally bound, the Company and the Investor hereby agree as follows:
1. PURCHASE AND SALE OF STOCK.
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1.1 AUTHORIZATION. The Company has authorized the sale and issuance of
4,500,000 shares (the "Shares") of its common stock, par value $0.001 per share
(the "Common Stock").
1.2 SALE AND ISSUANCE OF THE SHARES. Subject to the terms and conditions
set forth in this Agreement, the Investor shall purchase at the Closing (as
defined below) and the Company shall sell and issue to the Investor at the
Closing, the Shares, at a purchase price of approximately $0.8889 per share, or
an aggregate purchase price of Four Million Dollars ($4,000,000) (the "Purchase
Price"). The Purchase Price shall be paid as follows:
(a) $2,000,000 by delivery of a check or by wire transfer; and
(b) $2,000,000 to be evidenced by a credit established on the books
and records of the Investor against which the Company may apply the purchase
price of merchandise purchased by it from the Investor at the Investor's
customary wholesale prices or as otherwise mutually agreed (fob point of origin
and subject to Investor's customary terms of sale or as otherwise agreed in
writing). The items of merchandise for purchase and the quantities of each
item shall be mutually agreed to by the parties prior to purchase and
application of the credit. It is expressly agreed that the Investor may limit
availability and quantities of any items in its sole discretion.
2. CLOSING.
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2.1 THE CLOSING. The purchase and sale of the Shares shall take place on
the second business day following such date as all of the conditions to the
obligations of the parties hereunder are fully satisfied or waived, or on such
other date, as the Company and the Investor agree upon orally or in writing
(which place, time and date are designated as the "Closing").
2.2 DELIVERIES. At the Closing, the Company shall deliver to the
Investor a certificate or certificates representing the Shares, in exchange for
delivery to the Company from the Investor, by check or wire transfer, of the
cash portion of the Purchase Price.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth in the
disclosure letter to be delivered by the Company to the Investor at or prior to
the execution of this Agreement, which letter shall describe the nature of each
exception to the following representations and warranties in reasonable detail
and which specifically refers to the subsection of this Agreement to which it
applies (the "Disclosure Letter"), the Company hereby represents and warrants
to the Investor as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. The Company is duly
incorporated, validly existing and in good standing under the laws of the state
of its incorporation. The Company is qualified, licensed or domesticated as a
foreign corporation and is in good standing in all jurisdictions where the
character of its properties owned or held under lease or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified, licensed or domesticated would not have individually or in the
aggregate, a Material Adverse Effect. The Company has all requisite power and
authority and all requisite licenses, permits and franchises necessary to own,
lease and operate its properties and assets and to carry on its business in the
manner and in the locations as presently conducted, except where the failure to
do so would not have, individually or in the aggregate, a Material Adverse
Effect. Copies of the Certificate of Incorporation (as certified by the
Secretary of State of the State of Minnesota) and Bylaws of the Company have
been delivered to the Investor and are accurate and complete as of the date
hereof.
3.2 CAPITAL STOCK. The authorized capital stock of the Company consists
of 75,000,000 shares of Common Stock. As of the date hereof, (i) there are
4,893,328 shares of Common Stock issued and outstanding, all of which are duly
authorized, validly issued, fully paid and non-assessable and were not issued
in violation of any preemptive rights or any Federal or State securities laws,
(ii) no shares of Common Stock are held by Subsidiaries of the Company, and
(iii) 1,182,000 shares of Common Stock are subject to future issuance under
outstanding options to purchase Common Stock. Section 3.2 of the Disclosure
Letter shall contain a recitation of the authorized and outstanding capital of
each of the Company's Subsidiaries. As of the date hereof, and as of the
Closing Date, there are and will be (i) no options, warrants, calls,
subscriptions, convertible securities or other rights, (including preemptive
rights), agreements, understandings, arrangements or commitments of any
character obligating the Company now or at any time in the future to issue or
sell any of its capital stock or other equity interests of the Company or any
of its Subsidiaries, (ii) no obligations, contingent or otherwise, of the
Company or any of its Subsidiaries, to repurchase, redeem or otherwise acquire
any shares of capital stock or other equity interests of the Company or any of
its Subsidiaries or to provide funds or to make any investment (in the form of
a loan, capital contribution or otherwise) in any Subsidiary or another entity,
other than guarantees of obligations of Subsidiaries to institutional lenders
entered into in the ordinary course of business, (iii) no outstanding bonds,
debentures, notes or other obligations of the Company the holders of which have
the right to vote (or which are convertible into or exercisable for securities
having the right to vote) with the Company stockholders on any matter, (iv) no
obligations, contingent or otherwise, guaranteeing the value of any of the
shares of the Common Stock of the Company or any of its Subsidiaries either now
or at any time in the future, and (v) no voting trusts, proxies or other
agreements or understandings to which the Company is a party or is bound with
respect to the voting of any capital stock or other equity interests of the
Company or any of its Subsidiaries.
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3.3 SUBSIDIARIES. The Disclosure Letter sets forth a true and correct
list of each Subsidiary of the Company as of the date hereof. All of the
outstanding capital stock of each such Subsidiary is owned entirely by the
Company or by a Subsidiary of the Company, as the case may be, as of the date
hereof, free and clear of all liens, charges, pledges, security interests or
other encumbrances, except for restrictions on transfer imposed by applicable
securities laws. All such shares of capital stock have been duly authorized
and validly issued and are fully paid and nonassessable. There are no
agreements, understandings or undertakings governing the rights and duties of
the Company or any Subsidiary of the Company as a stockholder of any
Subsidiary, including, without limitation, any agreement, arrangement or
understanding under which the Company is or may become obligated, directly or
indirectly, to acquire or dispose of any equity interest in, make any capital
contribution or extend credit to, or act as guarantor, surety or indemnitor for
any liability of any Subsidiary. Each such Subsidiary is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, has the corporate power and authority to carry on its business as
it is now being conducted and is duly qualified to do business and is in good
standing in all jurisdictions where the failure to be so qualified would have,
individually or in the aggregate, a Material Adverse Effect. Other than its
Subsidiaries, neither the Company nor any Subsidiary of the Company has any
equity investment in any corporation, joint venture, partnership or other
business enterprise.
3.4 COMMISSION REPORTS AND FINANCIAL STATEMENTS. From and after January
1, 1994 the Company and each Subsidiary subject to the periodic reporting
requirements under the Exchange Act has filed with the Commission all forms,
reports, registration statements, proxy statements and other documents
(collectively, the "Company Reports") required to be filed by the Company and
any such Subsidiary under the Securities Act, the Exchange Act, and the rules
and regulations promulgated thereunder (collectively, the "Securities Laws"),
except failures to file which, individually or in the aggregate, do not have a
Material Adverse Effect; provided however, with respect to each Subsidiary, the
Company provides the representation stated above only from such date that each
Subsidiary became a Subsidiary of the Company. As of their respective dates,
or, in the case of registration statements, as of their respective effective
dates, all of the Company Reports, including all exhibits and schedules thereto
and all documents incorporated by reference therein, (i) complied as to form in
all material respects with the requirements of the Securities Laws applicable
thereto and (ii) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements, in light of the circumstances under which they were made,
not misleading. The representation in clause (ii) of the preceding sentence
shall not apply to any misstatement or omission in any Company Report filed
prior to the date of this Agreement which was superseded or corrected by a
subsequent Company Report filed before the date hereof. The audited
consolidated financial statements and unaudited interim consolidated financial
statements included or incorporated by reference in the Company Reports
(collectively, the "Company Financial Statements") have been prepared in
accordance with GAAP applied on a consistent basis in accordance with the
Company's historical practices which practices conform to GAAP (except as may
be indicated therein or in the notes thereto) and fairly present the
consolidated financial position of the Company or other Person, as applicable,
as of and at the dates thereof and the results of operations and cash flows for
the periods then ended, subject in the case of the unaudited interim financial
statements, to normal, recurring year-end adjustments and any other adjustments
described therein. Except as set forth or reflected in the Company Financial
Statements at December 31, 1996, or as set forth in the
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interim unaudited balance sheets, or in the notes thereto, included in the
Company Reports since that date, neither the Company nor any of its
Subsidiaries, has any liabilities or obligations of any kind or nature (whether
accrued, absolute, contingent or otherwise) which would be required to be
reflected or reserved against in any balance sheet of the Company, or in the
notes thereto, prepared in accordance with GAAP consistently applied, except
liabilities arising since December 31, 1996 either (i) in the ordinary course
of business; or (ii) as contemplated or permitted by this Agreement.
3.5 AUTHORIZATION
(a) The Company has all requisite corporate power and authority to
execute, deliver and perform the obligations under the terms of this Agreement
and all of the transactions contemplated hereunder, including the sale and
issuance of the Shares to the Investor. The execution and delivery of this
Agreement by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of the Company and, other than the stockholder approval, if any, required
pursuant to Section 8.4 hereof, all corporate proceedings have been taken and
no other corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery and performance by the Company of this
Agreement.
(b) This Agreement, when executed and delivered by the Company, will
constitute the valid and binding obligation of the Company, enforceable in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of creditors'
rights and remedies or by other equitable principles of general application
(collectively, the "Remedies Exception"). The execution, delivery and
performance of this Agreement by the Company will not conflict with or
constitute a breach, violation or default under the Company's Articles of
Incorporation or Bylaws, any statute, law or administrative regulation, or
under any judgment, decree, order, writ, governmental permit or license, any
material contract, agreement, lease, indenture or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound, which breach, violation or default would have
individually or in the aggregate, a Material Adverse Effect on the Company.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1997, the
Company and its Subsidiaries each has conducted its business in all material
respects in the ordinary and usual course consistent with past practice, and
there has not been (a) any event or occurrence which, individually or in the
aggregate, has or reasonably could result in a Material Adverse Effect, (b) any
material change in accounting methods, principles and practices by the Company
and its Subsidiaries (except for any such changes required by reason of a
concurrent change in GAAP or to conform a Subsidiary's accounting methods,
principles or practices to those of the Company), (c) any damage, destruction
or loss, whether covered by insurance or not, having, individually or in the
aggregate, a Material Adverse Effect, (d) except as contemplated by this
Agreement, any entry by the Company or any of its Subsidiaries into any
commitment or transaction material to the Company which is not in the ordinary
course of business consistent with past practice, (e) any declaration, payment
or setting aside for payment of any dividends, or (f) any grant to any officer
PAGE 4
or director of any increase in compensation (other than periodic salary
increases not cumulatively in excess of 10% made in the ordinary course of
business consistent with past practice or increases resulting from job
promotions or expansions of employment responsibilities), or any loan to any
officer or director, or any adoption, amendment in any material respect or
termination of any bonus, profit sharing, stock option, employee stock
ownership, pension, retirement, deferred compensation, employment or consulting
or other plan, agreement or arrangement for the benefit of employees of the
Company.
3.7 PENDING LITIGATION. The Company has disclosed in the Disclosure
Letter all information in its possession or custody or under its control with
respect to litigation pending or threatened as of the date hereof. Except as
set forth in the Disclosure Letter, the Company has no litigation pending as of
the date hereof. To the best of the Company's knowledge, the ultimate
liability for damages arising from such litigation (based upon assumptions that
the Company believes in good faith to be reasonable under the circumstances) is
either adequately reserved against in the Company Financial Statement at
December 31, 1996 or in the unaudited balance sheets included in the Company
Reports since that date or will not have individually or in the aggregate a
Material Adverse Effect on the Company. Except as set forth in the Disclosure
Letter, there are no actions, suits or proceedings of any nature pending, or,
to the knowledge of the Company, threatened, against or by the Company or any
of its Subsidiaries or any of their respective properties, assets or business,
nor is the Company or any of its Subsidiaries or any of its properties, assets
or business, subject to any order, judgment, ruling, or decree of any competent
authority, which would have, or is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect. The Company has not received
notice of any actual or threatened violation of any applicable statute,
regulation, code, ordinance, rule, order, judgment, decree or requirement
relating to its operations or its owned or leased properties and to the
knowledge of the Company, no such violation exists, in each case, other than a
violation which would not have, individually or in the aggregate, a Material
Adverse Effect.
3.8 TAX RETURNS. The Company and each of its Subsidiaries (i) has
accurately prepared and duly and timely filed all federal and state and all
other material income, property, sales and use and other applicable tax reports
and returns ("Tax Returns") required to be filed (subject to any extensions
applicable to any such filing) except where the failure to do so would not
have, individually or in the aggregate, a Material Adverse Effect, and all such
Tax Returns are true and complete except for such inaccuracies which would not
have a Material Adverse Effect, (ii) has paid all Taxes shown to be due and
payable on such Tax Returns or which have become due and payable pursuant to
any assessment, deficiency notice, 30-day letter, or other notice received by
it, and (iii) has properly accrued on its books and records all Taxes for such
periods subsequent to the periods covered by the Tax Returns, except for any
Taxes which would not have, individually or in the aggregate, a Material
Adverse Effect. To the Company's knowledge, the Tax Returns of the Company and
each of its Subsidiaries have not been examined by the appropriate taxing
authority. Neither the Company nor any of its Subsidiaries has executed or
filed with the Internal Revenue Service ("IRS") or any other taxing authority
any agreement now in effect extending the period for assessment or collection
of any income or other Taxes. Neither the Company nor any of its Subsidiaries
is a party to any pending action or proceeding by any governmental authority
for assessment or collection of Taxes, and to the knowledge of the Company, no
claim for assessment or collection of Taxes has been asserted against it.
There are
PAGE 5
no liens for Taxes upon the assets of the Company or any of its
Subsidiaries except liens for Taxes not yet due. True, correct and complete
copies of all Tax Returns filed by the Company and each of its Subsidiaries and
all communications relating thereto have been delivered to the Investor or made
available to the representatives of the Investor. All Taxes which the Company
is required to withhold or collect, including without limitation, sales and use
taxes, have been duly withheld or collected and, to the extent required, have
been paid over to the proper governmental authorities or are held in separate
bank accounts for such purposes, except where the failure to do so would not
have, individually or in the aggregate, a Material Adverse Effect. For
purposes of this Agreement, the term "Taxes" shall mean and include all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, excise, property, sales, withholding, social security,
occupation, use, service, license, payroll, franchise, transfer and recording
taxes, fees and charges imposed by the United States, or any state, local or
foreign government or subdivision or agency thereof, whether computed on a
separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest, fines, penalties or additional amounts attributable
or imposed on or with respect to any such taxes, charges, fees, levies or other
assessments.
3.9 TAX ELECTION. Neither the Company nor any of its Subsidiaries has
filed (and will not file prior to the Closing Date) any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f) of the Code apply
to any disposition of the subsection (f) assets (as such term is defined in
Section 341(f)(4) of the Code) owned by the Company or any of its Subsidiaries.
3.10 PROPERTIES, ENCUMBRANCES. The Company and its Subsidiaries have good
and marketable title in fee simple to, or a valid leasehold interest in, each
of the real properties reflected on the Company Financial Statements or which
have been acquired after the date thereof or used or controlled by them as of
the date hereof (collectively, the "Company Properties"), in each case, free
and clear of all liens, mortgages or deeds of trust, claims against title,
security interests or other encumbrances on title ("Liens") or any rights of
way, written agreements, laws, ordinances or regulations affecting the use or
occupancy of such properties, or any reservations of an interest in title
("Restrictions") except (i) Liens and Restrictions reflected in the Company
Financial Statements, (ii) Liens and Restrictions for taxes not yet due and
payable or being contested in good faith, (iii) Liens and Restrictions
attaching by operation of law, incurred in the ordinary course of business
consistent with past practices and securing payments not past due, (iv) the
rights of landlords or sublessors under the applicable lease, (v) Liens and
Restrictions disclosed in the Disclosure Schedule and (vi) Liens and
Restrictions which do not have, individually or in the aggregate, a Material
Adverse Effect (collectively, the "Company Permitted Liens"). Neither the
Company nor any of its Subsidiaries own any real property or lease or otherwise
use any real property other than the Company Properties in the conduct of its
business. All rental payments due under the lease pursuant to which the
Company uses the Company Properties have been paid and neither the Company nor
any of its Subsidiaries is in default (nor to the Company's knowledge, is any
landlord of the Company alleging that either the Company or any of its
Subsidiaries is in default), and to the knowledge of the Company, the landlord
under the lease is not in default, and no condition or event exists which with
the giving of notice or the passage of time, or both, would constitute a
material default by any party under any such lease
PAGE 6
other than any such non-payment or default which could not have, individually
or in the aggregate, a Material Adverse Effect.
3.11 PERSONAL PROPERTY. The Company and its Subsidiaries own good and
marketable title to or a valid right to use all items of personal property
owned or used by them which are material to their business, free and clear of
all Liens or Restrictions other than the Company Permitted Liens.
3.12 EMPLOYEE BENEFIT PLANS. The Disclosure Letter sets forth a list of
all plans and other arrangements which provide compensation or benefits to
officers, directors or consultants or employee benefits to employees of the
Company or its Subsidiaries, including, without limitation, all "employee
benefit plans" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and all bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar fringe or employee benefit plans, and all employment or
executive compensation agreements (collectively, the "Company Plans"). All
Company Plans comply with and are and have been operated in material compliance
with each applicable provision of ERISA, the Code, other federal statutes,
state law (including, without limitation, state insurance law) and the
regulations and rules promulgated pursuant thereto or in connection therewith,
except for any such failure to comply which would not have, individually or in
the aggregate, a Material Adverse Effect. No Company Plan is covered by Title
IV of ERISA or Section 412 of the Code. Neither the Company, any of its
Subsidiaries, nor any affiliate of the Company as determined under Section
414(b), (c), (m) or (o) of the Code ("ERISA Affiliate") has failed to make any
contributions or to pay any amounts due and owing as required by the terms of
any Company Plan, which failure would have, individually or in the aggregate, a
Material Adverse Effect. No amounts payable under the Company Plans will fail
to be deductible for federal income tax purposes by virtue of Section 280G of
the Code. True and complete copies of each written Company Plan have been made
available to the Investor or its representatives. Except as required by
Section 4980B of the Code, neither the Company, any of its Subsidiaries nor any
ERISA Affiliate has promised any former employee or other individual not
employed by the Company, any of its Subsidiaries or any ERISA Affiliate,
medical or other benefit coverage, and neither the Company, any of its
Subsidiaries nor any ERISA Affiliate maintains or contributes to any plan or
arrangement providing medical benefits, life insurance or other welfare
benefits to former employees, their spouses or dependents or any other
individual not employed by the Company, any of its Subsidiaries or any ERISA
Affiliate except to the extent required by applicable law. Neither the Company
nor any Subsidiary is a party or subject to any agreement, contract or other
obligation which would require the making of any payment, other than payments
as contemplated by this Agreement, to any employee of the Company or to any
other Person as a result of the consummation of the transactions contemplated
herein.
3.13 CERTAIN AGREEMENTS. Neither the Company nor any of its Subsidiaries
is a party to any oral or written (i) agreement (including, without limitation,
any employment, management, severance or consulting contract) with any current
or former officer (whose employment terminated in the last year), director, or
record or beneficial holder of more than 5% of the outstanding shares of the
Common Stock of the Company or with any entity in which any of the
PAGE 7
foregoing is a more than 5% equity owner, officer, director, employee or
consultant, (ii) any agreement involving an amount in excess of $25,000 the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving the Company or any of its
Subsidiaries of the nature contemplated by this Agreement, (iii) agreement or
plan, including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of benefits of which will be accelerated, by the
occurrence of the transactions contemplated by this Agreement or the value of
any of the benefits of which will be calculated on the basis of the
transactions contemplated by this Agreement or (iv) unconsummated or pending
agreement involving the acquisition of any equity interest in any business.
3.14 COMPLIANCE WITH APPLICABLE LAW. The businesses of the Company and
its Subsidiaries are not being conducted in violation of any applicable law,
ordinance, regulation, decree or order of any governmental entity, except for
violations which either singly or in the aggregate do not and are not expected
to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party to or subject to any judgment, decree, or order entered
in any suit or proceeding brought by any governmental agency or by any other
person, enjoining the Company or any of its Subsidiaries with respect to any
business practice, the acquisition of any property, or the conduct of business
in any area.
3.15 ENVIRONMENTAL COMPLIANCE MATTERS. The businesses of the Company and
its Subsidiaries as conducted in the past were not and as currently being
conducted are not in violation of any applicable law, ordinance, rule,
prohibition or regulation relating to pollution, or the production, storage,
labeling or disposition of wastes or hazardous or toxic substances, or the
health, safety or environmental conditions on, beneath or about any of the
properties owned, used or leased by the Company or any of its Subsidiaries or
relating to the business of the Company or any of its Subsidiaries (such laws,
ordinances, rules, prohibitions and regulations being herein referred to as
"Environmental Laws"), except for any such violation which would not have,
individually or in the aggregate, a Material Adverse Effect. The Company and
its Subsidiaries have timely filed all material reports, obtained all material
approvals and permits and generated and maintained all material data,
documentation and records required under any applicable Environmental Laws,
except where the failure to do so would not have, individually or in the
aggregate, a Material Adverse Effect. Neither the Company, its Subsidiaries
nor, to the knowledge of the Company or its Subsidiaries, any other Person has
placed, stored, buried, spilled or released, used, generated, manufactured,
refined, processed, treated, dumped or disposed of any materials produced by,
or resulting from, any business, commercial or industrial activities,
operations or processes, including without limitation any materials which are
"Hazardous Wastes", "Hazardous Substances", "Hazardous Materials",
"Pollutants", "Toxic Substances", "Solid Wastes" or "Contaminants" (as such
terms are defined in any applicable Environmental Law, including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act and the Toxic Substances Control Act),
on, beneath or about, or transported any such materials to or from, any of the
properties owned, used or leased by the Company or its Subsidiaries in each
case other than in material compliance with applicable Environmental Laws and
in the ordinary course of the Company's or its Subsidiaries' business or where
the failure to comply would not have individually or in the aggregate a
Material Adverse
PAGE 8
Effect. Neither the Company nor its Subsidiaries has received any notice
from any governmental agency or private or public entity advising it
that it is or may be responsible, or potentially responsible, for costs with
respect to a release, a threatened release or clean up of materials located in
any property owned by the Company or its Subsidiaries or produced by, or
resulting from, any business, commercial or industrial activities, operations
or processes of the Company or its Subsidiaries, including without limitation,
materials which are Hazardous Wastes, Hazardous Substances, Hazardous
Materials, Pollutants, Toxic Substances, Solid Wastes or Contaminants.
3.16 PATENTS, TRADE NAMES AND OTHER INTELLECTUAL PROPERTY RIGHTS. The
Company and each Subsidiary owns or is validly licensed or otherwise has the
right to use, free and clear of all Liens and Restrictions other than Company
Permitted Liens, any and all patents, trademarks, trade names, service marks,
copyrights, trade secrets, technology, know-how and processes (collectively,
"Intellectual Property"), used in or necessary for the conduct of its business
as now conducted or as proposed to be conducted except where any such failure
would not have, individually or in the aggregate, a Material Adverse Effect.
The operations and products of the Company do not infringe any Intellectual
Property rights of any other Person, except for any infringement which would
not have, individually or in the aggregate, a Material Adverse Effect. The
Company has not received any communication in the past three years alleging or
stating that the Company or any employee has violated or infringed, or by
conducting business as proposed, would violate or infringe any Intellectual
Property right of any other Person.
3.17 INVENTORY. All items that constitute "Inventory" are of a quality
and quantity saleable at regular prices or usable by the Company or its
Subsidiaries in the ordinary course of its business, net of reserves reflected
on the Company's Balance Sheet at September 30, 1997 and no items included in
Inventory have been pledged as collateral (other than to Coast Business Credit)
or are held on consignment from others. All Inventory is either located at the
Company Properties or in transit from one Company Property to another Company
Property.
3.18 CUSTOMER RETURNS. The Company maintains in the ordinary course of
business reserves for the possible return of items of Inventory previously
transferred to customers. The reserves for customer returns which have
occurred or may occur after September 30, 1997 provided for on the Company
Financial Statements are adequate to cover the gross profit recognized by the
Company on the original sale of the item of Inventory to the customer.
3.19 UNDISCLOSED LIABILITIES. The Company is not subject to any
liabilities of any nature except to the extent set forth or provided for in the
Company Financial Statements, except liabilities which individually or in the
aggregate would not have a Material Adverse Effect.
3.20 TRANSACTIONS WITH AFFILIATES. Except for regular salary payments and
fringe benefits under an individual's compensation package with the Company,
none of the officers, employees, directors, or other Affiliates of the Company,
or members of their immediate families is a party to any agreements,
understandings, indebtedness or proposed transactions with the Company or any
Subsidiary. No officer, director or employee is directly interested in any
contract with the Company or any Subsidiary other than such employment-related
agreements and arrangements (including stock option agreements). Neither the
Company nor any Subsidiary has
PAGE 9
guaranteed or assumed any obligations of the Company's officers, directors, or
employees. To the best knowledge of the Company, none of such individuals has
any direct or indirect ownership interest in any firm or entity with which the
Company or any Subsidiary is affiliated or with which the Company or any
Subsidiary has a business relationship, or any entity that competes with the
Company or any Subsidiary, except that such individuals may own less than 1% of
the outstanding voting stock in publicly traded companies that may compete with
the Company.
3.21 DISCLOSURE. Neither this Agreement nor the Ancillary Agreements nor
any other statements (oral or written) or financial schedules, organizational
charts or certificates made or delivered in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements herein or
therein not misleading.
3.22 BROKER/FINDER. The Company has not dealt with, or incurred liability
for a fee to, any finder, broker, investment banker or financial advisor in
connection with any of the transactions contemplated by this Agreement or the
negotiations looking toward the consummation of such transactions.
3.23 MATERIAL DOCUMENTS. Neither the Company nor any Subsidiary is a
party to any agreements, documents, arrangements or commitments that are
material to the business, prospects, financial condition or results of
operations of the Company that have not been filed with the Commission or
reviewed by the Investor.
3.24 INVESTMENT INFORMATION. The Company has disclosed to the Investor
any and all information that is material to making an investment decision in
the Company.
3.25 NO CONSENTS. No consent, authorization, order or approval of, or
filing with or registration with, any governmental authority, commission, board
or other regulatory body of the United States or any state or political
subdivision thereof, or any other Person, is required to be made or obtained by
the Company for or in connection with the execution and delivery by the Company
of this Agreement and the Ancillary Agreements and the consummation by the
Company of the transactions contemplated hereby and thereby, the absence of
which would have a Material Adverse Effect on the Company other than the
approval of the NASD to proceed with the transactions contemplated by this
Agreement absent approval by the shareholders of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. The Investor hereby
represents and warrants to the Company that:
4.1 AUTHORIZATION
(a) The Investor has all requisite corporate power and authority to
execute, deliver and perform the obligations under the terms of this Agreement
and all of the transactions contemplated hereunder. The execution and delivery
of this Agreement by the Investor and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of the Investor and all corporate proceedings have been
taken and no
PAGE 10
other corporate proceedings on the part of the Investor are necessary
to authorize the execution, delivery and performance by the Investor
of this Agreement.
(b) This Agreement, when executed and delivered by the Investor,
will constitute the valid and binding obligation of the Investor, enforceable
in accordance with its terms except as such enforceability may be limited by
the Remedies Exception. The execution, delivery and performance of this
Agreement by the Investor will not conflict with or constitute a breach,
violation or default under the Investor's Articles of Incorporation or Bylaws,
any statute, law or administrative regulation, or under any judgment, decree,
order, writ, governmental permit or license, any material contract, agreement,
lease, indenture or instrument to which the Investor or any of its Subsidiaries
is a party or by which the Investor or any of its Subsidiaries is bound, which
breach, violation or default would have individually or in the aggregate, a
Material Adverse Effect on the Investor.
4.2 ACCREDITED INVESTOR: EXPERIENCE. The Investor is an "accredited
investor" as defined by Rule 501(a) promulgated by the Commission and the
Investor has, alone or with such Investor's advisers, substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that the Investor is capable of evaluating
the merits and risks of the Investor's investment in the Company and has the
capacity to protect its own interest and can afford to sustain a total loss on
such investment. The Investor was not organized solely to make this investment
in the Company.
4.3 INVESTMENT INTENT. The Shares to be purchased by the Investor are
being acquired by the Investor solely for such Investor's own account, for
investment purposes only, and with no present intention of distributing,
selling or otherwise disposing of the Shares. The Investor understands that
the Shares have not been registered under the Securities Act and are being
issued and sold to the Investor in reliance upon an exemption from the
registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the Investor's
investment intent and accuracy of the Investor's representations, as expressed
herein.
4.4 RULE 144. The Investor understands that the Shares are "restricted
securities" under the federal securities laws, inasmuch as they are being
acquired from the Company in a transaction not involving a public offering, and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act only in certain limited
circumstances. The Investor is familiar with Rule 144, as amended, promulgated
under the Securities Act, understands the conditions precedent to reliance upon
such rule for the resale of the Shares and the resale limitations imposed
thereby and by the Securities Act.
4.5 LEGENDS. It is understood that the certificates evidencing the
Shares may bear one or all of the following legends:
(a) "These securities have not been registered under the Securities
Act of 1933, as amended. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant
PAGE 11
to Rule 144 of such Act or as otherwise provided in that certain Stock Purchase
Agreement dated as of November __, 1997."
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations, and
the laws and regulations of any other applicable jurisdiction.
4.6 BROKER/FINDER. The Investor has not dealt with, or incurred
liability for a fee to, any finder, broker, investment banker or financial
advisor in connection with any of the transactions contemplated by this
Agreement or the negotiations looking toward the consummation of such
transactions.
5. CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE THE
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA OR OF ANY OTHER STATE OR JURISDICTION
AND THE ISSUANCE OF THE SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION FOR SUCH SECURITIES PRIOR TO THE QUALIFICATION IS UNLAWFUL,
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION UNDER THE CALIFORNIA
CORPORATIONS CODE AND THE LAWS OR REGULATIONS OF ANY OTHER APPLICABLE
JURISDICTION. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
6. CONDITIONS TO THE INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
the Investor to purchase and pay for the Shares at the Closing and the other
obligations of the Investor under this Agreement are subject to the fulfillment
at or prior to the Closing of the following conditions, any of which may be
waived in writing in whole or in part by the Investors:
6.1 REPRESENTATIONS AND WARRANTIES. On the date of the Closing, the
representations and warranties of the Company contained herein shall be true
and correct in all respects with the same force and effect as though such
representations and warranties had been made at and as of the time of Closing,
except for representations and warranties that speak as of a specific date or
time, which need only be true and correct in all respects as of such date or
time.
6.2 PERFORMANCE. The Company shall have performed and complied with all
agreements, covenants, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before the
Closing.
6.3 QUALIFICATIONS; LEGAL INVESTMENT. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state or any other third party that are required in connection
with the lawful sale and issuance of the Shares pursuant to this Agreement
shall have been duly obtained and shall be effective on and as of the Closing.
No stop order or other order enjoining the sale of the Shares shall have been
issued and no proceedings for such purpose shall be pending or, to the best
knowledge of the Company and the Investor, threatened by the Commission, the
California Commissioner of Corporations or any
PAGE 12
commissioner of corporations or similar officer of any state having
jurisdiction over this transaction. At the time of the Closing, the sale and
issuance of the Shares shall be legally permitted by all laws and regulations
to which the Company and the Investor are subject.
6.4 ANCILLARY AGREEMENTS. The Company and the Investor shall have
executed and delivered to each other each of the Ancillary Agreements.
6.5 NO LEGAL ACTION. No preliminary or permanent injunction or other
order, decree or ruling issued by an court of competent jurisdiction, or by any
governmental, administrative or regulatory agency or commission, in the United
States which prohibits the consummation of the transactions contemplated by
this Agreement or the Ancillary Agreements.
6.6 NO ADVERSE CHANGE. Since the date hereof, there shall not have
occurred any change in the financial condition, business or operations of the
Company and its Subsidiaries that would have or would be reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect.
6.7 CLOSING DOCUMENTS. The Company shall have delivered to the Investor,
unless waived in writing by the Investor:
(a) Copies (certified by the President of the Company) of the
resolutions duly adopted by the Board of Directors of the Company, authorizing
the execution, delivery and performance of this Agreement and the Ancillary
Agreements and the transactions contemplated hereby;
(b) A copy (certified by the President or Secretary of the Company)
of the Bylaws as amended through the date of the Closing;
(c) A certificate of the Chief Executive Officer and Chief Financial
Officer of the Company confirming that the conditions in Sections 6.1, 6.2, 6.3
and 6.6 have been satisfied;
(d) The Ancillary Agreements; and
(e) Such other documents relating to the transactions contemplated
by this Agreement as the Investor may reasonably request.
6.8 OPINION OF COMPANY COUNSEL. The Investors shall have received an
opinion of counsel to the Company, dated the Closing Date, in form and
substance customary in transactions of the type contemplated by this Agreement
and reasonably acceptable to the Investor.
7. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of
the Company under this Agreement are subject to the fulfillment at or prior to
the Closing of the following conditions, any of which may be waived in writing
in whole or in part by the Company:
7.1 REPRESENTATIONS AND WARRANTIES. On the date of the Closing, the
representations and warranties of the Investors contained in Section 4 shall be
true and correct in all respects with
PAGE 13
the same force and effect as though such representations and warranties had
been made at and as of the time of Closing, except for representations and
warranties that speak as of a specific date or time, which need only be true
and correct in all respects as of such date or time.
7.2 PERFORMANCE. The Investor shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by such Investor on or before the
Closing, (other than payment to the Company of the Purchase Price which shall
be paid at Closing).
7.3 QUALIFICATIONS: LEGAL INVESTMENT. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful sale and
issuance of the Shares pursuant to this Agreement shall have been duly obtained
and shall be effective on and as of the Closing. No stop order or other order
enjoining the sale of the Shares shall have been issued and no proceedings for
such purpose shall be pending or, to the best knowledge of the Company or the
Investor, threatened by the Commission, the California Commissioner of
Corporations or any commissioner of corporations or similar officer of any
state having jurisdiction over this transaction. At the time of the Closing,
the sale and issuance of the Shares shall be legally permitted by all laws and
regulations to which the Company and the Investor are subject.
7.4 OPINION OF COUNSEL TO THE INVESTOR. The Company shall have received
an opinion of counsel to the Investor, dated the Closing Date, in form and
substance attached hereto as Exhibit "A".
8. COVENANTS OF THE COMPANY AND THE INVESTOR.
-----------------------------------------
8.1 INSPECTION OF RECORDS. Prior to the Closing, the Company shall allow
the duly authorized and appropriate officers, attorneys, accountants and other
representatives of the Investor free and full access at all reasonable times
and upon reasonable notice to the Company and its Subsidiaries, its personnel,
properties, contracts, books and records, and all other documents and data for
purposes of conducting its due diligence examination of the Company.
8.2 ACQUISITION PROPOSAL. Prior to the earlier to occur of the Closing
or the termination of this Agreement (the "Proposal Period"), the Company
agrees (a) that neither it nor any of its Subsidiaries shall, and it shall
direct and use its best efforts to cause its officers, directors, employees,
agents and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of its subsidiaries) not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to a
merger, acquisition, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any equity
securities of, the Company or any of its subsidiaries (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal") or engage in
any negotiations concerning, or provide any confidential information or data
to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal; (b) that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties
PAGE 14
conducted heretofore with respect to any of the foregoing and will take
the necessary steps to inform the individuals or entities referred to above of
the obligations undertaken in this section; and (c) that it will notify the
Investor immediately if any such inquiries or proposals are received by, any
such information is received from, or any such negotiations or discussions are
sought to be initiated or continued with, it.
8.3 PROTECTIVE PROVISIONS. Commencing on the date hereof and so long as
the Investor owns at least 70% of the Shares (as adjusted for all stock splits,
stock dividends and recapitalizations effected after the Closing Date), the
Company shall not, without first obtaining the written approval of the Investor
(i) amend, repeal, alter or change any of the rights, preferences or privileges
of the Common Stock; (ii) increase or decrease the authorized number of shares
of Common Stock; (iii) create (by reclassification of an existing class or
series, or otherwise) any new class or series of shares senior to or on a
parity with the Common Stock as to voting rights, dividends, redemption or a
distribution of assets of the Company in liquidation; (iv) declare or pay any
dividend on any class or series of stock of the Company; (v) purchase, redeem,
or otherwise acquire (or pay into or set aside for a sinking fund for such
purpose), or direct or permit any Subsidiary of the Company to purchase or
otherwise acquire, any of the Common Stock; provided, however, that this
restriction shall not apply to the repurchase of shares of Common Stock from
employees, directors or consultants pursuant to agreements under which the
Company has the option to repurchase such shares upon the occurrence of certain
events, such as the termination of employment, provided any such agreements
have been disclosed to the Investor prior to the Closing Date; (vi) merge,
reorganize, or effect any transaction in which assets of the Company valued in
excess of $1 million (other than sales of inventory in the ordinary course of
business) are sold; (vii) issue any options or warrants to purchase any equity
securities of the Company; (viii) make, amend or grant any security interest,
pledge, hypothecation, encumbrance or lien on any property of the Company; (ix)
terminate, dissolve, liquidate or wind-up the Company, (x) engage in any
transaction between the Company and any officer, director or Person who
beneficially or of record owns at least 5% of the Common Stock, or affiliates
thereof; (xi) open or acquire a new retail store or acquire, purchase, lease or
otherwise enter into any agreement which purports to bind the Investor; (xii)
increase the compensation or benefits payable or to become payable to its
officers or employees, except in amounts consistent with past practices or
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or other employee of the
Company or any of its Subsidiaries or establish or amend any collective
bargaining, bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or consulting or other plan,
agreement, trust, fund, plan, policy or arrangement for the benefit of any
current or former directors, officers or employees; (xiii) purchase any real
property; (xiv) sublease or assign any Company Property, or modify any lease,
or exercise any option under any lease to extend the term of such lease for
more than a five year period or to create a financial obligation of the Company
which for the remainder of the existing term and the extended term, in the
aggregate, exceeds $500,000; (xv) enter into any new leases for additional
facilities; (xvi) sell or license any Intellectual Property; (xvii) become a
franchisor or franchisee; (xviii) enter into any exclusivity agreements with
respect to purchases or sales by the Company or any Subsidiary or any non-
competition agreements; or (xix) make any loans or extend credit in an amount
in excess of $5,000, other than a loan in favor of ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ in an
amount not to exceed $33,000 in settlement of the pending litigation
PAGE 15
instituted against ▇▇. ▇▇▇▇▇▇▇, and threatened to be instituted against the
Company and one of its Subsidiaries, by ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Associates, et. al.
8.4 APPROVAL BY COMPANY STOCKHOLDERS AND NASD. The Company shall take
all necessary or appropriate action under the Securities Laws, the Bylaws of
the NASD and other applicable Nasdaq rules, Minnesota Law and its Certificate
of Incorporation and Bylaws to obtain all necessary approvals and consents from
governmental authorities, third parties and the stockholders of the Company, if
any, of this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby.
8.5 INCUMBENT DIRECTORS. The Company shall amend its Bylaws or take such
action as may be necessary to provide (a) that the size of the Company's Board
of Directors shall be increased to seven (7) directors, (b) that the
compensation committee of the Board of Directors shall consist of three (3)
directors, and (c) that the audit committee of the Board of Directors shall
consist of three (3) directors. Pursuant to the terms of its Bylaws, the
Company shall appoint, effective immediately following the Closing, the
designees of the Investor to the Board and the respective committees to which
they are entitled to be appointed under the Shareholders Agreement.
8.6 DIRECTOR AND OFFICER LIABILITY INSURANCE. The Company shall
maintain in effect directors' and officers' liability insurance covering the
Investors' designees to the Company's Board of Directors containing terms no
less favorable than those currently applicable to directors and officers of the
Company under its existing directors' and officers' liability policy. The
Company covenants to periodically review and modify, if appropriate, its
directors' and officers' liability policy to be consistent with the terms
customarily contained in policies of public companies with total assets and
market capitalization in amounts similar to that of the Company.
8.7 FILINGS; OTHER ACTION. Subject to the terms and conditions herein
provided, the Company and the Investor shall (a) use all reasonable efforts to
cooperate with one another in (i) determining which filings are required to be
made prior to the Closing Date with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Date from
states and foreign jurisdictions in connection with the execution and delivery
of this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby and (ii) timely making all such
filings and timely seeking all such consents, approvals, permits or
authorizations; and (b) use all reasonable efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If, at any time after the Closing
Date, any further action is necessary or desirable to carry out the purpose of
this Agreement, the proper officers and directors of the Company and the
Investor shall take all such necessary or desirable action.
8.8 NOTIFICATION OF CERTAIN MATTERS. Following the execution of this
Agreement and continuing until that date which is 90 days following the date on
which the Company's auditors deliver their audit opinion to the Company (with a
copy to Investor) with respect to the Company's financial statements for the
year ended December 31, 1997, the Company shall use reasonable good faith
efforts to promptly give written notice to the Investor and the Investor shall
use
PAGE 16
reasonable good faith efforts to promptly give written notice to the
Company, upon becoming aware of the occurrence or, to its knowledge,
respectively, impending or threatened occurrence, of any event which would
cause or constitute a breach of any of its representations, warranties or
covenants contained or referenced in this Agreement and use its reasonable good
faith efforts to prevent or promptly remedy the same.
8.9 LEGAL ACTION. In the event that a preliminary or permanent
injunction or other order decree or ruling is issued by any court of competent
jurisdiction or by any governmental, administrative or regulatory agency or
commission in the United States which prohibits the consummation of the
transactions contemplated by this Agreement or the Ancillary Agreements and
shall be in effect, each party agrees to use its reasonable efforts to have
such injunction lifted. Notwithstanding the foregoing, in the event any such
injunction is not lifted by the Drop Dead Date, the provisions of Section
11.1.2 are controlling.
8.10 PUBLICITY. The Company and the Investor shall, subject to their
respective legal obligations of public companies, use reasonable efforts to
agree upon the text of any press release relating to the transactions
contemplated by this Agreement and the Ancillary Agreements; provided, however,
if the parties hereto are unable to agree upon the text of any such press
release, nothing herein shall require any party to obtain the consent of any
other party to the release of any such press release which, upon the advice of
outside legal counsel, such party determines in good faith is required to be
issued by applicable law or the rules and regulations of the NASD.
9. POST CLOSING COVENANTS OF THE COMPANY AND THE INVESTOR.
------------------------------------------------------
9.1 INDEMNIFICATION.
9.1.1 GENERAL. From and after the Closing Date, the parties
shall indemnify each other as provided in this Section 9.1. As used in this
Agreement, (a) the term "Damages" shall mean all liabilities, demands, claims,
actions or causes of action, regulatory, legislative or judicial proceedings or
investigations, assessments, levies, losses, fines, penalties, judgments,
damages, costs and expenses, including without limitation reasonable
attorneys', accountants', investigators', and experts' fees and expenses,
sustained or incurred in connection with the defense or investigation of any
claim; (b) the term "Indemnified Party" shall mean a party who is entitled to
indemnification from a party hereto pursuant to this Section 9.1; (c) the term
"Indemnifying Party" shall mean a party hereto who is required to provide
indemnification under this Section 9.1 to another party; and (d) the term
"Third Party Claim" shall mean any claim, action, suit, proceeding,
investigation or like matter which is asserted or threatened by a party other
than the parties hereto, their successors and permitted assigns, against any
Indemnified Party or to which any Indemnified Party is subject.
9.1.2 THE COMPANY INDEMNIFICATION OBLIGATIONS. The Company shall
indemnify, save and keep the Investor, its officers, directors, employees and
stockholders (each an "Investor Indemnitee" and collectively, the "Investor
Indemnitees") harmless against and from all Damages sustained or incurred by
any Investor Indemnitee, as a result of or arising out of or by virtue of:
PAGE 17
(a) any inaccuracy in or breach of any representation or
warranty made by the Company to the Investor herein or in any of the Ancillary
Agreements delivered to the Investor in connection herewith; and
(b) the breach by the Company of, or failure of the Company to
comply with, any of the covenants or obligations under this Agreement or any of
the Ancillary Agreements to be performed by the Company (including, without
limitation, their obligations under this Section 9.1).
9.1.3 THE INVESTOR INDEMNIFICATION OBLIGATIONS. The Investor
shall indemnify, save and keep the Company, its officers, directors, employees
and stockholders (individually a "Company Indemnitee" and collectively, the
"Company Indemnitees") harmless against and from all Damages sustained or
incurred by any Company Indemnitee as a result of or arising out of or by
virtue of:
(a) any inaccuracy in or breach of any representation or
warranty made by the Investor to the Company herein or in any Ancillary
Agreements delivered to the Company in connection herewith;
(b) any breach by the Investor, or failure by the Investor to
comply with, any of the covenants or obligations under this Agreement or any of
the Ancillary Agreements to be performed by the Investor (including without
limitation its obligations under this Section 9.1).
9.1.4 LIMITATION ON INDEMNIFICATION OBLIGATIONS. No Indemnified
Party shall be entitled to recover under this Section 9.1 unless a claim has
been asserted by written notice, setting forth the basis for such claim (a
"Notice of Loss"), delivered to the Indemnifying Party on or prior to that date
which is 90 days following the date on which the Company's auditors deliver
their audit opinion to the Company (with a copy to Investor) with respect to
the Company's financial statements for the year ended December 31, 1997;
provided however, the limitations set forth in the preceding sentence shall not
apply to any claim for Damages to the extent it arises out of fraud or
intentional misrepresentation or in the event that the Indemnifying Party
intentionally fails timely to notify the Indemnified Party of, or conceals from
the Indemnified Party, a breach of a representation or warranty that otherwise
could result in an indemnifiable claim.
9.1.5 THIRD PARTY CLAIMS OTHER THAN TAXES. Forthwith following
the receipt of notice of a Third Party Claim (other than a Third Party Claim
with respect to Taxes) with respect to which indemnification is sought
hereunder, the party receiving the notice of the Third Party Claim shall (i)
notify the other party of its existence setting forth with reasonable
specificity the facts and circumstances of which such party has received notice
and (ii) if the party giving such notice is an Indemnified Party, specifying
the basis hereunder upon which the Indemnified Party's claim for
indemnification is asserted. The Indemnified Party shall, upon reasonable
notice, tender the defense of a Third Party Claim to the Indemnifying Party.
If:
(a) the defense of a Third Party Claim so tendered is accepted
without qualification (or reservation of rights) by the Indemnifying Party
within thirty (30) days thereafter
PAGE 18
such tender; or
(b) within thirty (30) days after the date on which written
notice of a Third Party Claim has been given pursuant to this Section 9.1.5,
the Indemnifying Party shall acknowledge in writing to the Indemnified Party
and without qualification (or reservation of rights) its indemnification
obligations as provided in this Section 9.1.5;
(c) the defense of a Third Party Claim is accepted by the
Indemnifying Party pursuant to Section 9.1.5(a) or 9.1.5(b) above, then, except
as hereinafter provided, the Indemnified Party shall not, and the Indemnifying
Party shall, have the right to contest, defend, litigate or settle such Third
Party Claim. Notwithstanding the preceding sentence, the Indemnified Party
shall have the right to be represented by counsel at its own expense in any
such contest, defense, litigation or settlement conducted by the Indemnifying
Party provided that the Indemnified Party shall be entitled to reimbursement
therefor if the Indemnifying Party shall lose its right to contest, defend,
litigate and settle the Third Party Claim as herein provided. The Indemnifying
Party shall lose its right to defend and settle the Third Party Claim if it
shall fail to diligently contest the Third Party Claim. So long as the
Indemnifying Party has not lost its right and/or obligation to contest, defend,
litigate and settle as herein provided, the Indemnifying Party shall have the
exclusive right to contest, defend and litigate the Third Party Claim and shall
have the exclusive right, in its discretion exercised in good faith, and upon
the advice of counsel, to settle any such matter, either before or after the
initiation of litigation, at such time and upon such terms as it deems fair and
reasonable, provided that at least ten (10) days prior to any such settlement,
written notice of its intention to settle shall be given to the Indemnified
Party. All expenses (including without limitation attorneys' fees) incurred by
the Indemnifying Party in connection with the foregoing shall be paid by the
Indemnifying Party. Notwithstanding the foregoing, in connection with any
settlement negotiated by an Indemnifying Party, no Indemnified Party shall be
required by an Indemnifying Party to (x) enter into any settlement that does
not include as an unconditional term thereof the delivery by the claimant or
plaintiff to the Indemnified Party of a release from all liability in respect
of such claim or litigation, (y) enter into any settlement that attributes by
its terms liability or wrongful conduct to the Indemnified Party or (z) consent
to the entry of any judgment that does not include as a term thereof a full
dismissal of the litigation or proceeding with prejudice. Absent waiver by the
Indemnified Party, any settlement negotiated by an Indemnifying Party shall
contain a provision requiring that all parties to the settlement maintain the
terms thereof in strict confidence, subject only to disclosure to legal
counsel, to accountants (each of whom shall be required to maintain the
confidentiality of the terms of the settlement) or as required by applicable
law or court order. No failure by an Indemnifying Party to acknowledge in
writing its indemnification obligations under this Section 9.1.5 shall relieve
it of such obligations to the extent they exist. If an Indemnified Party is
entitled to indemnification against a Third Party Claim, and the Indemnifying
Party fails to accept a tender of, or assume, the defense of a Third Party
Claim pursuant to this Section 9.1.5 or if, in accordance with the foregoing,
the Indemnifying Party shall lose its right to contest, defend, litigate and
settle such a Third Party Claim, the Indemnified Party shall have the right,
without prejudice to its right of indemnification hereunder, in its discretion
exercised in good faith and upon the advice of counsel to contest, defend and
litigate such Third Party Claim, and may settle such Third Party Claim, either
before or after the initiation of litigation, at such time and upon such terms
as the Indemnified Party deems fair and reasonable, provided that at least ten
(10) days prior to any such settlement, written notice of its intention to
settle is given to the Indemnifying Party. If, pursuant to this Section 9.1.5,
the Indemnified Party so contests, defends, litigates or
PAGE 19
settles a Third Party Claim, for which it is entitled to indemnification
hereunder as hereinabove provided, the Indemnified Party shall be reimbursed by
the Indemnifying Party for the reasonable attorneys' fees and other expenses of
defending, contesting, litigating and/or settling the Third Party Claim which
are incurred from time to time, forthwith following the presentation to the
Indemnifying Party of itemized bills for said attorneys' fees and other
expenses.
9.1.6 CLAIMS INVOLVING TAXES. In the case of any proposed or
actual assessment of Tax liabilities for which an Investor Indemnitee is
entitled to indemnification from the Company as provided herein, the Investor
shall give notice to the Company, and shall contest such proposed or actual
assessment in the manner reasonably directed by the Company (in consultation
with the Investor) through the administrative review or appeal procedures
available under the relevant Tax laws and regulations. The Company shall bear
all costs and expenses relating to any action requested by the Company to be
taken by the Investor under this Section 9.1.6. If the pursuit of such
administrative remedies by the Investor is unsuccessful, the Investor shall be
entitled to indemnification for the Tax (and any penalties and interest)
pursuant to Section 9.1 hereof; PROVIDED HOWEVER, that if within ten (10) days
of receipt from the Investor of notice of its intention to do so, the Company
shall notify the Investor of their desire to contest the proposed or assessed
Tax deficiency in the courts, they shall be entitled to do so at their expense
provided the Company pays the deficiency and any penalties and interest if
required in order to seek judicial relief. The Investor shall cooperate with
the Company for such purposes but shall be entitled to reimbursement for any
out-of-pocket expenses incurred by the Investor in doing so. For purposes of
this Section 9.1.6, the Company shall select a Company representative to act on
their behalf who shall serve as a liaison between Investor and the Company with
respect to all matters arising under or related to this Section 9.1.6.
9.1.7 COOPERATION. Subject to the provisions of Section 9.1.5,
the Indemnified Party shall have the right, at its own expense, to participate
in the defense of any Third Party Claim, and if said right is exercised, the
parties shall cooperate in the investigation and defense of said Third Party
Claim.
9.1.8 SUBROGATION. The Indemnifying Party shall not be entitled
to require that any action be brought against any other Person before action is
brought against it hereunder by the Indemnified Party and shall not be
subrogated to any right of action until it has paid in full or successfully
settled or defended against the Third Party Claim for which indemnification is
sought.
9.1.9 INDEMNIFICATION NET OF BENEFITS. The amount of any
recovery by an Indemnified Party pursuant to this Section 9.1 shall be net of
any insurance benefits actually received by such Indemnified Party (but not to
the extent such benefits are repaid through retrospective premium adjustments
or otherwise) or any foreign federal, state and/or local tax benefits actually
received by such Indemnified Party as a result of the state of facts which
entitled the Indemnified Party to recover from the Indemnifying Party pursuant
to this Section 9.1. Notwithstanding the foregoing, any increase or decrease
in the basis of any assets or stock of the Investor or any of its Subsidiaries
shall not be considered to give rise to a tax benefit for purposes of this
Section 9.1.9.
PAGE 20
9.2 LISTING OF ADDITIONAL SHARES ON NASDAQ. As promptly as reasonably
practicable following the Closing, the Company shall prepare and submit to the
National Association of Securities Dealers a Nasdaq Additional Listing
Application and all other documents and fees necessary to cause the Shares to
be listed on the Nasdaq Small Cap Market, all as in compliance with the rules
and regulations of the NASD.
9.3 INSURANCE. The Company shall maintain insurance on the Company
Properties and its other assets that is commercially reasonable.
9.4 SECURITY INTEREST. To the extent permitted under the Company's Loan
and Security Agreement with Coast Business Credit or if otherwise permitted by
Coast Business Credit, and subject to the security interest of Coast Business
Credit under the Loan and Security Agreement, the Company covenants to
cooperate with the Investor and use its best efforts to assist the Investor to
obtain and perfect a security interest in those items of property identified on
Exhibit B hereto to secure the Company's existing and future trade obligations
to the Investor in the normal course of business.
10. RIGHT OF FIRST REFUSAL.
----------------------
10.1 RIGHTS OF INVESTOR. If the Company determines to issue any
additional shares of its capital stock, or warrants, options, rights or other
securities exercisable for or convertible into shares of its capital stock
(collectively, the "Equity Securities"), except as provided in Section 10.5
below, the Company shall first give to the Investor the right to purchase all
or any portion of the Equity Securities by delivering to the Investor a written
offer which shall state the price and other terms and conditions of the
proposed issuance. If the Company proposes to issue the Equity Securities for
consideration other than solely cash and/or promissory notes, the offer to the
Investor shall, to the extent of such consideration, permit the Investor to pay
in lieu thereof, cash equal to the fair market value (as determined by the
independent appraisal of an appraiser mutually agreeable to the Investor and
the Company and paid for by the Company) of any portion of such consideration,
and the offer shall state the appraiser's estimate of such fair market value.
The Board of Directors shall fix the period of the offer, which shall be a
minimum of 30 days or such longer period as is necessary to determine the fair
market value of the consideration referred to in the preceding sentence.
10.2 ACCEPTANCE OF COMPANY OFFER. The Investor may accept an offer by
giving written notice (the "Acceptance Notice") to the Company before the offer
expires that the Investor has accepted the offer to purchase some or all of the
securities offered (the "Accepted Securities"). Within ten (10) days following
delivery of the Acceptance Notice, the Investor shall deliver to the Company
payment in full for the Accepted Securities purchased by it against delivery by
the Company to the Investor of a certificate or certificates evidencing the
Accepted Securities purchased by the Investor.
10.3 MERGERS; ACQUISITIONS. To the extent the Company desires to effect a
merger or consolidation of the Company into or with another corporation in
which the shareholders of the Company shall thereby own less than 50% of the
voting securities of the surviving corporation, or a sale, transfer or lease
(but not including a transfer or lease by pledge or mortgage to a bona
PAGE 21
fide lender) of all or substantially all of the assets of the Corporation (each
a "Sale"), the Company shall first give to the Investor the right to effect the
Sale by delivering to the Investor a written offer which shall state the price
and other terms and conditions of the Sale. If the Sale is proposed to be
effected for consideration other than solely cash and/or promissory notes, the
offer to the Investor shall, to the extent of such consideration, permit the
Investor to pay in lieu thereof, cash equal to the fair market value (as
determined by the independent appraisal of an appraiser mutually agreeable to
the Investor and the Company and paid for by the Company) of any portion of
such consideration and the offer shall state the appraiser's estimate of such
fair market value. The Board of Directors shall fix the period of the offer,
which shall be a minimum of 30 days. The Investor may accept an offer by
giving written notice to the Company (the "Acceptance Notice") before the offer
expires that such Investor has accepted the offer to effect the Sale. If the
Investor elects to effect the Sale, the transactions necessary to effect the
Sale shall take place at such reasonable time and place as may be specified in
the Acceptance Notice, but no later than 60 days from the date of the
Acceptance Notice.
10.4 ISSUANCES TO THIRD PARTIES. To the extent the offer contained in
this Section 10 is not accepted in full by the Investor, the Company may, for a
period of sixty (60) days after the expiration of such offer or the receipt by
the Company of the Investor's written notice that it declines to accept the
offer, issue and sell the Equity Securities, upon terms and conditions no less
favorable to the Company than those specified in such offer, to any Person or
Persons.
10.5 EXCLUDED TRANSACTIONS. Notwithstanding the provisions of this
Section 10, the Company shall not be required to first offer the Equity
Securities to the Investors pursuant to this Agreement if:
(a) The issuance by the Company is as a result of the acquisition of
the assets or stock of another company in exchange for shares of capital stock
of the Company; or
(b) The issuance by the Company is pursuant to convertible
securities issued to employees, directors or consultants of the Company; or
(c) The Investor owns less than 70% of the Shares (as adjusted for
all stock splits, stock dividends and recapitalizations effected after the
Closing Date) at the time of such issuance.
11. TERMINATION.
-----------
11.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date, notwithstanding approval thereof the by stockholders of the
Company:
11.1.1 by mutual written consent duly authorized by the Boards of
Directors of the Company and the Investor;
11.1.2 by either party at any time after November 20, 1997 (the
"Drop Dead Date") if the Closing has not occurred as of the time of the
termination; provided, however, that the right to terminate this Agreement
under this Section 11.1.2 shall not be available to any party whose
PAGE 22
failure to fulfill any obligation under this Agreement has been the cause of or
a substantial contributor to the failure of the Closing to occur on or before
such date. No termination of this Agreement shall relieve either party for
damages caused by any breach of this Agreement.
11.1.3 by either party if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued a nonappealable final order, decree or ruling or taken any other action
having the effect of permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement or the Ancillary
Agreements (provided that (i) the party seeking to terminate this Agreement
pursuant to Section 11, 11.1 is subject to such order, decree or ruling, it
shall have used all reasonable efforts to have such order ,decree or ruling
removed and (ii) the right to terminate the Agreement under this Section
11, 11.1 shall not be available to any party who has not complied with its
obligations under Section 8.7 and such noncompliance materially contributed to
the issuance of any such order, decree or ruling or the taking of such action).
11.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 11,11.1, (a) this Agreement shall become void and of no effect with no
liability on the part of any party hereto and (b) if termination of this
Agreement shall be judicially determined to have been caused by willful breach
of this Agreement, then, in addition to other remedies at law or equity for
breach of this Agreement, the party found to have willfully breached this
Agreement shall indemnify the other parties for their respective costs, fees
and expenses of their counsel, accountants and other experts and advisors as
well as fees and expenses incident to negotiation, preparation and execution of
this Agreement, the Ancillary Agreements and related documentation.
12. MISCELLANEOUS.
-------------
12.1 EXPENSES. The Company and the Investors each agree to pay their own
legal and other expenses relating in any manner to the negotiation and
consummation of this Agreement and any related agreements.
12.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties
(including transferees of any Shares). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
12.3 GOVERNING LAW; ARBITRATION. This Agreement shall be governed by and
construed under the laws of the State of Minnesota as applied to agreements
among Minnesota residents entered into and to be performed entirely within
Minnesota. The parties' rights under this Section shall be governed by and
construed in accordance with the Federal Arbitration Act, 9 U.S.C. sections 1
et. sec. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by the following procedures:
Either party may send the other written notice identifying the matter in
dispute and involving the procedures of this Section. Within
PAGE 23
fourteen (14) days after such written notice is given, one or more principals
of each party shall meet at a mutually agreeable location in Los Angeles,
California, for the purpose of determining whether they can resolve the dispute
themselves by written agreement, and, if not, whether they can agree upon a
third-party impartial arbitrator (the "Arbitrator") to whom to submit the
matter in dispute for final and binding arbitration. If the parties fail to
resolve the dispute by written agreement or to agree on the Arbitrator within a
twenty-one (21) day period, either party may make written application to the
Judicial Arbitration and Mediation Services ("JAMS"), for the appointment of a
single Arbitrator to resolve the dispute by arbitration and at the request of
JAMS, the parties shall meet with JAMS at its offices or confer with JAMS by
telephone within ten (10) calendar days of such request to discuss the dispute
and the qualifications and experience which each party respectively believes
the Arbitrator should have; provided, however, the selection of the Arbitrator
shall be the exclusive decision of JAMS and shall be made within thirty (30)
days of the written application to JAMS. Within 30 days of the selection of
the Arbitrator, the parties shall meet in Los Angeles, California with such
Arbitrator at a place and time designated by the Arbitrator after consultation
with the parties and present their respective positions on the dispute. Each
party shall have no longer than one day to present its position, the entire
proceeding before the Arbitrator shall be on no more than three consecutive
days, and the award shall be made in writing no more than 30 days following the
end of the proceeding. Such award shall be a final and binding determination
of the dispute and shall be fully enforceable as an arbitration award in any
court having jurisdiction and venue over the parties. The prevailing party (as
determined by the Arbitrator) shall in addition be awarded by the Arbitrator
such party's own attorneys' fees and expenses in connection with such
proceeding. The non-prevailing party (as determined by the Arbitrator,) shall
pay the Arbitrator's fees and expenses.
12.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
12.6 NOTICES. Unless otherwise provided herein, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given (a) upon personal delivery to the party to be notified, or
(b) three (3) days after deposit in the United States mail, by registered or
certified mail, postage prepaid and addressed to the party to be notified at
the address indicated for such party on the signature page hereof or at such
other address as such party may designate by ten (10) days advance written
notice to the other parties.
12.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either
generally or in a particular instance, either before or after the Closing and
either retroactively or prospectively), only with the written consent of the
Company and the Investor.
12.8 SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision or provisions shall be
excluded from this
PAGE 24
Agreement and the balance of the Agreement shall be interpreted as if such
provision or provisions were so excluded and shall be enforceable in accordance
with its terms.
12.9 FINDER'S FEE. The Company and the Investor shall each indemnify and
hold the other harmless from any liability for any commission or compensation
in the nature of a finder's fee (including the costs, expenses and legal fees
of defending against such liability) for which the Company or the Investor, or
any of their respective directors, officers, employees, or representatives, as
the case may be, is responsible.
12.10 CONSTRUCTION. The language in all parts of this Agreement shall be
in all cases construed simply according to its fair meaning and not strictly
for or against any of the parties.
12.11 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto, the
Ancillary Agreements and the other documents required to be delivered pursuant
hereto constitute the entire understanding and agreement between the parties
with regard to the specific subject matter hereof and no party shall be liable
or bound by any representation, warranty, covenant or agreement except as
specifically set forth herein. Any previous agreement (whether written, oral
or implied) among the parties relative to the specific subject matter hereof is
superseded by this Agreement.
12.12 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants of the Company and the Investor
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing and shall in no way be affected by
any investigation of the subject matter thereof made by or on behalf of the
Investor or the Company; provided, however, that the representations and
warranties shall expire on that date which is 90 days following the date on
which the Company's auditors deliver their audit opinion to the Company (with a
copy to Investor) with respect to the Company's financial statements for the
year ended December 31, 1997, subject to the exceptions set forth in Section
9.1.4.
13. INDEX.
13.1 "AFFILIATE" means, when used with reference to a specified Person,
any Person that directly or indirectly through one or more intermediaries
controls or is controlled by, or is under common control with, the specified
Person. For purposes of this definition, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
13.2 "ANCILLARY AGREEMENTS" means the Registration Rights Agreement and
the Shareholders Agreement.
13.3 "COMMISSION" means the United Stated Securities and Exchange
Commission.
13.4 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
PAGE 25
13.5 "GAAP" means generally accepted accounting principles.
13.6 "CODE" means the Internal Revenue Code of 1986, as amended.
13.7 "MATERIAL ADVERSE EFFECT" means (i) with respect to the Company and
its Subsidiaries, an effect which is materially adverse to the business,
properties, assets, revenues, operations, financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole, and (ii) with
respect to the Investor and its Subsidiaries, an effect which is materially
adverse to the business, properties, assets, revenues, operations, financial
condition or results of operations of the Investor and its Subsidiaries, taken
as a whole.
13.8 "NASD" means the National Association of Securities Dealers, Inc.
13.9 "PERSON" includes an individual, partnership, limited liability
company, limited liability partnership, trust, estate, corporation, joint
venture, unincorporated association, government bureau or agency or other
entity of whatsoever kind or nature.
13.10 "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement to be entered into between the Company and the Investor attached to
this Agreement as Appendix A.
13.11 "SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
13.12 "SHAREHOLDERS AGREEMENT" means the Shareholders Agreement to be
entered into between the Company and the Investor attached hereto as Appendix
B.
13.13 "SUBSIDIARY" of the corporation means (i) any corporation of which
equity securities possessing a majority of the ordinary voting power in
electing the board of directors are, at the time as of which such determination
is being made, owned by such corporation either directly or indirectly through
one or more Subsidiaries and (ii) any Person (other than a corporation) in
which such corporation or any Subsidiary, directly or indirectly, has more than
a 10% ownership interest or over which it exercise control including, without
limitation, with respect to the Company, Odds N Ends, Inc.
DEFINED TERM SECTION
------------ -------
Acceptance Notice 10.2
Accepted Securities 10.2
Acquisition Proposal 8.2
Ancillary Agreements 6.4
Closing 2.1
Company Preamble
Company Permitted Liens 3.10
Company Plans 3.12
Company Properties 3.10
Company Reports 3.4
Disclosure Letter 6.1
PAGE 26
Equity Securities 10.1
ERISA 3.12
ERISA Affiliate 3.12
Company Financial Statements 3.4
Intellectual Property 3.15
Investor Preamble
IRS 3.8
Liens 3.10
Remedies Exception 3.5(b)
Restrictions 3.10
Securities Laws 3.4
Shares 1.1
Taxes 3.8
Tax Returns 3.8
PAGE 27
IN WITNESS WHEREOF, the parties hereto have executed delivered this
Agreement as of the date first above written.
THE COMPANY:
UNIVERSAL INTERNATIONAL, INC.
a Minnesota corporation
By: _______________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Executive Officer and
Chief Financial Officer
Address: ______________________
______________________
______________________
THE INVESTOR:
99 CENTS ONLY STORES
a California corporation
By: _______________________
Name: ▇▇▇▇▇ ▇▇▇▇
Title: President, Chief Executive
Officer and Chairman of the Board
Address: ______________________
______________________
______________________
PAGE 28
EXHIBIT A
OPINIONS TO BE RENDERED BY COUNSEL TO THE INVESTOR
1. Each of the Agreement and the Ancillary Agreements has been duly
authorized, executed and delivered by the Investor and constitutes the valid
and binding obligation of the Investor, enforceable against the Investor in
accordance with its terms (subject to the qualifications set forth below).
The parties to this Agreement understand and agree that counsel to the
Investor will not opine as to Minnesota law which is the law governing the
Agreement and the Ancillary Agreements and that counsel to the Investor shall
opine only as to questions of law of the State of California, the General
Corporation Law of the State of Delaware and the federal law of the United
States of America, as applicable, and shall not express any opinion with
respect to any other laws or the law of any other jurisdiction.
PAGE 29
EXHIBIT B
ITEMS OF PROPERTY
All "accounts", "general intangibles", "chattel paper", "products",
"fixtures" and "equipment", as such items are defined in Division 9 of the
California Uniform Commercial Code in effect on the date hereof; and all
products, proceeds and insurance proceeds of any or all of the foregoing.