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99 CENTS ONLY STORES
(a California corporation)
2,800,000 Shares of Common Stock
U.S. PURCHASE AGREEMENT
Dated: , 1998
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99 CENTS ONLY STORES
(a California corporation)
2,800,000 Shares of Common Stock
(No Par Value Per Share)
U.S. PURCHASE AGREEMENT
, 1998
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇▇▇▇▇▇▇, SACHS & CO.
▇▇▇▇▇ ▇▇▇▇▇▇ INC.
EVEREN SECURITIES, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇ INC.
as U.S. Representatives of the several U.S. Underwriters
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
99 Cents Only Stores, a California corporation (the "Company") and the
persons listed in Schedule B hereto (the "Selling Shareholders"), confirm
their respective agreements with ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce,
▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated ("▇▇▇▇▇▇▇ ▇▇▇▇▇") and each of the other U.S.
Underwriters named in Schedule A hereto (collectively, the "U.S.
Underwriters", which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom ▇▇▇▇▇▇▇ Lynch, Goldman,
Sachs & Co., ▇▇▇▇▇ ▇▇▇▇▇▇ Inc., EVEREN Securities, Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇▇
Inc. are acting as representatives (in such capacity, the "U.S.
Representatives"), with respect to the sale by the Company and the Selling
Shareholders, acting severally and not jointly, and the purchase by the U.S.
Underwriters, acting severally and not jointly,
of the respective numbers of shares of Common Stock, no par value per share,
of the Company ("Common Stock") set forth in said Schedule A, and with
respect to the grant by the Company and the Selling Shareholders to the U.S.
Underwriters, acting severally and not jointly, of the option described in
Section 2(b) hereof to purchase all or any part of 420,000 additional shares
of Common Stock to cover over-allotments, if any. The aforesaid 2,800,000
shares of Common Stock (the "Initial U.S. Securities") to be purchased by the
U.S. Underwriters and all or any part of the 420,000 shares of Common Stock
subject to the option described in Section 2(b) hereof (the "U.S. Option
Securities") are hereinafter called, collectively, the "U.S. Securities".
It is understood that the Company and the Selling Shareholders are
concurrently entering into an agreement dated the date hereof (the
"International Purchase Agreement") providing for the offering by the Company
and the Selling Shareholders of an aggregate of 700,000 shares of Common
Stock (the "Initial International Securities") through arrangements with
certain underwriters outside the United States and Canada (the "International
Managers") for which ▇▇▇▇▇▇▇ ▇▇▇▇▇ International, ▇▇▇▇▇▇▇ Sachs
International, ▇▇▇▇▇ ▇▇▇▇▇▇ Inc., EVEREN Securities, Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇▇
Inc. are acting as lead managers (the "Lead Managers") and the grant by the
Company and the Selling Shareholders to the International Managers, acting
severally and not jointly, of an option to purchase all or any part of the
International Managers' pro rata portion of up to 105,000 additional shares
of Common Stock solely to cover overallotments, if any (the "International
Option Securities" and, together with the U.S. Option Securities, the "Option
Securities"). The Initial International Securities and the International
Option Securities are hereinafter called the "International Securities". It
is understood that the Company is not obligated to sell and the U.S.
Underwriters are not obligated to purchase, any Initial U.S. Securities
unless all of the Initial International Securities are contemporaneously
purchased by the International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters", the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities", and the U.S. Securities, and the International
Securities are hereinafter collectively called the "Securities".
The Underwriters will concurrently enter into an Intersyndicate
Agreement of even date herewith (the "Intersyndicate Agreement") providing
for the coordination of certain transactions among the Underwriters under the
direction of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated (in such capacity, the "Global Coordinator").
The Company and the Selling Shareholders understand that the U.S.
Underwriters propose to make a public offering of the U.S. Securities as soon
as the U.S. Representatives deem advisable after this Agreement has been
executed and delivered.
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The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-___________)
covering the registration of the Securities under the Securities Act of 1933,
as amended (the "1933 Act"), including the related preliminary prospectus or
prospectuses. Promptly after execution and delivery of this Agreement, the
Company will either (i) prepare and file a prospectus in accordance with the
provisions of Rule 430A ("Rule 430A") of the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations") and paragraph (b)
of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations or (ii) if the
Company has elected to rely upon Rule 434 ("Rule 434") of the 1933 Act
Regulations, prepare and file a term sheet (a "Term Sheet") in accordance
with the provisions of Rule 434 and Rule 424(b). Two forms of prospectus are
to be used in connection with the offering and sale of the Securities: one
relating to the U.S. Securities (the "Form of U.S. Prospectus") and one
relating to the International Securities (the "Form of International
Prospectus"). The Form of International Prospectus is identical to the Form
of U.S. Prospectus, except for the front cover and back cover pages and the
information under the caption "Underwriting" and the inclusion in the Form of
International Prospectus of a section under the caption "Certain United
States Tax Considerations for Non-United States Holders." The information
included in any such prospectus or in any such Term Sheet, as the case may
be, that was omitted from such registration statement at the time it became
effective but that is deemed to be part of such registration statement at the
time it became effective (a) pursuant to paragraph (b) of Rule 430A is
referred to as "Rule 430A Information" or (b) pursuant to paragraph (d) of
Rule 434 is referred to as "Rule 434 Information." Each Form of U.S.
Prospectus and Form of International Prospectus used before such registration
statement became effective, and any prospectus that omitted, as applicable,
the Rule 430A Information or the Rule 434 Information, that was used after
such effectiveness and prior to the execution and delivery of this Agreement,
is herein called a "preliminary prospectus." Such registration statement,
including the exhibits thereto, schedules thereto, if any, and the documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
1933 Act, at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration
Statement" shall include the Rule 462(b) Registration Statement. The final
Form of U.S. Prospectus and the final Form of International Prospectus,
including the documents incorporated by reference therein pursuant to Item 12
of Form S-3 under the 1933 Act, in the forms first furnished to the
Underwriters for use in connection with the offering of the Securities are
herein called the "U.S. Prospectus" and the "International Prospectus,"
respectively, and collectively, the "Prospectuses." If Rule 434 is relied
on, the terms "U.S. Prospectus" and "International Prospectus" shall refer to
the preliminary U.S. Prospectus dated _________, 1998 and preliminary
International Prospectus dated _______, 1998, respectively, each together
with the applicable Term Sheet and all references in this Agreement to the
date of such Prospectuses shall mean the date of the applicable Term Sheet.
For purposes of this Agreement, all references to the Registration Statement,
any preliminary prospectus, the U.S. Prospectus, the International Prospectus
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or any Term Sheet or any amendment or supplement to any of the foregoing
shall be deemed to include the copy filed with the Commission pursuant to its
Electronic Data Gathering, Analysis and Retrieval system ("▇▇▇▇▇").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus (including the Form of
U.S. Prospectus and Form of International Prospectus) or the Prospectuses (or
other references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is
incorporated by reference in the Registration Statement, any preliminary
prospectus (including the Form of U.S. Prospectus and Form of International
Prospectus) or the Prospectuses, as the case may be; and all references in
this Agreement to amendments or supplements to the Registration Statement,
any preliminary prospectus or the Prospectuses shall be deemed to mean and
include the filing of any document under the Securities Exchange Act of 1934
(the "1934 Act") which is incorporated by reference in the Registration
Statement, such preliminary prospectus or the Prospectuses, as the case may
be.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company
represents and warrants to each U.S. Underwriter as of the date hereof, as of
the Closing Time referred to in Section 2(c) hereof, and as of each Date of
Delivery (if any) referred to in Section 2(b) hereof, and agrees with each
U.S. Underwriter, as follows:
(1) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Company meets the
requirements for use of Form S-3 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any U.S. Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and did not and will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading. Neither of the Prospectuses nor
4
any amendments or supplements thereto, at the time the Prospectuses or
any amendments or supplements thereto were issued and at the Closing
Time (and, if any U.S. Option Securities are purchased, at the Date of
Delivery), included or will include an untrue statement of a material
fact or omitted or will omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading. If Rule 434 is used, the Company
will comply with the requirements of Rule 434. The representations and
warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or the U.S. Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by any U.S. Underwriter through the U.S.
Representatives expressly for use in the Registration Statement or the
U.S. Prospectus.
Each preliminary prospectus and the prospectuses filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and the Prospectuses delivered to the Underwriters
for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation S-T.
(2) INCORPORATED DOCUMENTS. The documents incorporated or deemed to
be incorporated by reference in the Registration Statement and the
Prospectuses, at the time they were or hereafter are filed with the
Commission, complied and will comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), and, when read together
with the other information in the Prospectuses, at the time the
Registration Statement became effective, at the time the Prospectuses were
issued and at the Closing Time (and, if any U.S. Option Securities are
purchased, at the Date of Delivery), did not and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(3) INDEPENDENT ACCOUNTANTS. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(4) FINANCIAL STATEMENTS. The consolidated financial statements of
the Company, together with related notes and schedules of the Company
included in the Registration Statement and the Prospectuses, are accurate
and present fairly the financial position, results of operations and cash
flows of the Company at the indicated dates and for the indicated periods;
such financial statements have been prepared in accordance with
5
generally accepted accounting principles ("GAAP") consistently applied
throughout the periods involved, and all adjustments necessary for a
fair presentation of results for such periods have been made and any
unaudited financial statements have been prepared on a basis
substantially consistent with that of the audited operating financial
statements included in the Registration Statement and the Prospectuses;
and the summary and selected financial and operating data included in
the Registration Statement and the Prospectuses presents fairly the
information shown therein and have been compiled on a basis consistent
with the audited and any unaudited financial statements, as the case may
be, included therein; and the pro forma information included in the
Prospectuses present fairly the information shown therein, have been
prepared in accordance with GAAP and the Commission's rules and
guidelines with respect to pro forma financial statements and other pro
forma basis described therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate under the circumstances.
(5) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectuses, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company, whether or
not arising in the ordinary course of business (a "Material Adverse
Effect"), (B) there have been no transactions entered into by the Company,
other than those in the ordinary course of business, which are material
with respect to the Company and (C) except for the stock dividend on the
Common Stock paid on December 1, 1997 described in the Prospectuses, there
has been no dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock.
(6) GOOD STANDING OF THE COMPANY. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of California and has corporate power and authority
to own and lease its properties and assets and to conduct its business as
described in the Prospectuses and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect. The Company has no subsidiaries and has
never had a subsidiary.
(7) CAPITALIZATION. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectuses in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, the International Purchase
Agreement or pursuant to employee benefit plans referred to in
6
the Prospectuses). The shares of issued and outstanding capital stock
of the Company, including the securities to be purchased by the U.S.
Underwriters from the Selling Shareholders, have been duly authorized
and validly issued and are fully paid and non-assessable; none of the
outstanding shares of capital stock of the Company, including the
securities to be purchased by the U.S. Underwriters from the Selling
Shareholders, was issued in violation of the preemptive or other similar
rights of any securityholder of the Company.
(8) AUTHORIZATION OF AGREEMENT. This Agreement and the International
Purchase Agreement have been duly authorized, executed and delivered by the
Company.
(9) AUTHORIZATION AND DESCRIPTION OF SECURITIES. The Securities to
be purchased by the U.S. Underwriters and the International Managers from
the Company have been duly authorized for issuance and sale to the U.S.
Underwriters pursuant to this Agreement and the International Managers
pursuant to the International Purchase Agreement, respectively, and, when
issued and delivered by the Company pursuant to this Agreement and the
International Purchase Agreement, respectively, against payment of the
consideration set forth herein and the International Purchase Agreement,
respectively, will be validly issued, fully paid and non-assessable; the
Common Stock conforms to all statements relating thereto contained in the
Prospectuses and such description conforms to the rights set forth in the
instruments defining the same; no holder of the Securities will be subject
to personal liability by reason of being such a holder; and the issuance of
the Securities is not subject to the preemptive or other similar rights of
any securityholder of the Company.
(10) ABSENCE OF DEFAULTS AND CONFLICTS. The Company is not in
violation of its charter or by-laws or in default in the performance or
observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which the Company is a
party or by which it may be bound, or to which any of the property or
assets of the Company is subject (collectively, "Agreements and
Instruments") except for such defaults that would not result in a Material
Adverse Effect; and the execution, delivery and performance of this
Agreement and the International Purchase Agreement and the consummation of
the transactions contemplated in this Agreement, the International Purchase
Agreement and in the Registration Statement (including the issuance and
sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectuses under the caption "Use of
Proceeds") and compliance by the Company with its obligations under this
Agreement and the International Purchase Agreement have been duly
authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or
7
default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any subsidiary pursuant to, the
Agreements and Instruments (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not result in a
Material Adverse Effect), nor will such action result in any violation
of the provisions of the charter or by-laws of the Company or any
subsidiary or any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any
subsidiary or any of their assets, properties or operations. As used
herein, a "Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any subsidiary.
(11) ABSENCE OF LABOR DISPUTE. No labor dispute with the employees of
the Company exists, or to the best knowledge of the Company after due
inquiry, is imminent, that could result in a Material Adverse Effect; and
the Company has not received notice of any existing or imminent labor
disturbance by the employees of any of its principle suppliers, customers,
manufacturers or contractors that could result in any Material Adverse
Effect.
(12) ABSENCE OF PROCEEDINGS. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or any
subsidiary, which is required to be disclosed in the Registration Statement
(other than as disclosed therein), or which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably be expected
to materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement and the
International Purchase Agreement or the performance by the Company of its
obligations hereunder or thereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any subsidiary is a party
or of which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect.
(13) ACCURACY OF EXHIBITS. There are no contracts or documents which
are required to be described in the Registration Statement, the
Prospectuses or the documents incorporated by reference therein or to be
filed as exhibits thereto which have not been so described and filed as
required.
(14) POSSESSION OF INTELLECTUAL PROPERTY. The Company owns or
possess, or can acquire on reasonable terms, the patents, patent rights,
licenses, inventions,
8
copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names (collectively,
"Patents and Proprietary Rights") currently employed by it in connection
with the business it now operates except where the failure to so own,
possess or acquire such Patents and Proprietary Rights would not have a
Material Adverse Effect; and the Company has not received any notice and
is not otherwise aware of any infringement of or conflict with asserted
rights of others with respect to any Patent or Proprietary Rights that,
if the subject of any unfavorable decision, ruling or finding, singly or
in the aggregate, could result in a Material Adverse Effect; "99CENTS
Only Stores" and its related logo is a trademark and service ▇▇▇▇ used
by the Company to identify its retail stores; "Bargain Wholesale" is a
service ▇▇▇▇ used by the Company to identify its wholesale business; and
such trademarks and service marks are protected by registration in the
name of the Company on the principal register in the United States
Patent and Trademark Office and are registered with the State of
California.
(15) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities under this Agreement and the International Purchase
Agreement or the consummation of the transactions contemplated by this
Agreement and the International Purchase Agreement, except such as have
been already obtained or as may be required under the 1933 Act or the 1933
Act Regulations and foreign or state securities or blue sky laws.
(16) POSSESSION OF LICENSES AND PERMITS. The Company possesses such
permits, licenses, approvals, consents and other authorizations
(collectively, "Governmental Licenses") issued by the appropriate federal,
state, local or foreign regulatory agencies or bodies necessary to conduct
the business now operated by it; the Company is in compliance with the
terms and conditions of all such Governmental Licenses, except where the
failure so to comply would not, singly or in the aggregate, have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full
force and effect, except when the invalidity of such Governmental Licenses
or the failure of such Governmental Licenses to be in full force and effect
would not have a Material Adverse Effect; and the Company has not received
any notice of proceedings relating to the revocation or modification of any
such Governmental Licenses which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in a
Material Adverse Effect.
9
(17) TITLE TO PROPERTY. The Company has good and marketable title to
all real property owned by the Company and good title to all other
properties owned by it, in each case, free and clear of all mortgages,
pledges, liens, security interests, claims, restrictions or encumbrances of
any kind except such as (a) are described in the Prospectuses or (b) do
not, singly or in the aggregate, materially affect the value of such
property and do not interfere with the use made and proposed to be made of
such property by the Company; and all of the leases and subleases material
to the business of the Company, and under which the Company holds
properties described in the Prospectuses, are in full force and effect, and
the Company has not received any notice of any material claim of any sort
that has been asserted by anyone adverse to the rights of the Company under
any of the leases or subleases mentioned above, or affecting or questioning
the rights of the Company to the continued possession of the leased or
subleased premises under any such lease or sublease.
(18) COMPLIANCE WITH CUBA ACT. The Company has complied with, and is
and will be in compliance with, the provisions of that certain Florida act
relating to disclosure of doing business with Cuba, codified as Section
517.075 of the Florida statutes, and the rules and regulations thereunder
(collectively, the "Cuba Act") or is exempt therefrom.
(19) INVESTMENT COMPANY ACT. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectuses
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
(20) ENVIRONMENTAL LAWS. The Company has not violated any foreign,
federal, state or local law or regulation relating to the protection of
human health and safety, the environment or hazardous or toxic substances
or wastes, pollutants or
10
contaminants ("Environmental Laws"), that, in each case or in the
aggregate, might result in a Material Adverse Effect; none of the
property leased by the Company is contaminated with any waste or
hazardous substances (except that certain leased locations may contain
asbestos or certain cleaning materials, the presence of which will not
result in a Material Adverse Effect), nor may the Company be deemed an
"owner or operator" of a "facility" or "vessel" that owns, possesses,
transports, generates, discharges or disposes of a "hazardous substance"
as those terms are defined in Section 9601 et seq. (except that the
Company disposes in the ordinary course of its business ordinary
household products that may be classified as or contain "hazardous
substances"; the disposal of such products (A) is in
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material compliance with all applicable laws as of the date hereof and (B)
has not and will not result in a Material Adverse Effect); the Company has
all permits, authorizations and approvals required under any applicable
Environmental Laws and is in compliance with their requirements.
(21) INSURANCE. The Company maintains reasonably adequate insurance
for the conduct of its business in accordance with prudent business
practices (and the insurances maintained by retailers generally) with
reputable third-party insurers; PROVIDED, that the Company does not
maintain coverage for losses associated with earthquakes.
(22) NO REGISTRATION RIGHTS. No holder of any security of the Company
has any right to require inclusion of any such security in the Registration
Statement.
(23) TAXES. The Company has filed or caused to be filed, or has
properly filed extensions for, all foreign, federal, state and local
income, value added and franchise tax returns and has paid all taxes and
assessments shown thereon as due, except for such taxes and assessments as
are disclosed or adequately reserved against and that are being contested
in good faith by appropriate proceedings, promptly instituted and
diligently conducted; all material tax liabilities are adequately provided
for on the books of the Company, and there is no material tax deficiency
that has been or might be asserted against the Company that is not so
provided for; during the time the Company has elected to be treated as an
"S" Corporation under the Internal Revenue Code, as amended from time to
time (the "Code"), and any applicable state law, the Company's election of
such status was validly made, and at all times from August 31, 1965 through
April 30, 1996 the Company qualified continuously for treatment as an S
Corporation under the Code; from August 31, 1995 through April 30, 1996,
the Company never (A) was an ineligible corporation as defined in Section
1361(b)(2) of the Code (I.E., the Company never was (1) a member of an
affiliated group (determined under Code Section 1504 without regard to the
exceptions contained in subsection (b) thereof; (2) a financial institution
to which Code Section 585
12
applies (or would apply but for subsection (c) thereof) or to which
Code Section 593 applies; (3) an insurance company subject to tax under
subchapter L of the Code; (4) a corporation to which an election under
Code Section 936 applies; or (5) a DISC or former DISC); (B) had more
than 35 shareholders; (C) had as a shareholder (other than an estate and
other than domestic trusts described in Code Section 1361(c)(2),
including a domestic qualified Subchapter 5 trust) a person who is not
an individual; (D) had a nonresident alien as a shareholder; or (E) had
more than one class of stock outstanding or authorized or issued debt
convertible into capital stock or debt on which the payment of interest
is contingent on profits of the Company or on the Company's discretion;
from August 31, 1965 through April 30, 1996, there was no agreement to
redeem or purchase stock of the Company at the time of shareholder's
death, divorce, disability or termination of employment (such as
buy-sell agreements among the shareholders or similar option
arrangements) that establishes a purchase price that, at the time the
agreement was entered into, was significantly in excess of or below the
fair market value of the stock of the Company; Form 2553 was properly
completed and filed with the Internal Revenue Service within the 15th
day of the 3rd month of the Company's first taxable year; and such Form
2553 was signed by a duly-authorized signatory of the Company's Form
11205 and all shareholders of the Company (including all spouses of the
shareholders) consented to the Company's S corporation election by duly
executing the Form 2553 filed with the Internal Revenue Service.
(24) NO UNLAWFUL PAYMENTS. Neither the Company nor, to the best
knowledge of the Company and the Existing Shareholders, any employee or
agent of the Company has made any payment of funds of the Company or
received or retained any funds in violation of any law, Rule or regulation
(including, without limitation, the Foreign Corrupt Practices Act) or of a
character required to be disclosed in the Prospectuses; the Company has
not, at any time during the past five years, (1) made any unlawful
contributions to any candidate for any political office, or failed fully to
disclose any contribution in violation of law, or (2) made any unlawful
payment to state, federal or foreign government officer or officers, or
other person charged with similar public or quasi-public duty.
(25) INTERNAL CONTROLS. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv)
the recorded accountability for inventory is compared with the existing
inventory at reasonable intervals and appropriate action is taken with
respect to any differences.
13
(b) REPRESENTATIONS AND WARRANTIES BY THE SELLING SHAREHOLDERS. Each
Selling Shareholder severally represents and warrants to each U.S. Underwriter
as of the date hereof, as of the Closing Time referred to in Section 2(c)
hereof, and as of each Date of Delivery (if any) referred to in Section 2(b)
hereof, and agrees with each U.S. Underwriter, as follows:
(i) ACCURATE DISCLOSURE. To the best knowledge of such Selling
Shareholder, the representations and warranties of the Company contained
in Section 1(a) hereof are true and correct; such Selling Shareholder
has reviewed and is familiar with the Registration Statement and the
Prospectuses and neither the Prospectuses nor any amendments or
supplements thereto includes any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; such Selling Shareholder is not prompted to sell the
Securities to be sold by such Selling Shareholder hereunder by any
information concerning the Company which is not set forth in the
Prospectuses.
(ii) AUTHORIZATION OF AGREEMENTS. Each Selling Shareholder has
the full right, power and authority to enter into this Agreement, the
International Purchase Agreement and a Power of Attorney and Custody
Agreement (the "Power of Attorney and Custody Agreement") and to sell,
transfer and deliver the Securities to be sold by such Selling
Shareholder hereunder. The execution and delivery of this Agreement,
the International Purchase Agreement and the Power of Attorney and
Custody Agreement and the sale and delivery of the Securities to be sold
by such Selling Shareholder and the consummation of the transactions
contemplated in this Agreement and the International Purchase Agreement
and compliance by such Selling Shareholder with its obligations
hereunder have been duly authorized by such Selling Shareholder and do
not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or
default under, or result in the creation or imposition of any tax, lien,
charge or encumbrance upon the Securities to be sold by such Selling
Shareholder or any property or assets of such Selling Shareholder
pursuant to any contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, license, lease or other agreement or instrument
to which such Selling Shareholder is a party or by which such Selling
Shareholder may be bound, or to which any of the property or assets of
such Selling Shareholder is subject, nor will such action result in any
violation of the provisions of the charter or by-laws or other
organizational instrument of such Selling Shareholder, if applicable, or
any applicable treaty, law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over such Selling Shareholder
or any of its properties.
(iii) GOOD AND MARKETABLE TITLE. Such Selling Shareholder has and
will at the Closing Time have good and marketable title to the Securities
to be sold by such Selling
14
Shareholder hereunder, free and clear of any security interest,
mortgage, pledge, lien, charge, claim, equity or encumbrance of any
kind, other than pursuant to this Agreement and the International
Purchase Agreement; and upon delivery of such Securities and payment of
the purchase price therefor as herein contemplated, assuming each such
U.S. Underwriter has no notice of any adverse claim, each of the U.S.
Underwriters will receive good and marketable title to the Securities
purchased by it from such Selling Shareholder, free and clear of any
security interest, mortgage, pledge, lien, charge, claim, equity or
encumbrance of any kind.
(iv) DUE EXECUTION OF POWER OF ATTORNEY AND CUSTODY AGREEMENT.
Such Selling Shareholder has duly executed and delivered, in the form
heretofore furnished to the U.S. Representatives, the Power of Attorney
and Custody Agreement with ________________, as attorney-in-fact (the
"Attorney-in-Fact") and __________________, as custodian (the
"Custodian"); the Custodian is authorized to deliver the Securities to
be sold by such Selling Shareholder hereunder and to accept payment
therefor; and the Attorney-in-Fact is authorized to execute and deliver
this Agreement, the International Purchase Agreement and the certificate
referred to in Section 5(f) or that may be required pursuant to Section
5(m) on behalf of such Selling Shareholder, to sell, assign and transfer
to the U.S. Underwriters the Securities to be sold by such Selling
Shareholder hereunder, to determine the purchase price to be paid by the
U.S. Underwriters to such Selling Shareholder, as provided in Section
2(a) hereof, to authorize the delivery of the Securities to be sold by
such Selling Shareholder hereunder, to accept payment therefor, and
otherwise to act on behalf of such Selling Shareholder in connection
with this Agreement and the International Purchase Agreement.
(v) ABSENCE OF MANIPULATION. Such Selling Shareholder has not
taken, and will not take, directly or indirectly, any action which
is designed to or which has constituted or which might reasonably be
expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of
the Securities.
(vi) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or consent,
approval, authorization, order, registration, qualification or
decree of, any court or governmental authority or agency, domestic or
foreign, is necessary or required for the performance by each Selling
Shareholder of its obligations under this Agreement, the International
Purchase Agreement or the Power of Attorney and Custody Agreement, or
in connection with the sale and delivery of the Securities hereunder or
the consummation of the transactions contemplated by this Agreement and
the International Purchase Agreement, except such as may have previously
been made or obtained or as may be required under the 1933 Act or the
1933 Act Regulations or state securities laws.
15
(vii) RESTRICTION ON SALE OF SECURITIES. During a period of 90 days
from the date of the Prospectuses, such Selling Shareholder will not,
without the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any
share of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or file any registration statement under the
1933 Act with respect to any of the foregoing or (ii) enter into any swap
or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i)
or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply
to the Securities to be sold hereunder or under the International Purchase
Agreement.
(viii) CERTIFICATES SUITABLE FOR TRANSFER. Certificates for all
of the Securities to be sold by such Selling Shareholder pursuant
to this Agreement, in suitable form for transfer by delivery or
accompanied by duly executed instruments of transfer or assignment in
blank with signatures guaranteed, have been placed in custody with the
Custodian with irrevocable conditional instructions to deliver such
Securities to the U.S. Underwriters pursuant to this Agreement.
(ix) NO ASSOCIATION WITH NASD. Neither such Selling Stockholder
nor any of its affiliates directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, or has any other association with (within the meaning of
Article I, Section 1(m) of the By-laws of the National Association of
Securities Dealers, Inc.), any member firm of the National Association
of Securities Dealers, Inc.
(c) OFFICER'S CERTIFICATES. Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to the Global Coordinator, the U.S.
Representatives or to counsel for the U.S. Underwriters shall be deemed a
representation and warranty by the Company to each U.S. Underwriter as to the
matters covered thereby; and any certificate signed by or on behalf of the
Selling Shareholders as such and delivered to the Global Coordinator, the U.S.
Representatives or to counsel for the U.S. Underwriters pursuant to the terms of
this Agreement shall be deemed a representation and warranty by such Selling
Shareholder to each U.S. Underwriter as to the matters covered hereby.
16
SECTION 2. SALE AND DELIVERY TO U.S. UNDERWRITERS; CLOSING.
(a) INITIAL SECURITIES. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein
set forth, the Company and each Selling Shareholder, severally and not
jointly, agrees to sell to each U.S. Underwriter, severally and not jointly,
and each U.S. Underwriter, severally and not jointly, agrees to purchase from
the Company and each Selling Shareholder, at the price per share set forth in
Schedule C, that portion of the number of Initial U.S. Securities set forth
in Schedule B opposite the name of the Company or such Selling Shareholder,
as the case may be, which the number of Initial U.S. Securities set forth in
Schedule A opposite the name of such U.S. Underwriter, plus any additional
number of Initial U.S. Securities which such U.S. Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof bears
to the total number of Initial U.S. Securities, subject, in each case, to
such adjustments among the U.S. Underwriters as the Global Coordinator in its
discretion shall make to eliminate any sales or purchases of fractional
securities.
(b) OPTION SECURITIES. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company and the Selling Shareholders, acting
severally and not jointly, hereby grant an option to the U.S. Underwriters,
severally and not jointly, to purchase up to an additional 420,000 shares of
Common Stock at the price per share set forth in Schedule C, less an amount
per share equal to any dividends or distributions declared by the Company and
payable on the Initial U.S. Securities but not payable on the U.S. Option
Securities. The option hereby granted will expire 30 days after the date
hereof and may be exercised in whole or in part from time to time only for
the purpose of covering over-allotments which may be made in connection with
the offering and distribution of the Initial U.S. Securities upon notice by
the Global Coordinator to the Company and the Selling Shareholders setting
forth the number of U.S. Option Securities as to which the several U.S.
Underwriters are then exercising the option and the time and date of payment
and delivery for such U.S. Option Securities. Any such time and date of
delivery for the U.S. Option Securities (a "Date of Delivery") shall be
determined by the Global Coordinator, but shall not be later than seven full
business days after the exercise of said option, nor in any event prior to
the Closing Time, as hereinafter defined. If the option is exercised as to
all or any portion of the U.S. Option Securities, each of the U.S.
Underwriters, acting severally and not jointly, will purchase that proportion
of the total number of U.S. Option Securities then being purchased which the
number of Initial U.S. Securities set forth in Schedule A opposite the name
of such U.S. Underwriter bears to the total number of Initial U.S.
Securities, subject in each case to such adjustments as the Global
Coordinator in its discretion shall make to eliminate any sales or purchases
of fractional shares.
(c) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of ▇▇▇▇▇▇,
▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, or at such other place as shall be agreed upon by
17
the Global Coordinator and the Company and the Selling Shareholders, at 7:00
A.M. (California time) on the third (fourth, if the pricing occurs after 4:30
P.M. (Eastern time) on any given day) business day after the date hereof
(unless postponed in accordance with the provisions of Section 10), or such
other time not later than ten business days after such date as shall be
agreed upon by the Global Coordinator and the Company and the Selling
Shareholders (such time and date of payment and delivery being herein called
"Closing Time").
In addition, in the event that any or all of the U.S. Option Securities
are purchased by the U.S. Underwriters, payment of the purchase price for,
and delivery of certificates for, such U.S. Option Securities shall be made
at the above-mentioned offices, or at such other place as shall be agreed
upon by the Global Coordinator and the Company and the Selling Shareholders,
on each Date of Delivery as specified in the notice from the Global
Coordinator to the Company and the Selling Shareholders.
Payment shall be made to the Company and the Selling Shareholders by
wire transfer of immediately available funds to a bank account designated by
the Company and the Custodian pursuant to each Selling Shareholder's Power of
Attorney and Custody Agreement, as the case may be, against delivery to the
U.S. Representatives for the respective accounts of the U.S. Underwriters of
certificates for the U.S. Securities to be purchased by them. It is
understood that each U.S. Underwriter has authorized the U.S.
Representatives, for its account, to accept delivery of, receipt for, and
make payment of the purchase price for, the Initial U.S. Securities and the
U.S. Option Securities, if any, which it has agreed to purchase. ▇▇▇▇▇▇▇
▇▇▇▇▇, individually and not as representative of the U.S. Underwriters, may
(but shall not be obligated to) make payment of the purchase price for the
Initial U.S. Securities or the U.S. Option Securities, if any, to be
purchased by any U.S. Underwriter whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such U.S. Underwriter from its obligations
hereunder.
(d) DENOMINATIONS; REGISTRATION. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representatives may
request in writing at least one full business day before the Closing Time or
the relevant Date of Delivery, as the case may be. The certificates for the
Initial U.S. Securities and the U.S. Option Securities, if any, will be made
available for examination and packaging by the U.S. Representatives in The
City of New York not later than 10:00 A.M. (Eastern time) on the business day
prior to the Closing Time or the relevant Date of Delivery, as the case may
be.
18
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with each
U.S. Underwriter as follows:
(a) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS.
The Company, subject to Section 3(b), will comply with the requirements of
Rule 430A or Rule 434, as applicable, and will notify the Global Coordinator
immediately, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement shall become effective, or any
supplement to the Prospectuses or any amended Prospectuses shall have been
filed, (ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission for any amendment to the Registration Statement or
any amendment or supplement to the Prospectuses or for additional
information, and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering or sale in any
jurisdiction, or of the initiation or threatening of any proceedings for any
of such purposes. The Company will promptly effect the filings necessary
pursuant to Rule 424(b) and will take such steps as it deems necessary to
ascertain promptly whether the form of prospectus transmitted for filing
under Rule 424(b) was received for filing by the Commission and, in the event
that it was not, it will promptly file such prospectus. The Company will
make every reasonable effort to prevent the issuance of any stop order and,
if any stop order is issued, to obtain the lifting thereof at the earliest
possible moment.
(b) FILING OF AMENDMENTS. The Company will give the Global Coordinator
notice of its intention to file or prepare any amendment to the Registration
Statement (including any filing under Rule 462(b)), any Term Sheet or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the
Prospectuses, whether pursuant to the 1933 Act, the 1934 Act or otherwise,
will furnish the Global Coordinator with copies of any such documents a
reasonable amount of time prior to such proposed filing or use, as the case
may be, and will not file or use any such document to which the Global
Coordinator or counsel for the U.S. Underwriters shall object.
(c) DELIVERY OF REGISTRATION STATEMENTS. The Company has furnished or
will deliver to the U.S. Representatives and counsel for the U.S.
Underwriters, without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein and documents incorporated or
deemed to be incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the U.S.
Representatives, without charge, a conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without
exhibits) for each of the U.S. Underwriters. The copies of the Registration
Statement and each amendment thereto furnished to the U.S. Underwriters will
be identical to the electronically transmitted copies thereof filed with the
Commission pursuant to ▇▇▇▇▇, except to the extent permitted by Regulation
S-T.
19
(d) DELIVERY OF PROSPECTUSES. The Company has delivered to each U.S.
Underwriter, without charge, as many copies of each preliminary prospectus as
such U.S. Underwriter reasonably requested, and the Company hereby consents
to the use of such copies for purposes permitted by the 1933 Act. The
Company will furnish to each U.S. Underwriter, without charge, during the
period when the U.S. Prospectus is required to be delivered under the 1933
Act or the 1934 Act, such number of copies of the U.S. Prospectus (as amended
or supplemented) as such U.S. Underwriter may reasonably request. The U.S.
Prospectus and any amendments or supplements thereto furnished to the U.S.
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to ▇▇▇▇▇, except to the extent
permitted by Regulation S-T.
(e) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934
Act Regulations so as to permit the completion of the distribution of the
Securities as contemplated in this Agreement, the International Purchase
Agreement and in the Prospectuses. If at any time when a prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the U.S. Underwriters or
for the Company, to amend the Registration Statement or amend or supplement
any Prospectus in order that the Prospectuses will not include any untrue
statements of a material fact or omit to state a material fact necessary in
order to make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or if it
shall be necessary, in the opinion of such counsel, at any such time to amend
the Registration Statement or amend or supplement any Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations, the
Company will promptly prepare and file with the Commission, subject to
Section 3(b), such amendment or supplement as may be necessary to correct
such statement or omission or to make the Registration Statement or the
Prospectuses comply with such requirements, and the Company will furnish to
the U.S. Underwriters such number of copies of such amendment or supplement
as the U.S. Underwriters may reasonably request.
(f) BLUE SKY QUALIFICATIONS. The Company will use its best efforts, in
cooperation with the U.S. Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and
other jurisdictions (domestic or foreign) as the Global Coordinator may
designate and to maintain such qualifications in effect for a period of not
less than one year from the later of the effective date of the Registration
Statement and any Rule 462(b) Registration Statement; provided, however, that
the Company shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject. In each jurisdiction in which the Securities have been
so qualified, the Company will file such statements and reports as may be
required by the laws of such jurisdiction to continue such qualification in
effect for a period of not less than one year from the effective date of the
Registration Statement and any Rule 462(b) Registration Statement.
20
(g) RULE 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the purposes
of, and to provide the benefits contemplated by, the last paragraph of
Section 11(a) of the 1933 Act.
(h) USE OF PROCEEDS. The Company will use the net proceeds received by
it from the sale of the Securities in the manner specified in the
Prospectuses under "Use of Proceeds."
(i) LISTING. The Company will use its best efforts to effect the
listing of the Securities on the New York Stock Exchange.
(j) RESTRICTION ON SALE OF SECURITIES. During a period of 90 days from
the date of the Prospectuses, the Company will not, without the prior written
consent of the Global Coordinator, (i) directly or indirectly, offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of any share of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or file any
registration statement under the 1933 Act with respect to any of the
foregoing or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap
or transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Securities to be sold hereunder
or under the International Purchase Agreement, or (B) any shares of Common
Stock issued or options to purchase Common Stock granted pursuant to existing
employee benefit plans of the Company referred to in the Prospectuses.
(k) REPORTING REQUIREMENTS. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to
the 1934 Act within the time periods required by the 1934 Act and the 1934
Act Regulations.
SECTION 4. PAYMENT OF EXPENSES.
(a) EXPENSES. The Company and the Selling Shareholders will pay or
cause of be paid all expenses incident to the performance of their
obligations under this Agreement, including (i) the preparation, printing and
filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, printing and delivery to the Underwriters of this Agreement, any
Agreement among Underwriters and such other documents as may be required in
connection with the offering, purchase, sale, issuance or delivery
21
of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Underwriters, including any stock or
other transfer taxes and any stamp or other duties payable upon the sale,
issuance or delivery of the Securities to the Underwriters and the transfer
of the Securities between the U.S. Underwriters and the International
Managers, (iv) the fees and disbursements of the Company's counsel,
accountants and other advisors, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(f) hereof,
including filing fees and the reasonable fees and disbursements of counsel
for the Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the
printing and delivery to the Underwriters of copies of each preliminary
prospectus, any Term Sheets and of the Prospectuses and any amendments or
supplements thereto, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto,
(viii) the fees and expenses of any transfer agent or registrar for the
Securities, (ix) the filing fees incident to, and the reasonable fees and
disbursements of counsel to the Underwriters in connection with, the review
by the National Association of Securities Dealers, Inc. (the "NASD") of the
terms of the sale of the Securities and (x) the fees and expenses incurred in
connection with the listing of the Securities on the New York Stock Exchange.
(b) EXPENSES OF SELLING SHAREHOLDERS. The Selling Shareholders,
jointly and severally, will pay all expenses incident to the performance of
their respective obligations under, and the consummation of the transactions
contemplated by this Agreement, including (i) any stamp duties, capital
duties and stock transfer taxes, if any, payable upon the sale of the
Securities to the Underwriters, and the transfer of the Securities between
the U.S. Underwriters and the International Managers pursuant to an agreement
between such Underwriters, and (ii) the fees and disbursements of their
respective counsel and accountants.
(c) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
U.S. Representatives in accordance with the provisions of Section 5, Section
9(a)(i) or Section 11 hereof, the Company and the Selling Shareholders shall
reimburse the U.S. Underwriters for all of their out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the U.S.
Underwriters.
(d) ALLOCATION OF EXPENSES. The provisions of this Section shall not
affect any agreement that the Company and the Selling Shareholders may make
for the sharing of such costs and expenses.
SECTION 5. CONDITIONS OF U.S. UNDERWRITERS' OBLIGATIONS. The
obligations of the several U.S. Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Company and the Selling
Shareholders contained in Section 1 hereof or in certificates of any officer
of the Company or any subsidiary of the Company or on behalf of any Selling
Shareholder delivered pursuant to the provisions hereof, to the performance
by the Company of its covenants and other obligations hereunder, and to the
following further conditions:
22
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the U.S.
Underwriters. A prospectus containing the Rule 430A Information shall have
been filed with the Commission in accordance with Rule 424(b) (or a
post-effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A) or, if
the Company has elected to rely upon Rule 434, a Term Sheet shall have been
filed with the Commission in accordance with Rule 424(b).
(b) OPINION OF COUNSEL FOR COMPANY. At Closing Time, the U.S.
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Troop ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, counsel for the
Company, in form and substance satisfactory to counsel for the U.S.
Underwriters, together with signed or reproduced copies of such letter for
each of the other U.S. Underwriters to the effect set forth in Exhibit A
hereto and to such further effect as counsel to the U.S. Underwriters may
reasonably request.
(c) OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS. At Closing Time,
the U.S. Representatives shall have received the favorable opinion, dated as
of Closing Time, of ________________, counsel for the Selling Shareholders,
in form and substance satisfactory to counsel for the U.S. Underwriters,
together with signed or reproduced copies of such letter for each of the
other U.S. Underwriters to the effect set forth in Exhibit B hereto and to
such further effect as counsel to the U.S. Underwriters may reasonable
request.
(d) OPINION OF COUNSEL FOR U.S. UNDERWRITERS. At Closing Time, the
U.S. Representatives shall have received the favorable opinion, dated as of
Closing Time, of ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel for the U.S.
Underwriters, together with signed or reproduced copies of such letter for
each of the other U.S. Underwriters with respect to the matters set forth in
clauses (i), (ii), (v), (vi) (solely as to preemptive or other similar rights
arising by operation of law or under the charter or by-laws of the Company),
(viii) through (x), inclusive, (xiii), and the penultimate paragraph of
Exhibit A hereto. In giving such opinion such counsel may rely, as to all
matters governed by the laws of jurisdictions other than the law of the State
of New York and the federal law of the United States, upon the opinions of
counsel satisfactory to the U.S. Representatives. Such counsel may also
state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of the
Company and its subsidiaries and certificates of public officials.
(e) OFFICERS' CERTIFICATE. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectuses, any material
23
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course
of business, and the U.S. Representatives shall have received a certificate
of the President or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company, dated as of Closing
Time, to the effect that (i) there has been no such material adverse change,
(ii) the representations and warranties in Section 1(a) hereof are true and
correct with the same force and effect as though expressly made at and as of
Closing Time, (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior
to Closing Time, and (iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or are contemplated by the Commission.
(f) CERTIFICATE OF SELLING SHAREHOLDERS. At Closing Time, the U.S.
Representatives shall have received a certificate of an Attorney-in-Fact on
behalf of each Selling Shareholder, dated as of Closing Time, to the effect
that (i) the representations and warranties of each Selling Shareholder
contained in Section 1(b) hereof are true and correct in all respects with
the same force and effect as though expressly made at and as of Closing Time
and (ii) each Selling Shareholder has complied in all material respects with
all agreements and all conditions on its part to be performed under this
Agreement at or prior to Closing Time.
(g) ACCOUNTANT'S COMFORT LETTER. At the time of the execution of this
Agreement, the U.S. Representatives shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
LLP a letter dated such date, in form and substance satisfactory to the U.S.
Representatives, together with signed or reproduced copies of such letter for
each of the other U.S. Underwriters containing statements and information of
the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectuses.
(h) BRING-DOWN COMFORT LETTER. At Closing Time, the Representatives
shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (g) of this Section, except that the
specified date referred to shall be a date not more than three business days
prior to Closing Time.
(i) APPROVAL OF LISTING. At Closing Time, the Securities shall have
been approved for listing on the New York Stock Exchange, subject only to
official notice of issuance.
(j) NO OBJECTION. The NASD has confirmed that it has not raised any
objection with respect to the fairness and reasonableness of the underwriting
terms and arrangements.
24
(k) LOCK-UP AGREEMENTS. At the date of this Agreement, the U.S.
Representatives shall have received an agreement substantially in the form of
Exhibit C hereto signed by the persons listed on Schedule D hereto.
(l) PURCHASE OF INITIAL INTERNATIONAL SECURITIES. Contemporaneously
with the purchase by the U.S. Underwriters of the Initial U.S. Securities
under this Agreement, the International Managers shall have purchased the
Initial International Securities under the International Purchase Agreement.
(m) CONDITIONS TO PURCHASE OF U.S. OPTION SECURITIES. In the event
that the U.S. Underwriters exercise their option provided in Section 2(b)
hereof to purchase all or any portion of the U.S. Option Securities, the
representations and warranties of the Company and the Selling Shareholders
contained herein and the statements in any certificates furnished by the
Company, any subsidiary of the Company and the Selling Shareholders hereunder
shall be true and correct as of each Date of Delivery and, at the relevant
Date of Delivery, the U.S. Representatives shall have received:
(i) OFFICERS' CERTIFICATE. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company and of the
chief financial or chief accounting officer of the Company confirming that
the certificate delivered at the Closing Time pursuant to Section 5(d)
hereof remains true and correct as of such Date of Delivery.
(ii ) CERTIFICATE OF SELLING SHAREHOLDERS. A certificate, dated
such Date of Delivery, of an Attorney-in-Fact on behalf of each Selling
Shareholder confirming that the certificate delivered at Closing Time
pursuant to Section 5(f) remains true and correct as of such Date of
Delivery.
(iii) OPINION OF COUNSEL FOR COMPANY. The favorable opinion of
Troop ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, counsel for the Company, in form
and substance satisfactory to counsel for the U.S. Underwriters, dated
such Date of Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect as
the opinion required by Section 5(b) hereof.
(iv) OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS. The
favorable opinion of ____________, counsel for the Selling
Shareholders, in form and substance satisfactory to counsel for the U.S.
Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Section 5(c) hereof.
(iv) OPINION OF COUNSEL FOR U.S. UNDERWRITERS. The favorable
opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, counsel for the U.S. Underwriters,
dated such Date of Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect as the
opinion required by Section 5(d) hereof.
25
(v) BRING-DOWN COMFORT LETTER. A letter from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
in form and substance satisfactory to the U.S. Representatives and dated
such Date of Delivery, substantially in the same form and substance as
the letter furnished to the U.S. Representatives pursuant to Section
5(g) hereof, except that the "specified date" in the letter furnished
pursuant to this paragraph shall be a date not more than five days prior
to such Date of Delivery.
(n) ADDITIONAL DOCUMENTS. At Closing Time and at each Date of
Delivery, counsel for the U.S. Underwriters shall have been furnished with
such documents and opinions as they may require for the purpose of enabling
them to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company and the Selling
Shareholders in connection with the issuance and sale of the Securities as
herein contemplated shall be satisfactory in form and substance to the U.S.
Representatives and counsel for the U.S. Underwriters.
(o) TERMINATION OF AGREEMENT. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of U.S.
Option Securities on a Date of Delivery which is after the Closing Time, the
obligations of the several U.S. Underwriters to purchase the relevant Option
Securities, may be terminated by the U.S. Representatives by notice to the
Company at any time at or prior to Closing Time or such Date of Delivery, as
the case may be, and such termination shall be without liability of any
party to any other party except as provided in Section 4 and except that
Sections 1, 6, 7 and 8 shall survive any such termination and remain in full
force and effect.
SECTION 6. INDEMNIFICATION.
(a) INDEMNIFICATION OF U.S. UNDERWRITERS. The Company and the Selling
Shareholders, jointly and severally, agree to indemnify and hold harmless each
U.S. Underwriter and each person, if any, who controls any U.S. Underwriter
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged
26
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out
of any untrue statement or alleged untrue statement of a material fact
included in any preliminary prospectus or the Prospectuses (or any
amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of the
Company and the Selling Shareholders; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by ▇▇▇▇▇▇▇
▇▇▇▇▇), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of
any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with written information
furnished to the Company by any U.S. Underwriter through the U.S.
Representatives expressly for use in the Registration Statement (or any
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary prospectus or the U.S.
Prospectus (or any amendment or supplement thereto).
(b) INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS AND SELLING
SHAREHOLDERS. Each U.S. Underwriter severally agrees to indemnify and
hold harmless the Company, its directors, each of its officers who
signed the Registration Statement, each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act and each Selling Shareholder and each person, if any,
who controls any Selling Shareholder within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act against any and all loss,
liability, claim, damage and expense described in the indemnity
contained in subsection (a) of this Section, as incurred, but only with
respect to untrue statements or omissions, or alleged untrue statements
or omissions, made in the Registration Statement (or any amendment
thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary U.S. prospectus or the
U.S. Prospectus (or any amendment or supplement thereto) in reliance
upon and in conformity with
27
written information furnished to the Company by such U.S. Underwriter
through the U.S. Representatives expressly for use in the Registration
Statement (or any amendment thereto) or such preliminary prospectus or
the U.S. Prospectus (or any amendment or supplement thereto).
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party
shall give notice as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect of
which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any
liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability
which it may have otherwise than on account of this indemnity agreement.
In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by ▇▇▇▇▇▇▇ ▇▇▇▇▇,
and, in the case of parties indemnified pursuant to Section 6(b) above,
counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of
any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also
be counsel to the indemnified party. In no event shall the indemnifying
parties be liable for fees and expenses of more than one counsel (in
addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the
same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under
this Section 6 or Section 7 hereof (whether or not the indemnified
parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release
of each indemnified party from all liability arising out of such
litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to
act by or on behalf of any indemnified party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of
the nature contemplated by Section 6(a)(ii) effected without its written
consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into
and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of
such settlement.
28
(e) OTHER AGREEMENTS WITH RESPECT TO INDEMNIFICATION. The
provisions of this Section shall not affect any agreement among the
Company and the Selling Shareholders with respect to indemnification.
SECTION 7. CONTRIBUTION. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to
hold harmless an indemnified party in respect of any losses,
liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such
indemnified party, as incurred, (i) in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Selling
Shareholders on the one hand and the U.S. Underwriters on the other hand
from the offering of the Securities pursuant to this Agreement or (ii)
if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Selling Shareholders on the one hand and of
the U.S. Underwriters on the other hand in connection with the
statements or omissions which resulted in such losses, liabilities,
claims, damages or expenses, as well as any other relevant equitable
considerations.
The relative benefits received by the Company and the Selling
Shareholders on the one hand and the U.S. Underwriters on the other hand
in connection with the offering of the U.S. Securities pursuant to this
Agreement shall be deemed to be in the same respective proportions as
the total net proceeds from the offering of the U.S. Securities pursuant
to this Agreement (before deducting expenses) received by the Company
and the Selling Shareholders and the total underwriting discount
received by the U.S. Underwriters, in each case as set forth on the
cover of the U.S. Prospectus, or, if Rule 434 is used, the corresponding
location on the Term Sheet, bear to the aggregate initial public
offering price of the U.S. Securities as set forth on such cover.
The relative fault of the Company and the Selling Shareholders on
the one hand and the U.S. Underwriters on the other hand shall be
determined by reference to, among other things, whether any such untrue
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Selling Shareholders or by the U.S. Underwriters and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Selling Shareholders and the U.S. Underwriters
agree that it would not be just and equitable if contribution pursuant
to this Section 7 were determined by pro rata allocation (even if the
U.S. Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by
an indemnified party and referred to above in this Section 7 shall be
deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or
29
defending against any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S.
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the U.S. Securities
underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such U.S. Underwriter has
otherwise been required to pay by reason of any such untrue or alleged
untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
For purposes of this Section 7, each person, if any, who controls a
U.S. Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as
such U.S. Underwriter, and each director of the Company, each officer of
the Company who signed the Registration Statement, and each person, if
any, who controls the Company or any Selling Shareholder within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
shall have the same rights to contribution as the Company or such
Selling Shareholder. The U.S. Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the
number of Initial U.S. Securities set forth opposite their respective
names in Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among
the Company and the Selling Shareholders with respect to contribution.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in
this Agreement or in certificates of officers of the Company or any of
its subsidiaries or the Selling Shareholders submitted pursuant hereto,
shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any U.S. Underwriter or
controlling person, or by or on behalf of the Company or the Selling
Shareholders, and shall survive delivery of the Securities to the U.S.
Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. The U.S. Representatives may terminate
this Agreement, by notice to the Company and the Selling Shareholders,
at any time at or prior to Closing Time (i) if there has been, since the
time of execution of this Agreement or since the respective dates as of
which information is given in the U.S. Prospectus, any material adverse
change in the condition,
30
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business,
or (ii) if there has occurred any material adverse change in the
financial markets in the United States or the international financial
markets, any outbreak of hostilities or escalation thereof or other
calamity or crisis or any change or development involving a prospective
change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in
the judgment of the U.S. Representatives, impracticable to market the
Securities or to enforce contracts for the sale of the Securities, or
(iii) if trading in any securities of the Company has been suspended or
materially limited by the Commission or the New York Stock Exchange, or
if trading generally on the American Stock Exchange or the New York
Stock Exchange or in the Nasdaq National Market has been suspended or
materially limited, or minimum or maximum prices for trading have been
fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental
authority, or (iv) if a banking moratorium has been declared by either
Federal or New York authorities.
(b) LIABILITIES. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any
other party except as provided in Section 4 hereof, and provided further
that Sections 1, 6, 7 and 8 shall survive such termination and remain in
full force and effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE U.S. UNDERWRITERS. If
one or more of the U.S. Underwriters shall fail at Closing Time or a
Date of Delivery to purchase the Securities which it or they are
obligated to purchase under this Agreement (the "Defaulted Securities"),
the U.S. Representatives shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
U.S. Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the U.S.
Representatives shall not have completed such arrangements within such
24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of
the number of U.S. Securities to be purchased on such date, each of the
non-defaulting U.S. Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of U.S. Securities to be purchased on such date, this
Agreement or, with respect to any Date of Delivery which occurs after
the Closing Time, the obligation of the U.S. Underwriters to purchase
and of the Company and
31
the Selling Shareholders to sell the Option Securities to be purchased
and sold on such Date of Delivery shall terminate without liability on
the part of any non-defaulting U.S. Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting U.S. Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery
which is after the Closing Time, which does not result in a termination
of the obligation of the U.S. Underwriters to purchase and the Company
and the Selling Shareholders to sell the relevant U.S. Option
Securities, as the case may be, either (i) the U.S. Representatives or
(ii) the Company and any Selling Shareholder shall have the right to
postpone Closing Time or the relevant Date of Delivery, as the case may
be, for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectuses or in any
other documents or arrangements. As used herein, the term "U.S.
Underwriter" includes any person substituted for a U.S. Underwriter
under this Section 10.
SECTION 11. DEFAULT BY ONE OR MORE OF THE SELLING SHAREHOLDERS OR
THE COMPANY. (a) If a Selling Shareholder shall fail at Closing Time or
at a Date of Delivery to sell and deliver the number of Securities which
such Selling Shareholder or Selling Shareholders are obligated to sell
hereunder, and the remaining Selling Shareholders do not exercise the
right hereby granted to increase, pro rata or otherwise, the number of
Securities to be sold by them hereunder to the total number to be sold
by all Selling Shareholders as set forth in Section B hereto, then the
U.S. Underwriters may, at option of the U.S. Representatives, by notice
from the U.S. Representatives to the Company and the non-defaulting
Selling Shareholders, either (a) terminate this Agreement without any
liability on the fault of any non-defaulting party except that the
provisions of Sections 1, 4, 6, 7 and 8 shall remain in full force and
effect or (b) elect to purchase the Securities which the non-defaulting
Selling Shareholders and the Company have agreed to sell hereunder. No
action taken pursuant to this Section 11 shall relieve any Selling
Shareholder so defaulting from liability, if any, in respect of such
default.
In the event of a default by any Selling Shareholder as referred to
in this Section 11, each of the U.S. Representatives, the Company and
the non-defaulting Selling Shareholders shall have the right to postpone
Closing Time or Date of Delivery for a period not exceeding seven days
in order to effect any required change in the Registration Statement or
Prospectuses or in any other documents or arrangements.
(b) If the Company shall fail at Closing Time or at the Date of
Delivery to sell the number of Securities that it is obligated to sell
hereunder, then this Agreement shall terminate without any liability on
the part of any nondefaulting party; provided, however, that the
provisions of Sections
32
1, 4, 6, 7 and 8 shall remain in full force and effect. No action taken
pursuant to this Section shall relieve the Company from liability, if
any, in respect of such default.
SECTION 12. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly
given if mailed or transmitted by any standard form of _______________
telecommunication. Notices to the U.S. Underwriters shall be directed
to the U.S. Representatives at North Tower, World Financial Center, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇; and notices to
the Company shall be directed to it at __________________, attention of
_______________ ; and notices to the Selling Shareholders shall be directed to
________________________, attention of ___________________________.
SECTION 13. PARTIES. This Agreement shall each inure to the
benefit of and be binding upon the U.S. Underwriters, the Company and
the Selling Shareholders and their respective successors. Nothing
expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation, other than the U.S.
Underwriters, the Company and the Selling Shareholders and their
respective successors and the controlling persons and officers and
directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be
for the sole and exclusive benefit of the U.S. Underwriters, the Company
and the Selling Shareholders and their respective successors, and said
controlling persons and officers and directors and their heirs and legal
representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from any U.S. Underwriter shall
be deemed to be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY
REFER TO NEW YORK CITY TIME.
SECTION 15. EFFECT OF HEADINGS. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not
affect the construction hereof.
33
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the
Attorney-in-Fact for the Selling Shareholders a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a
binding agreement between the U.S. Underwriters, the Company and the
Selling Shareholders in accordance with its terms.
Very truly yours,
99 CENTS ONLY STORES
By:
------------------------------------
Title:
By:
------------------------------------
As Attorney-in-Fact acting on behalf
of the Selling Shareholders named in
Schedule B hereto
CONFIRMED AND ACCEPTED,
as of the date first above written:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇▇▇▇▇▇▇, SACHS & CO.
▇▇▇▇▇ ▇▇▇▇▇▇ INC.
EVEREN SECURITIES, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇ INC.
By: ▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
By
-------------------------------
Authorized Signatory
For themselves and as U.S. Representatives of the
other U.S. Underwriters named in Schedule A hereto.
34
SCHEDULE A
Number of
Initial U.S.
Name of U.S. Underwriter Securities
------------------------ ------------
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated.....................................
▇▇▇▇▇▇▇, Sachs & Co. ...................................
▇▇▇▇▇ ▇▇▇▇▇▇ Inc. ......................................
EVEREN Securities, Inc. ................................
▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc. .....................................
------------
Total................................................... 2,800,000
------------
------------
Sch A - 1
SCHEDULE B
Number of Initial Maximum Number of Option
Securities to be Sold Securities to Be Sold
--------------------- -------------------------
Total ........................
Sch B - 1
SCHEDULE C
99CENTS ONLY STORES
2,800,000 Shares of Common Stock
(No Par Value Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $_____________________.
2. The purchase price per share for the U.S. Securities to be paid by
the several U.S. Underwriters shall be $__________________, being an amount
equal to the initial public offering price set forth above less $____________
per share; provided that the purchase price per share for any U.S. Option
Securities purchased upon the exercise of the over-allotment option described
in Section 2(b) shall be reduced by an amount per share equal to any
dividends or distributions declared by the Company and payable on the Initial
U.S. Securities but not payable on the U.S. Option Securities.
Sch C - 1
SCHEDULE D
List of persons and entities
subject to lock-up
Sch D - 1
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of California.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under the U.S.
Purchase Agreement and the International Purchase Agreement.
(iii) The Company is duly qualified as a foreign corporation to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify
or to be in good standing would not result in a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectuses in the column entitled "Actual"
under the caption "Capitalization" (except for subsequent issuances, if any,
pursuant to the U.S. Purchase Agreement and the International Purchase
Agreement or pursuant to employee benefit plans referred to in the
Prospectuses; the shares of issued and outstanding capital stock of the
Company, including the Securities to be purchased by the U.S. Underwriters
and the International Managers from the Selling Shareholders, have been duly
authorized and validly issued and are fully paid and non-assessable; and
none of the outstanding shares of capital stock of the Company was issued in
violation of the preemptive or other similar rights of any securityholder of
the Company.
(v) The Securities to be purchased by the U.S. Underwriters and the
International Managers from the Company have been duly authorized for
issuance and sale to the Underwriters pursuant to the U.S. Purchase Agreement
and the International Purchase Agreement, respectively, and, when issued and
delivered by the Company pursuant to the U.S. Purchase Agreement and the
International Purchase Agreement, respectively, against payment of the
consideration set forth in the U.S. Purchase Agreement and the International
Purchase Agreement, will be validly issued and fully paid and non-assessable
and no holder of the Securities is or will be subject to personal liability
by reason of being such a holder.
A-1
(vi) The issuance and sale of the Securities by the Company and the
sale of the Securities by the Selling Shareholders is not subject to the
preemptive or other similar rights of any securityholder of the Company.
(vii) To the best of our knowledge, the Company does not have any
subsidiaries.
(viii) The U.S. Purchase Agreement and the International Purchase
Agreement have been duly authorized, executed and delivered by the Company.
(ix) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required
filing of the Prospectuses pursuant to Rule 424(b) has been made in the
manner and within the time period required by Rule 424(b); and, to the best
of our knowledge, no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement has been
issued under the 1933 Act and no proceedings for that purpose have been
instituted or are pending or threatened by the Commission.
(x) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectuses, excluding the documents incorporated by
reference therein, and each amendment or supplement to the Registration
Statement and the Prospectuses, excluding the documents incorporated by
reference therein, as of their respective effective or issue dates (other
than the financial statements and supporting schedules included therein or
omitted therefrom, as to which we need express no opinion) complied as to
form in all material respects with the requirements of the 1933 Act and the
1933 Act Regulations.
(xi) The documents incorporated by reference in the Prospectuses (other
than the financial statements and supporting schedules included therein or
omitted therefrom, as to which we need express no opinion), when they were
filed with the Commission complied as to form in all material respects with
the requirements of the 1933 Act or the 1934 Act and the rules and
regulations of the Commission thereunder.
(xiii) The form of certificate used to evidence the Common Stock
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the charter and by-laws of the Company
and the requirements of the New York Stock Exchange.
(xiv) To the best of our knowledge, there is not pending or threatened
any action, suit, proceeding, inquiry or investigation, to which the Company
or any subsidiary is a party, or to which the property of the Company or any
subsidiary is subject, before or brought by any court or governmental agency
or body, domestic or foreign, which might reasonably be expected to result in
a Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in the
A-2
U.S. Purchase Agreement and International Purchase Agreement or the
performance by the Company of its obligations thereunder.
(xv) The information in the Prospectuses under "Description of Capital
Stock," "Shares Eligible for Future Sale" and "Certain Federal Income Tax
Considerations" and in the Registration Statement under Item 15, to the
extent that it constitutes matters of law, summaries of legal matters, the
Company's charter and bylaws or legal proceedings, or legal conclusions, has
been reviewed by us and is correct in all material respects.
(xvi) To the best of our knowledge, there are no statutes or
regulations that are required to be described in the Prospectuses that are
not described as required.
(xvii) All descriptions in the Prospectuses of contracts and other
documents to which the Company or its subsidiaries are a party are accurate
in all material respects; to the best of our knowledge, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases
or other instruments required to be described or referred to in the
Registration Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed or incorporated by reference as
exhibits thereto, and the descriptions thereof or references thereto are
correct in all material respects.
(xviii) To the best of our knowledge, the Company is not in violation
of its charter or by-laws and no default by the Company exists in the due
performance or observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other agreement or instrument that is described or referred to
in the Registration Statement or the Prospectuses or filed or incorporated by
reference as an exhibit to the Registration Statement.
(xix) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and
the 1933 Act Regulations, which have been obtained, or as may be required
under the securities or blue sky laws of the various states, as to which we
need express no opinion) is necessary or required in connection with the due
authorization, execution and delivery of the U.S. Purchase Agreement and the
International Purchase Agreement or for the offering, issuance, sale or
delivery of the Securities.
(xx) The execution, delivery and performance of the U.S. Purchase
Agreement and the International Purchase Agreement and the consummation of
the transactions contemplated in the U.S. Purchase Agreement, the
International Purchase Agreement and in the Registration Statement (including
the issuance and sale of the Securities, and the use of the proceeds from the
sale of the Securities as described in the Prospectuses under the caption
"Use Of Proceeds") and compliance
A-3
by the Company with its obligations under the U.S. Purchase Agreement and the
International Purchase Agreement do not and will not, whether with or without
the giving of notice or lapse of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined in Section 1(a)(xi) of
the Purchase Agreements) under or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to any contract, indenture, mortgage, deed of trust, loan
or credit agreement, note, lease or any other agreement or instrument, known
to us, to which the Company or any subsidiary is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company or any subsidiary is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not have a Material
Adverse Effect), nor will such action result in any violation of the
provisions of the charter or by-laws of the Company or any subsidiary, or any
applicable law, statute, rule, regulation, judgment, order, writ or decree,
known to us, of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any subsidiary or any of
their respective properties, assets or operations.
(xxi) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
1940 Act.
Nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included or incorporated by
reference therein or omitted therefrom, as to which we need make no
statement), at the time such Registration Statement or any such amendment
became effective, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectuses or any
amendment or supplement thereto (except for financial statements and
schedules and other financial data included or incorporated by reference
therein or omitted therefrom, as to which we need make no statement), at the
time the Prospectuses were issued, at the time any such amended or
supplemented prospectus was issued or at the Closing Time, included or
includes an untrue statement of a material fact or omitted or omits to state
a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely, as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials.
Such opinion shall not state that it is to be governed or qualified by, or
that it is otherwise subject to, any treatise, written policy or other
document relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991).
A-4
Exhibit B
FORM OF OPINION OF COUNSEL FOR THE SELLING SHAREHOLDERS
TO BE DELIVERED PURSUANT TO SECTION 5(c)
(i) No filing with, or consent, approval, authorization, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign, (other than the issuance of the
order of the Commission declaring the Registration Statement effective and
such authorizations, approvals or consents as may be necessary under state
securities laws, as to which we need express no opinion) is necessary or
required to be obtained by the Selling Shareholders for the performance by
each Selling Shareholder of its obligations under the U.S. Purchase
Agreement, the International Purchase Agreement or in the Power of Attorney
and Custody Agreement, or in connection with the offer, sale or delivery of
the Securities.
(ii) Each Power of Attorney and Custody Agreement has been duly
executed and delivered by the respective Selling Shareholders named therein
and constitutes the legal, valid and binding agreement of such Selling
Shareholder.
(iii) The U.S. Purchase Agreement and the International Purchase
Agreement have been duly authorized, executed and delivered by or on behalf
of each Selling Shareholder.
(iv) Each Attorney-in-Fact has been duly authorized by the Selling
Shareholders to deliver the Securities on behalf of the Selling Shareholders
in accordance with the terms of the U.S. Purchase Agreement and the
International Purchase Agreement.
(v) The execution, delivery and performance of the U.S. Purchase
Agreement, the International Purchase Agreement and the Power of Attorney and
Custody Agreement and the sale and delivery of the Securities and the
consummation of the transactions contemplated in the U.S. Purchase Agreement
and the International Purchase Agreement and in the Registration Statement
and compliance by the Selling Shareholders with their obligations under the
U.S. Purchase Agreement and the International Purchase Agreement have been
duly authorized by all necessary action on the part of the Selling
Shareholders and do
B-1
not and will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default under or
result in the creation or imposition of any tax, lien, charge or encumbrance
upon the Securities or any property or assets of the Selling Shareholders
pursuant to, any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, license, lease or other instrument or agreement to which any
Selling Shareholder is a party or by which they may be bound, or to which any
of the property or assets of the Selling Shareholders may be subject nor will
such action result in any violation of the provisions of the charter or
by-laws of the Selling Shareholders, if applicable, or any law,
administrative regulation, judgment or order of any governmental agency or
body or any administrative or court decree having jurisdiction over such
Selling Shareholder or any of its properties.
(vi) To the best of our knowledge, each Selling Shareholder has valid
and marketable title to the Securities to be sold by such Selling Shareholder
pursuant to the U.S. Purchase Agreement and the International Purchase
Agreement, free and clear of any pledge, lien, security interest, charge,
claim, equity or encumbrance of any kind, and has full right, power and
authority to sell, transfer and deliver such Securities pursuant to the U.S.
Purchase Agreement and the International Purchase Agreement. By delivery of
a certificate or certificates therefor such Selling Shareholder will transfer
to the U.S. Underwriters and the International Managers who have purchased
such Securities pursuant to the U.S. Purchase Agreement and the International
Purchase Agreement, respectively, (without notice of any defect in the title
of such Selling Shareholder and who are otherwise bona fide purchasers for
purposes of the Uniform Commercial Code) valid and marketable title to such
Securities, free and clear of any pledge, lien, security interest, charge,
claim, equity or encumbrance of any kind.
Nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information and Rule 434 Information (if applicable), (except for financial
statements and schedules and other financial data included or incorporated
by reference therein or omitted therefrom, as to which we need make no
statement), at the time such Registration Statement or any such amendment
became effective, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that the Prospectuses or any
amendment or supplement thereto (except for financial statements and
schedules and other financial data included or incorporated by reference
therein or omitted therefrom, as to which we need
B-2
make no statement), at the time the Prospectuses were issued, at the time any
such amended or supplemented prospectuses were issued or at the Closing Time,
included or include an untrue statement of a material fact or omitted or omit
to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
B-3
[FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER STOCKHOLDERS PURSUANT TO
SECTION 5(K)]
Exhibit C
_____________________________________ , 1998
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated,
▇▇▇▇▇▇▇, SACHS & CO.
▇▇▇▇▇ ▇▇▇▇▇▇ INC.
EVEREN SECURITIES, INC.
▇▇▇▇▇ ▇▇▇▇▇▇▇ INC.
as U.S. Representatives of the several
U.S. Underwriters to be named in the
within-mentioned U.S. Purchase Agreement
▇/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Re: PROPOSED PUBLIC OFFERING BY 99CENTS ONLY STORES
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director] of 99
Cents Only Stores, a California corporation (the "Company"), understands that
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
("▇▇▇▇▇▇▇ ▇▇▇▇▇"), ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., ▇▇▇▇▇ ▇▇▇▇▇▇ Inc., EVEREN
Securities, Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇▇ Inc. propose to enter into a U.S. Purchase
Agreement (the "U.S. Purchase Agreement") with the Company and the Selling
Shareholders providing for the public offering of shares (the "Securities")
of the Company's common stock, no par value per share (the "Common Stock").
In recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder [and an officer and/or director] of the Company,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the undersigned agrees with each underwriter
to be named in the U.S. Purchase Agreement that, during a period of 90 days
from the date of the U.S. Purchase Agreement, the undersigned will not,
without the prior written consent of ▇▇▇▇▇▇▇ ▇▇▇▇▇, directly or indirectly,
(i)
C-1
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant for the sale of, or otherwise dispose of or transfer any shares of
the Company's Common Stock or any securities convertible into or exchangeable
or exercisable for Common Stock, whether now owned or hereafter acquired by
the undersigned or with respect to which the undersigned has or hereafter
acquires the power of disposition, or file any registration statement under
the Securities Act of 1933, as amended, with respect to any of the foregoing
or (ii) enter into any swap or any other agreement or any transaction that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of the Common Stock, whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities,
in cash or otherwise.
Very truly yours,
Signature: __________________________
Print Name: __________________________
C-2