STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is made and entered into effective as of
January 1, 1995 (the "Effective Date"), by and among KRAZY COLORS, INC., a
Nevada corporation ("Krazy Colors"), JAY H. LUSTIG ("Lustig"), GLEN MILLER
("Miller"), LINDA REINHART ("Reinhart") (Lustig, Miller and Reinhart are
collectively referred to as the "Shareholders"), and NBI, INC., a Delaware
corporation ("NBI").
A. The Shareholders are the sole shareholders of Krazy Colors and
subject to the terms of this Agreement desire to sell eighty percent (80%) of
their stock in Krazy Colors on a pro rata basis to NBI.
B. NBI desires to purchase eighty percent (80%) of the issued and
outstanding stock of Krazy Colors from the Shareholders subject to the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I. DEFINITIONS
SECTION 1.1 Definitions. As used in this Agreement, the following
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terms shall have the following meanings:
"Affiliate" of a Person means a Person that directly or indirectly,
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through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned Person.
"Agreement" means this Stock Purchase Agreement, either as originally
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executed or as it may from time to time be supplemented, modified, or amended.
"Claim Notice" has the meaning specified in Section 7.5(a).
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"Closing" means the consummation of the transactions contemplated by
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this Agreement, which shall take place at the offices of Ireland, Stapleton,
Pryor & Pascoe, P.C., 1675 Broadway, Suite 2600, Denver, Colorado 80202, on
February 3, 1995, at 2:00 p.m., or such other place, date and time as may be
agreed upon by the parties.
"Closing Date" means the date on which the Closing shall occur.
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"Competitive market" means the sale of children's products such as
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those sold by Krazy Colors in the geographic markets in which Krazy Colors is
actively selling such products now or at any time during the periods specified
in Section 5.1 hereof.
"Employment Agreement" means the Employment Agreement between Krazy
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Colors and Miller in the form attached as Exhibit A.
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"Gross Profit" means (a) gross revenues from all sources less any
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returns and allowances; minus (b) all direct costs related to products shipped
and included in revenue, sales commissions, and all manufacturing operating
costs, other than those capitalized and included in ending inventory, including
all material costs, manufacturing labor costs (including Miller's salary),
freight, warehouse rent, insurance, utilities, depreciation, fringe and
expenses, and any other operating expenses associated with the manufacturing
operation.
"Indemnitee" has the meaning specified in Section 7.2.
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"Krazy Colors Common Stock" means the common stock, no par value per
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share, of Krazy Colors.
"Laws" means, collectively, all federal, state and local statutes,
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ordinances and codes, all rules and regulations issued by any governmental
agency pursuant to any of the foregoing, and all decisions, judgments, orders or
decrees of a court of applicable jurisdiction.
"Liabilities" means any and all debts, liabilities and obligations of
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a Person, whether accrued or fixed, absolute or contingent, mature or unmatured
or determined or determinable, including, without limitation, those arising
under any Laws or orders by a governmental agency and those arising under any
contract, agreement, commitment or undertaking.
"Long-Term Payout" means the payment by Krazy Colors to the
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Shareholders, in proportion to their ownership of the Krazy Colors Common Stock
after the Closing, of a percentage of the Gross Profit, based on the following
rates for each calendar year:
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Annual Gross
Profit ("GP") Percentage Payout
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Up to $150,000 0% of GP
greater than $150,001 up to $300,000 20% of GP above $150,000
greater than $300,001 up to $450,000 25% of GP above $150,000
$450,001 and above 30% of GP above $150,000
"Loss" of a Person means any and all Liabilities, losses, damages,
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claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, legal costs and expenses) actually suffered or
incurred by such Person.
"NBI Warrants" means the warrants issued by NBI to the Shareholders as
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part of the Purchase Price in the form attached hereto as Exhibit B, for a total
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of 1,700,000 shares of the common stock of NBI granted to the Shareholders in
proportion to the number of shares of Krazy Colors Common Stock they are selling
to NBI: Lustig will receive a warrant for the purchase of 935,000 shares of the
stock of NBI; Miller 680,000 shares; and, Reinhart 85,000 shares.
"Person" means a natural person, legal entity or other entity,
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including without limitation, a corporation, subsidiary, limited liability
company, trust, partnership, company, business, joint venture, Governmental
Agency, committee or other association.
"Pre-Tax Cash Flow" means, for purposes of this Agreement, net income
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before income taxes, increased by depreciation and amortization. It is
understood and agreed that after the Closing, net income will reflect reasonable
allocations from NBI for common expenses, general and administrative support and
intercompany interest at the stated rate. The term reasonable in this context
shall mean paying no more than Krazy Colors would have had to pay if it were an
independent company, subcontracting these services out in a competitive
environment. Krazy Colors is in no way to be impacted by non-Krazy Colors
related expenses. Reasonable in this context may also be as determined by the
board of directors of Krazy Colors.
"Purchase Price" means the $288,000 to be paid by NBI to the
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Shareholders for the Purchased Stock.
"Purchased Stock" has the meaning specified in Section 2.1 of this
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Agreement.
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"Shareholder Agreement" means the agreement among Krazy Colors,
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Shareholders and NBI in the form attached as Exhibit C.
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SECTION 1.2 Schedules and Exhibits. All Schedules and Exhibits to
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this Agreement, either as originally existing or as the same may from time to
time be supplemented, modified, or amended, are incorporated in this Agreement
by this reference.
ARTICLE II. PURCHASE AND SALE OF STOCK; CLOSING; EFFECTIVE DATE
SECTION 2.1 Purchase and Sale. Subject to and in accordance with the
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terms and conditions of this Agreement, at the Closing, the Shareholders shall,
in consideration for the Purchase Price, sell, transfer and assign to NBI, and
NBI will purchase from the Shareholders, eighty percent (80%) of all of the
issued and outstanding Krazy Colors Common Stock, free and clear of any
encumbrances as follows: 15,400 shares from Lustig, 11,200 shares from Miller
and 1,400 shares from Reinhart (the "Purchased Stock"). The Shareholders shall
deliver to NBI stock certificates representing the Purchased Stock, accompanied
by all necessary stock powers duly executed, in form acceptable to NBI and as
required for transfer on the books of Krazy Colors.
SECTION 2.2 Closing.
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(a) At the Closing, the Shareholders shall deliver to NBI: (i)
all such documents and instruments, in form and substance reasonably
satisfactory to NBI and its counsel, as may be necessary or appropriate to sell,
transfer, assign and convey to, and to vest in, NBI good and marketable title to
the Purchased Stock, free and clear of any encumbrance; (ii) the certificate
referred to in Section 6.1(a); (iii) certified resolutions of the board of
directors of Krazy Colors approving the transactions contemplated by this
Agreement; (iv) a receipt for the Purchase Price and the NBI Warrants; (v)
executed originals of the Employment Agreement; and (vi) such other documents as
shall be required by this Agreement or as NBI shall reasonably request.
(b) At the Closing, NBI shall deliver to the Shareholders: (i) the
Purchase Price and the NBI Warrants, (ii) the certificate referred to in Section
6.2(a), and (iii) such other documents as shall be required by this Agreement
or as the Shareholders shall reasonably request.
SECTION 2.3 Effective Date. The parties agree that the purchase and
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sale of the Purchased Stock contemplated hereunder shall be deemed to have
occurred at 12:01 a.m. on the Effective Date. Notwithstanding the Effective
Date, (i) the
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parties may terminate this Agreement as provided in Section 8.1 at
any time prior to Closing, and (ii) the indemnification obligations of the
Shareholders shall include the time period between the Effective Date and the
Closing Date, as provided in Article 7 hereof.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF KRAZY COLORS
AND THE SHAREHOLDERS
Each of Krazy Colors, Lustig, Miller and Reinhart, jointly and
severally, represent and warrant to NBI as of the date of this Agreement and as
of the Closing that:
SECTION 3.1 Corporate Existence, Qualification and Power. Krazy
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Colors is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada, and has all requisite corporate power and
authority to own, lease and operate its properties and carry on its business as
now conducted. Krazy Colors is licensed or qualified as a foreign corporation
in all jurisdictions in which such licensing or qualification is required.
Krazy Colors has no subsidiaries nor any interest or investment in any
partnership, joint venture or corporation.
SECTION 3.2 Authority Relevant to this Agreement. Krazy Colors has
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all the necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations and to consummate the transactions
contemplated hereunder. The execution, delivery and performance of this
Agreement by Krazy Colors and the Shareholders have been duly and validly
authorized by all necessary action. No other action on the part of the
Shareholders and no other corporate proceedings on the part of Krazy Colors are
necessary to authorize this Agreement or to consummate the transactions
contemplated by this Agreement. This Agreement has been duly and validly
executed and delivered by the Shareholders and Krazy Colors and, assuming the
due authorization, execution and delivery hereof by NBI, constitutes the legal,
valid and binding obligation of Krazy Colors and the Shareholders enforceable
against each of them in accordance with its terms (except in each such case as
enforceability may be limited by bankruptcy, insolvency, reorganization and
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and to the extent that the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought).
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SECTION 3.3 No Conflict; Required Filings and Consents.
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(a) The execution and delivery of this Agreement by Krazy Colors
and the Shareholders do not, and the performance of this Agreement will not, (i)
conflict with or violate the certificate of incorporation or bylaws of Krazy
Colors, (ii) conflict with or violate any Laws or any order, award, judgment or
decree of any governmental agency applicable to the Shareholders or Krazy Colors
or by which either of their respective properties are bound or affected, or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation, or
result in the creation of an encumbrance on any of the properties or assets of
Krazy Colors or the Shareholders pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, insurance policy or
other instrument or obligation to which Krazy Colors or the Shareholders is a
party, or by which Krazy Colors or the Shareholders or their respective
properties are bound or affected.
(b) the execution and delivery of this Agreement by Krazy Colors
and the Shareholders do not and the performance of this Agreement by Krazy
Colors and the Shareholders will not require any consent, approval,
authorization or filing with or notification to any governmental agency or
other party except as listed on Schedule 3.3.
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SECTION 3.4 Compliance with Laws. Krazy Colors's business is not in
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conflict with nor is Krazy Colors in violation of any Laws applicable to Krazy
Colors or by which Krazy Colors or any of its properties are bound or affected.
SECTION 3.5 Krazy Colors Capitalization. The authorized capital
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stock of Krazy Colors consists of 1,000,000 shares of its no par value common
stock. Of the 1,000,000 authorized shares of Krazy Colors Common Stock, 19,250,
14,000 and 1,750 shares are issued and outstanding and owned by Lustig, Miller
and Reinhart, respectively, free and clear of all encumbrances. There are no
outstanding subscriptions, contracts, conversion privileges, options, warrants,
calls or other rights obligating Krazy Colors to issue, sell or otherwise
dispose of or to purchase, redeem or otherwise acquire any shares of its capital
stock, and there are no agreements relating to the Krazy Colors Common Stock.
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SECTION 3.6 Title to Property. Krazy Colors has good and marketable
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title to the real properties, tangible and intangible personal properties, and
other assets necessary to the operation of its business, other than as disclosed
on Schedule 3.6. Such properties and assets are not subject to any material
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liens, mortgages, pledges, encumbrances or charges of any kind except liens for
current taxes and assessments not delinquent. All leases by which Krazy Colors
leases real or personal property are in good standing, are valid and effective
in accordance with their respective terms, and Krazy Colors enjoys quiet
enjoyment under all such leases. All property owned or used by Krazy Colors is
in good condition and repair.
SECTION 3.7 Material Contracts and Commitments. Krazy Colors has no
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material Contracts, other than this Agreement and those reflected in Schedule
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3.7.
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SECTION 3.8 Outstanding Indebtedness. As of the Closing Date, Krazy
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Colors does not have, and has no expectation or intention of incurring, any
material Liabilities, except for debt to NBI.
SECTION 3.9 Tax Returns. Krazy Colors has filed, or caused to be
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filed with the appropriate federal, state and local agencies, all tax returns
and tax reports required by law to be filed by Krazy Colors. All income,
profits, franchise, sales, use, ownership, occupation, property, excise and any
other taxes due have been fully paid (except as set forth on the Financial
Statements) and there exist no liens, nor are Krazy Colors or the Shareholders
aware of any facts which could reasonably be anticipated to result in any lien
for unpaid or delinquent taxes.
SECTION 3.10 Financial Statements. Krazy Colors has furnished to NBI
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unaudited financial statements at and for the 10-month period ending on December
31, 1994, and detail of accounts receivable and inventory as of December 31,
1994 (collectively, the "Financial Statements"). Such Financial Statements
present fairly the properties, assets and financial position of Krazy Colors as
of such dates and the results of its operations for the periods then ended and
were prepared in conformity with generally accepted accounting principles
applied on a consistent basis. Since such dates, (a) there has been no event
that could have a material adverse effect on Krazy Colors and (b) Krazy Colors
has not entered into any transactions other than in the ordinary course of
business.
SECTION 3.11 Litigation. There is no pending or to the best
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knowledge of Krazy Colors and the Shareholders, threatened, litigation,
arbitration or governmental investigation or legal, administrative or
regulatory proceeding against Krazy Colors which could affect Krazy Colors's
ability to perform this
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Agreement or which relate to any of the assets of Krazy Colors. There are no
material citations, fines or penalties relating to Krazy Colors heretofore
asserted against Krazy Colors under any federal, state or local law which remain
unpaid or which otherwise bind Krazy Colors or any of its assets.
SECTION 3.12 Agreements Between Shareholders. There exist no
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agreements between any stockholder and Krazy Colors, or between any of the
shareholders of Krazy Colors, relating to Krazy Colors or its capital stock,
except for the Shareholder Agreement and this Agreement.
SECTION 3.13 Brokers. No broker, finder or investment banker is
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entitled to any brokerage, finder's or other fee or commission in connection
with the transactions hereunder based upon arrangements made by or on behalf of
Krazy Colors.
SECTION 3.14 Labor Agreements, Employee Benefit Plans, and Employment
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Agreements. Krazy Colors is not (i) a party to any union, collective bargaining
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or similar agreement, (ii) providing or obligated to provide any profit-sharing,
deferred compensation, bonus, savings, stock option, stock purchase, retainer,
consulting, or incentive plan or agreement, (iii) providing or obligated to
provide for "fringe benefits" to employees, including but not limited to
vacation, sick leave, pension, retirement, welfare, medical, hospitalization,
life insurance and other insurance plans, and related benefits, (iv) providing
or obligated to provide any employee perquisites (e.g., club membership dues,
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rental cars, etc.) or (v) a party to any written employment agreement not
terminable upon notice without penalty or severance payment.
SECTION 3.15 Full Disclosure. Without limiting the specific language
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of any other representation or warranty herein, all information furnished by the
Shareholders and Krazy Colors to NBI in connection with this Agreement, in the
Schedules attached hereto or otherwise by authorized officers, employees or
representatives of Krazy Colors is, and at the Closing will be, accurate and
complete in all material respects, does, and at the Closing will, include all
material facts required to be stated therein and does not, and at the Closing
will not, contain any untrue statement of material fact or omit any material
fact necessary to make the statements therein not misleading.
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF NBI
NBI represents and warrants to Krazy Colors that:
SECTION 4.1 Corporate Organization. NBI is a corporation duly
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organized, validly existing, and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own, lease and
operate its properties and carry on its business as now conducted.
SECTION 4.2 Authority Relative to This Agreement. NBI has all
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necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations and to consummate the transactions contemplated
hereunder. The execution, delivery and performance of this Agreement by NBI
have been duly and validly authorized by all necessary corporate action of NBI
and no other corporate proceedings on the part of NBI are necessary to authorize
this Agreement or to consummate the transactions contemplated by this Agreement.
This Agreement has been duly and validly executed and delivered by NBI and,
assuming the due authorization, execution and delivery by the Shareholders and
Krazy Colors, constitutes the legal, valid and binding obligation of NBI
enforceable against NBI in accordance with its terms (except in each such case
as enforceability may be limited by bankruptcy, insolvency, reorganization and
other similar laws now of hereafter in effect relating to or affecting
creditors' rights generally and to the extent that the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought).
SECTION 4.3 No Conflict; Required Filings and Consents.
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(a) The execution and delivery of this Agreement by NBI do not and
the performance of this Agreement will not, (i) conflict with or violate the
articles of incorporation or bylaws of NBI, or (ii) conflict with or violate any
Laws or any order, award, judgment or decree of any governmental agency
applicable to NBI or by which its properties are bound or affected.
(b) The execution and delivery of this Agreement by NBI do not and
the performance of this Agreement by NBI will not require any consent, approval,
authorization or filing with or notification to any governmental agency or other
party.
SECTION 4.4 Brokers. No broker, finder or investment banker is
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entitled to any brokerage, finder's or other fee or
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commission in connection with the transactions hereunder based upon
arrangements made by or on behalf of NBI.
SECTION 4.5 Investment Representation. NBI is acquiring the
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Purchased Stock for its own account and not with the view to, or for resale in
connection with any distribution thereof. NBI understands that the Purchased
Stock has not been registered under the registration provisions of the
Securities Act of 1933 or applicable state law.
ARTICLE V. ADDITIONAL AGREEMENTS
SECTION 5.1 Non-Competition Covenant.
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(a) Commencing on the Closing Date and continuing for the later to
occur of: (i) two (2) years after the termination of the Employment Agreement
or (ii) five (5) years after the Closing Date, none of the Shareholders will,
directly or indirectly, whether as an employer, shareholder, consultant,
employee, partner, licensor or otherwise:
(i) become or be interested in, undertake or join any planning
for or organization of, engage in activities or render services (including
consulting) for, sell, distribute, promote or transport to end users any
competitive products for or be associated with, any other person, corporation,
firm, partnership or other entity whatsoever to the extent such activities or
services involve or relate to the Competitive Market;
(ii) interfere with the customer relations in the Competitive
Market of Krazy Colors, NBI or any of their respective Affiliates;
(iii) entice, induce or encourage any of the employees, agents
or representatives of Krazy Colors, NBI or any of their Affiliates to engage
in any activity which, were it done by the Shareholders, would violate any
provision of this Section 5.1; or
(iv) employ or otherwise contract for the services of any
present or future Competitive Market employee, consultant or agent of Krazy
Colors, NBI or any of their Affiliates, or in any way influence or solicit any
such employee, consultant or agent to leave the employ of Krazy Colors, NBI or
any of their Affiliates.
(b) Notwithstanding the provisions of Section 5.1(a) above, the
Shareholders may make investments of up to 3% of the
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outstanding stock of publicly traded companies whose products may compete with
Krazy Colors's or NBI's. Investments of over 3% of the outstanding stock of
publicly traded companies whose products may compete with NBI's or Krazy Colors'
can occur upon receiving approval from NBI and Krazy Colors.
(c) If any one or more of the provisions contained in this Section
5.1 shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, it shall be construed by limiting and
reducing it, so as to be enforceable to the extent compatible with the
applicable law then in effect.
(d) Shareholders acknowledge that a remedy at law for any breach or
threatened breach by one or more of the Shareholders of the non-competition
obligations under this Section 5.1 would alone be inadequate and Shareholders
therefore agree that NBI and/or Krazy Colors shall be entitled to a temporary
restraining order and/or injunctive relief in case of any such breach or
threatened breach. In the event that one or more of the Shareholders breaches
such non-competition obligations, Krazy Colors reserves the right to withhold,
offset or terminate the Long-Term Payout to which all of the Shareholders may be
entitled under Section 5.5 hereof. Notwithstanding any of the above, nothing in
this Agreement shall be construed to prohibit NBI and/or Krazy Colors from
pursuing any other available remedies either at law or in equity, for a breach
or threatened breach of this Agreement or the Shareholders' non-competition
obligations hereunder, including the recovery of monetary damages from
Shareholders.
SECTION 5.2 Access to Information.
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(a) From the date hereof to the Closing Date, Krazy Colors shall,
and shall cause its officers, directors, employees, auditors and other agents
to, afford the officers, employees, auditors and other agents of NBI reasonable
access at all reasonable times to Krazy Colors's officers, employees, agents,
properties, offices, plants and other facilities and to all books and records,
and shall furnish NBI with all financial, operating and other data and
information with respect to the Krazy Colors business as NBI, through its
officers, employees or agents, may reasonably request.
(b) No investigation by NBI pursuant to this Section 5.2 shall
affect any of the representations or warranties of the Krazy Colors or either
of the Shareholders contained in this Agreement.
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SECTION 5.3 Notification of Certain Matters. For a period of three
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(3) years from the Closing Date, the Shareholders shall give prompt notice to
NBI of (i) the occurrence, or non-occurrence of any event whose occurrence or
non-occurrence would be likely to cause any representation or warranty of Krazy
Colors or the Shareholders contained in this Agreement to be untrue or
inaccurate, and (ii) any failure of Krazy Colors or the Shareholders to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it or them hereunder; provided, however, that the delivery of
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any notice pursuant to this Section 5.3 shall not limit or otherwise affect the
remedies available hereunder to NBI.
SECTION 5.4 Buyer's Remorse. If Krazy Colors' Pre-Tax Cash Flow
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during calendar year 1995 is not $100,000 or more, NBI shall have the right, at
its sole option, to sell the Purchased Stock back to the Shareholders for the
Purchase Price. If NBI wishes to exercise this option, NBI shall deliver
written notice to Shareholders and Krazy Colors within thirty (30) days after
NBI receives the final financial information for calendar year 1995, stating
that it wishes to sell the Purchased Stock to the Shareholders and instructing
the Shareholders where to make payments (the "NBI Notice"). Shareholders shall
pay the Purchase Price within thirty (30) days after receipt of the NBI Notice.
Upon receipt of such payment, NBI shall deliver to the each Shareholder the
respective number of shares NBI received from them at the Closing, as stated in
Section 2.1, accompanied by all necessary stock powers duly executed, in form
acceptable to Shareholders and as required for transfer on the books of Krazy
Colors. If any Shareholder fails to make the payment required by this Section
5.4, the amount due from such Shareholder shall accrue interest at the rate of
9% per annum from and after the date such amounts became due. Upon the giving
of the NBI Notice, the NBI Warrants shall terminate and all other agreements and
understandings entered into hereunder shall terminate and be of no further force
or effect, except that the representation and warranties shall survive as set
forth in Section 7.1.
SECTION 5.5 Long-Term Payout. As long as the Shareholders are not in
----------------
default of any continuing obligations under this Agreement, Krazy Colors shall
pay the Long-Term Payout, if any, by the 15th day of February following the
completion of each calendar year, commencing with calendar year 1995 (except
that any payment for calendar year 1995 shall not be made until after NBI has
had the opportunity to exercise its option pursuant to Section 5.4) to the
Shareholders in proportion to their ownership of the Krazy Colors Common Stock
after the Closing, at the addresses listed in Section 9.1 of this Agreement.
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SECTION 5.6 Long-Term Payout Purchase Option. Krazy Colors shall
--------------------------------
have an option to buy out the Long-Term Payout, in whole or in part, from the
Shareholders, commencing on the fifth anniversary of this Agreement and
continuing thereafter (the "Buy-Back Option"). If Krazy Colors wishes to
exercise the Buy-Back Option, it shall provide the Shareholders with written
notice (the "Buy-Back Notice") stating its desire to buy back, pro rata, all or
any portion of their Long-Term Payout, stating how much of the Long-Term Payout
it wishes to buy and including a check payable to the Shareholder in an amount
equal to the higher of (a) five (5) multiplied by the average annual Long-Term
Payout paid to the Shareholders for the preceding five years or (b) 3.6
multiplied by the highest annual payout for any of the preceding five years.
Upon sending such payment, Krazy Colors shall be relieved of the obligation to
make the Long-Term Payout, in whole or in part, based on the amount of the Long-
Term Payout repurchased.
SECTION 5.7 Board of Directors. A majority of the board of directors
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of Krazy Colors shall be appointed by NBI. Upon the Closing, the Krazy Colors
board of directors shall consist of Jay H. Lustig, Martin J. Noonen and Marjorie
A. Cogan.
SECTION 5.8 Conduct of Business by Krazy Colors Pending the Closing.
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Except as contemplated by this Agreement, Krazy Colors covenants and agrees that
during the period between the Effective Date and through and including the
Closing Date, Krazy Colors shall conduct its business only in the ordinary
course, and not engage in any extraordinary transactions without NBI's prior
written consent.
SECTION 5.9 Forfeiture of Shareholders' Krazy Colors Common Stock.
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The Shareholders' acknowledge that part of the inducement for NBI to enter into
this transaction is the expectation that Miller will be a long-term employee of
Krazy Colors, as is contemplated by the Employment Agreement. In order to secure
Miller's long-term commitment to Krazy Colors and to insure that Lustig and
Reinhart maintain a vested interest in keeping Miller as an employee at Krazy
Colors, each of the Shareholders agrees that if Miller terminates his employment
with Krazy Colors prior to December 31, 1999, without the consent of the Krazy
Colors board of directors (the "Early Termination"), each of the Shareholders
shall, at the election of the Krazy Colors board of directors, forfeit their
Krazy Colors Common Stock to Krazy Colors. If Krazy Colors requires such
forfeiture, Krazy Colors shall within one hundred and eighty (180) days after
the Early Termination, send a written notice to each of the Shareholders
informing them of the Early Termination, that their Krazy Colors Common Stock
has been forfeited to Krazy Colors and instructing them to deliver the stock
certificates for their Krazy Colors Common Stock to Krazy Colors. Whether the
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Shareholders' return such stock certificates to Krazy Colors or not, their stock
shall be deemed terminated effective upon the date of Early Termination and
Krazy Colors shall cancel on its books the certificate or certificates
representing such terminated Krazy Colors Common Stock.
The rights and obligations set out in Sections 5.1 through 5.9 of the
foregoing Article V of this Agreement shall survive the Closing.
ARTICLE VI. CONDITIONS TO THE CLOSING
SECTION 6.1 Conditions to Obligations of NBI. The obligations of NBI
--------------------------------
to effect the Closing shall be subject to the prior fulfillment of each of the
following conditions:
(a) Representations and Warranties; Agreement and Covenants.
-------------------------------------------------------
Except for changes permitted or contemplated hereby or matters waived or
consented to by NBI pursuant to Section 9.14, (i) the representations and
warranties of the Krazy Colors and the Shareholders contained in this
Agreement which are qualified as to materiality shall be true in all respects
and all other representations and warranties shall be true and correct in all
material respects on and as of the Closing, with the same force and effect as
if made as of the Closing, (ii) all the agreements contained in this Agreement
to be performed or complied with by the Shareholders and Krazy Colors at or
before the Closing, shall have been performed or complied with in all material
respects and (iii) NBI shall have received certificates of the Krazy Colors
and the Shareholders, as to the fulfillment of the conditions set forth in the
foregoing clauses (i) and (ii).
(b) Employment Agreement. Miller and Krazy Colors shall have
--------------------
entered into the Employment Agreement.
(c) Shareholder Agreement. The Shareholders and Krazy Colors shall
---------------------
have entered into the Shareholder Agreement.
(d) Consents. Any necessary consent or approval of any customer,
--------
supplier, governmental agency or other third party shall have been obtained.
(e) Litigation. There shall have been no order or preliminary or
----------
permanent injunction entered by, nor any action or proceeding initiated before,
any Governmental Agency which seeks to restrain, limit or prohibit the
consummation of the transactions contemplated by this Agreement, or to obtain
damages or other relief in connection therewith.
-14-
(f) Bankruptcy; Insolvency. No insolvency or bankruptcy proceeding
----------------------
shall have been instituted or consented to by or against Krazy Colors or either
or both of the Shareholders, and Krazy Colors shall not have taken any corporate
action to authorize any insolvency or bankruptcy proceeding.
(g) No Material Adverse Effect. No fact, event, or condition
--------------------------
(financial or otherwise) shall have occurred with respect to Krazy Colors having
a material adverse effect.
SECTION 6.2 Conditions to Obligations of the Shareholders. The
---------------------------------------------
obligations of the Shareholders to effect the Closing shall be subject to the
prior fulfillment of each of the following conditions:
(a) Representations and Warranties. Except for changes permitted
------------------------------
or contemplated hereby or consented to by the Shareholders and except for
matters waived or consented to by the Shareholders pursuant to Section 9.14, (i)
the representations and warranties of NBI contained in this Agreement shall be
true and correct in all material respects on and as of the Closing, with the
same force and effect as if made as of the Closing, (ii) all the agreements
contained in this Agreement to be performed or complied with by NBI, at or
before the Closing, shall have been performed or complied with in all material
respects and (iii) the Shareholders shall have received a certificate of NBI,
signed by a duly authorized officer thereof, as to the fulfillment of the
conditions set forth in the foregoing clauses (i) and (ii).
(b) Shareholder Agreement. NBI shall have entered into the
---------------------
Shareholder Agreement.
(c) Litigation. There shall have been no order or preliminary or
----------
permanent injunction entered in any action or proceeding before any Governmental
Agency which seeks to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or to obtain damages or other relief in
connection therewith.
(d) Consents. Any necessary consent or approval of any customer,
--------
Governmental Agency or other third party shall have been obtained;
(e) Bankruptcy; Insolvency. No insolvency or bankruptcy proceeding
----------------------
shall have been instituted or consented to by or against NBI, and NBI shall not
have taken any corporate action to authorize any insolvency or bankruptcy
proceeding.
-15-
ARTICLE VII. INDEMNIFICATION
SECTION 7.1 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of the Shareholders in Article III shall survive
the Closing for three (3) years, except that the Compliance With Laws and Taxes
representations and warranties contained in Sections 3.4 and 3.9 shall survive
for the duration of all statutes of limitations associated with any underlying
civil claim or violation of Law relating to Krazy Colors's or the Shareholders'
conduct prior to the Closing Date. Neither the period of survival nor the
liability of the Shareholders with respect to the Shareholders' representations
and warranties shall be reduced by any investigation made at the time by or on
behalf of NBI.
SECTION 7.2 Indemnification by the Shareholders. In the event that
-----------------------------------
the "Indemnitees" (as hereinafter defined) suffer Losses from those matters
described in subsections (a) through (c) below, the Shareholders, jointly and
severally, agree to indemnify and hold harmless NBI and its Affiliates,
officers, directors, employees, agents, successors and assigns (individually, an
"Indemnitee") from and against any Loss arising out of or resulting from:
----------
(a) the breach of any representation or warranty made by Krazy
Colors or any the Shareholders contained herein or in any document delivered by
the Shareholders hereunder at the Closing;
(b) the breach of any covenant or agreement by Krazy Colors or any
of the Shareholders contained herein;
(c) any claim relating to any act or omission or any event or
condition occurring or existing prior to the Closing and not disclosed in
writing on a Schedule to this Agreement.
SECTION 7.3 Materiality. Notwithstanding anything in this Agreement
-----------
to the contrary, for the purposes of application of the indemnity provision of
this Article VII, the amount of any Loss arising from the breach of such
representation, warranty, covenant or agreement shall be the entire amount of
any such loss actually incurred by the respective Indemnitee as a result of such
breach and not just that portion that exceeds the relevant level of materiality.
SECTION 7.4 Time Period. The indemnification obligations of the
-----------
Shareholders under this Article VII shall continue for the same period of
survival specified in Section 7.1 for each such representation and warranty.
Any claim or demand against the Shareholders which has been asserted at or prior
to
-16-
the expiration of any survival period may continue to be asserted and
indemnified against thereafter, including claims or demands asserted after the
expiration of any such survival period, but which are related to claims already
asserted.
SECTION 7.5 Notice and Defense. All claims for indemnification of an
------------------
Indemnitee by the Shareholders shall be asserted and resolved as follows:
(a) In the event that any claim or demand for which the
Shareholders would be liable to Indemnitee hereunder is asserted against or
sought to be collected from Indemnitee by a third party, Indemnitee shall
promptly notify the Shareholders in writing of such claim or demand, specifying
the nature of such claim or demand and the amount or the estimated amount
thereof to the extent then feasible (which estimate shall not be conclusive of
the final amount of such claim or demand) (the "Claim Notice"). The
------------
Shareholders shall notify Indemnitee promptly (i) whether or not the
Shareholders dispute the liability of the Shareholders to Indemnitee hereunder
with respect to such claim or demand and (ii) whether or not the Shareholders
desire, at their sole cost and expense, to defend Indemnitee against such claim
or demand. Subject to clause (b) below, in the event that the Shareholders
notify Indemnitee that the Shareholders desire to defend Indemnitee against such
claim or demand, the Shareholders shall have the right to defend by appropriate
proceedings, provided that the Shareholders and their counsel (which counsel
must be approved by Indemnitee, such approval not to be unreasonably withheld)
shall proceed with diligence and good faith with respect thereto. If Indemnitee
desires to participate in, but not control, any such defense or settlement, it
may do so at its sole cost and expense. The Shareholders shall not settle such
claim or demand without prior reasonable consultation with Indemnitee and
without the prior written consent of Indemnitee (which consent shall not be
withheld unreasonably).
(b) If, in the reasonable opinion of Indemnitee, notice of which
shall be given in writing to the Shareholders, (i) any such claim or demand
described in Section 7.5(a) above seeks material prospective relief which could
have a material adverse effect on Indemnitee or on a subsidiary or Affiliate of
Indemnitee, or (ii) Indemnitee reasonably determines in good faith that its
interests with respect to such claim or demand cannot appropriately be
represented by the Shareholders, then Indemnitee shall have the right to assume
control of the defense of such claim or demand and the amount of any judgment or
settlement together with the reasonable costs and expenses of defense shall be
included as part of the indemnification obligations of the Shareholders
hereunder; provided, however, that no settlement of such claim or demand may be
made without
-17-
prior reasonable consultation with the Shareholders and without the
prior written consent of the Shareholders (which consent shall not be
unreasonably withheld). If Indemnitee should elect to exercise the right under
this clause (b), the Shareholders shall have the right to participate in, but
not control, the defense of such claim or demand at the sole cost and expense of
the Shareholders.
(c) In the event Indemnitee should have a claim against the
Shareholders hereunder which does not involve a claim or demand being asserted
against or sought to be collected from Indemnitee by a third party, Indemnitee
shall promptly send a Claim Notice with respect to such claim to the
Shareholders. Such notice shall specify in detail the nature of the claim, the
provision of this Agreement under which it arises, and the amount or estimated
amount thereof.
(d) Regardless of which party is controlling the defense of any
claim, (i) the Shareholders and Indemnitee shall act in good faith, (ii) the
controlling party shall deliver, or cause to be delivered, to the other party,
copies of all correspondence, studies, reports, pleadings, motions, briefs,
appeals or other written statements relating to or submitted in connection with
the claim or demand and with the defense of any such claim or demand and timely
notices of, and the right to participate in (as an observer), any hearing or
other court proceeding relating to such claim or demand, and (iii) the other
parties shall cooperate fully with the controlling party with respect to access
to books, records, or other documentation within such other party's direct or
indirect control, if deemed necessary or appropriate by the controlling party in
the defense of any claim or demand.
(e) If the Shareholders do not elect under Section 7.5(a) above to
defend Indemnitee, or if the Shareholders elect to defend Indemnitee but do not
proceed with diligence and in good faith, then Indemnitee shall have the right
to take over control of any defense and settlement of such claim or demand (and
shall, so long as any legal rights are not jeopardized, notify the Shareholders
not less than ten (10) days in advance of the reasons for the defense being
taken over), and the reasonable costs and expenses of defense shall be included
as part of the indemnification obligations of the Shareholders hereunder.
(f) After payment by the Shareholders of the Loss, the Shareholders
shall, unless prohibited by law or contract, be subrogated to the rights of the
Indemnitee against any third party.
(g) Failure of the Indemnitee to notify the Shareholders shall not
relieve the Shareholders of their
-18-
obligations hereunder unless, and only to the extent that, such failure to
notify prejudices the Shareholders.
(h) The defending party and the nondefending party may be
represented by the same counsel unless such representation would be
inappropriate due to actual or potential differing interests between them. In
addition, the nondefending party shall at all times be entitled to monitor such
defense through the appointment of counsel of its own choosing, at it own cost
and expense.
(i) To the extent the Shareholders indemnify any Indemnitee
hereunder, the Shareholders shall be subrogated to the rights of such Indemnitee
with respect to the claim as to which such indemnification was provided.
ARTICLE VIII. TERMINATION
SECTION 8.1 Termination.
-----------
(a) This Agreement may be terminated and the transactions
contemplated hereby may be abandoned anytime prior to the Closing:
(i) By mutual written consent of Krazy Colors, the
Shareholders and NBI, or
(ii) By NBI, Krazy Colors or the Shareholders, if any
governmental agency shall have issued any order, decree, or ruling or taken any
other action restraining, enjoining or otherwise prohibiting any of the
transactions hereunder and such order, decree, ruling or other action shall have
become final and nonappealable.
(b) This Agreement shall terminate, without any action or notice
in writing or otherwise by any of the parties hereto, if an insolvency or
bankruptcy proceeding shall have been instituted against or consented to by
Krazy Colors or the Shareholders.
SECTION 8.2 Effect of Termination. In the event of the termination
---------------------
of this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and have no effect and there shall be no liability on the part of any party
hereto or its Affiliates, directors, officers or shareholders; provided,
--------
however, that termination of this Agreement shall not affect: (a) obligations
- -------
incurred or accrued prior to the effective date of termination and (b)
obligations which are expressly intended to survive termination of this
Agreement.
-19-
ARTICLE IX. GENERAL PROVISIONS
SECTION 9.1 Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to NBI:
NBI, Inc.
1880 Industrial Circle, Suite F
Longmont, Colorado 80501
Attention: Marjorie A. Cogan
with copies to:
John G. Lewis, Esq.
Ireland, Stapleton, Pryor & Pascoe, P.C.
1675 Broadway, Suite 2600
Denver, Colorado 80202
(b) if to the Shareholders:
Jay H. Lustig
c/o JHL Holdings
1250 4th Street, 5th Floor
Santa Monica, California 90401
Glen Miller
c/o Krazy Colors, Inc.
6245 Harrison Drive, Suite 17
Las Vegas, Nevada 89120
Linda Reinhart
2080 Casual Court
Simi Valley, California 93065
with a copy to:
____________________________
____________________________
____________________________
____________________________
-20-
(c) if to Krazy Colors:
Krazy Colors, Inc.
6245 Harrison Drive, Suite 17
Las Vegas, Nevada 89120
Attention: President
with a copy to:
____________________________
____________________________
____________________________
SECTION 9.2 Entire Agreement. Except as expressly set forth herein,
----------------
this Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, between the parties with respect to the
subject matter hereof.
SECTION 9.3 Assignment. This Agreement shall not be assigned by
----------
operation of law or otherwise, except that NBI may assign all or any of its
rights and obligations hereunder to any Affiliate of NBI upon the execution of a
written instrument whereby such assignee agrees to assume all of NBI's
obligations hereunder and be bound by all the terms and conditions of this
Agreement; provided that no such assignment shall relieve NBI of its obligations
--------
hereunder if such assignee does not perform such obligations.
SECTION 9.4 Parties in Interest. This Agreement and all of the
-------------------
provisions hereof shall be binding upon and inure solely to the benefit of each
party hereto, their subsidiaries, and any successors in interest by reason of
any business combination, reorganization or otherwise. Nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 9.5 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Colorado regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof. No provision of this Agreement shall be construed against any
party by reason of that party having drafted the same.
SECTION 9.6 Headings. The descriptive headings contained in this
--------
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
-21-
SECTION 9.7 Counterparts. This Agreement may be executed in one or
------------
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 9.8 Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event any of the provisions of this
Agreement were not to be performed by the Shareholders or Krazy Colors in
accordance with the terms hereof and that NBI shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or
equity.
SECTION 9.9 Severability; Enforceability. If any term or provision
----------------------------
of this Agreement or any application thereof shall be invalid or enforceable,
the remainder of this Agreement and any other application of such term or
provision shall not be affected thereby.
SECTION 9.10 Costs. Each of the parties hereto shall bear its own
-----
costs and expenses incurred in connection with the transactions contemplated
hereunder, including the fees and expenses of their respective representatives.
SECTION 9.11 Attorneys' Fees. In the event of any dispute among the
---------------
parties hereto relating to the subject matter of this Agreement, the out-of-
pocket costs and reasonable attorneys' fees of the prevailing party shall be
paid by the other party in addition to any other relief.
SECTION 9.12 Dispute Resolution. All disputes arising under this
------------------
Agreement that cannot be amicably resolved shall be settled by binding
arbitration in Denver, Colorado. Judgment upon any award rendered may be
entered in any court having jurisdiction thereof. Except as provided below, the
arbitration shall proceed as to the laws of procedure in accordance with
Colorado's Uniform Arbitration Act of 1975.
(a) Any party requesting arbitration shall serve a written demand
for arbitration on the other party by registered or certified mail. The demand
shall set forth in reasonable detail a statement of the nature of the dispute,
the amount involved and the remedies sought. No later than twenty (20) calendar
days after a demand for arbitration is served, the parties shall jointly select
and appoint a retired judge of the Courts of the Colorado to act as the
arbitrator. In the event that the parties do not agree on the selection of an
arbitrator, the party seeking arbitration shall apply to the District Court for
the County in which the arbitration is to be conducted for appointment of a
retired judge to serve as arbitrator.
-22-
(b) No later than ten (10) calendar days after appointment of an
arbitrator, the parties shall jointly prepare and submit to the arbitrator a set
of rules for the arbitration. In the event that the parties cannot agree on the
rules for the arbitration, the arbitrator shall establish the rules. No later
than ten (10) calendar days after the arbitrator is appointed he shall arrange
for a hearing to commence on a mutually convenient date. The hearing shall
commence no later than one hundred twenty (120) calendar days after the
arbitrator is appointed and shall continue from day to day until completed.
(c) The arbitrator shall issue his or her award in writing no later
than twenty (20) calendar days after the conclusion of the hearing. The
arbitration award shall be final and binding regardless of whether any party
fails or refuses to participate in the arbitration. The arbitrator is empowered
to hear and determine all disputes between the parties hereto concerning the
subject matter of this Agreement, and the arbitrator may award money damages
(but specifically not punitive damages), injunctive relief, rescission,
restitution, costs, and attorneys' fees. The arbitrator shall not have the power
to amend this Agreement in any respect.
(d) In the event that any party serves a proper demand for
arbitration under this Agreement, all parties may pursue discovery in accordance
with the Colorado Rules of Civil Procedure, the provisions of which are
incorporated herein by reference, with the following exceptions: (i) The parties
hereto may conduct all discovery, including depositions for discovery purposes,
without leave of the arbitrator; and (ii) all discovery shall be completed no
later than the commencement of the arbitration hearing or one hundred twenty
(120) calendar days after the date that a proper demand for arbitration is
served, whichever occurs earlier, unless upon a showing of good cause the
arbitrator extends or shortens that period.
SECTION 9.13 Amendment. This Agreement may be amended by the parties
---------
hereto at any time prior to the Closing Date. This Agreement may not be
supplemented, modified or amended except by an instrument in writing signed by
the parties hereto.
SECTION 9.14 Waiver. At any time prior to the Closing Date either
------
party hereto may (a) extend the time of the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party to be bound thereby. The
giving of a waiver in one instance or for one purpose shall not create any
implied
-23-
obligation to give a waiver in another instance or for another purpose.
The failure of either party to assert any of its rights hereunder shall not
constitute a waiver of any such rights.
IN WITNESS WHEREOF, NBI and Krazy Colors have each caused this
Agreement to be executed by its duly authorized officer and the Shareholders
have executed this Agreement, each as of the date first written above.
KRAZY COLORS, INC., a Nevada corporation
By: /s/ GLEN MILLER
----------------
Title: President
---------
NBI, INC., a Delaware corporation
By: /s/ MARTIN J. NOONAN
---------------------
Title: Director
--------
SHAREHOLDERS: /s/ JAY H. LUSTIG
-----------------
Jay H. Lustig, Individually
/s/ GLEN MILLER
---------------
Glen Miller, Individually
/s/ LINDA REINHART
------------------
Linda Reinhart, Individually
-24-
Schedule 3.3 to Stock Purchase Agreement
----------------------------------------
CONSENTS REQUIRED
Schedule 3.6 to Stock Purchase Agreement
----------------------------------------
ENCUMBRANCE ON ASSETS
Schedule 3.7 to Stock Purchase Agreement
----------------------------------------
MATERIAL CONTRACTS
EXHIBIT A TO STOCK PURCHASE AGREEMENT
-------------------------------------
KRAZY COLORS, INC.
EMPLOYMENT AND NON-DISCLOSURE AGREEMENT
-1-
EXHIBIT B TO STOCK PURCHASE AGREEMENT
-------------------------------------
WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED FOR SALE OR SOLD IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND SUCH LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
NO. _______ Initial Number of Shares
Subject to Purchase Upon
Exercise of Warrant: _________
NBI, INC.
Warrant Certificate
THIS CERTIFIES THAT for value received, __________, or his or her
successors as set forth herein ("Holder"), is the registered owner of a Warrant
which entitles the owner thereof to purchase __________ fully paid and
nonassessable shares (the "Warrant Shares") of the Common Stock, $.01 par value
(the "Common Stock"), of NBI, Inc., a Delaware corporation (the "Company"), at a
purchase price per share of $.89 (the "Exercise Price"), commencing on the date
(the "Commencement Date") of the expiration of the Company's option under
Section 5.4 of that certain Stock Purchase Agreement dated as of January 1,
1995, among the Holder, Company, Krazy Colors, Inc., a Nevada corporation,
_______________ and ___________ (the "Stock Purchase Agreement"). If the
Company does not exercise its option under Section 5.4 of the Stock Purchase
Agreement and the original Holder is not in default of any of his or her
obligations under the Stock Purchase Agreement, this Warrant shall be
exercisable from the Commencement Date through December 31, 2002 (the
"Expiration Date"), and shall be exercised by Holder by completing the attached
Form of Election to Purchase and submitting it to the Company. If the Company
does exercise such option, this Warrant shall be deemed to have terminated
effective December 31, 1995.
1. Registration. The Company shall be entitled to treat the
------------
registered Holder of this Warrant on the Company's Warrant Register as the owner
in fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim
-1-
to or interest in this Warrant on the part of any other person other than the
registered Holder.
This Warrant shall not be transferred by the Holder except at the time
of his or her death pursuant to his or her valid last will and testament or by
the laws of intestate succession applicable to his or her estate. If a new
Warrant is requested in connection with such transfer, Holder's personal
representative or successor in title shall surrender this Warrant for
cancellation, endorsed or accompanied by a written instrument of transfer, in
form and with supporting documentation satisfactory to the Company, duly
executed by the Holder's personal representative or successor in title, or by
such person's agent or attorney-in-fact duly appointed in writing. Upon receipt
thereof, the Company will issue and deliver, in the name of the transferee or
transferees, a new Warrant on like terms.
2. Adjustment; Exercise of Warrant.
-------------------------------
(a) If the number of shares of Common Stock outstanding at any
time after the date hereof is increased by a stock dividend or by a subdivision
or split-up of shares of the Common Stock, or if the number of shares of Common
Stock then outstanding at any time after the date hereof is decreased by a
combination or reverse stock split of the outstanding shares of Common Stock,
then the Exercise Price shall be adjusted by multiplying the Exercise Price in
effect immediately prior to the time of such event by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event. Upon each adjustment
of the Exercise Price, the Holder shall thereafter be entitled to purchase, at
the Exercise Price resulting from such adjustment, the number of shares obtained
by multiplying the Exercise Price in effect immediately prior to such adjustment
by the number of shares purchasable pursuant to this Warrant immediately prior
to such adjustment and dividing the product thereof by the Exercise Price
resulting from such adjustment. In the event of any adjustment in the number of
Warrant Shares, the Company will, upon the request of the Holder, issue a new
Warrant to Holder reflecting any such adjustment upon surrender of this Warrant
or any subsequently issued Warrant.
(b) The Holder may purchase from the Company (and the Company
shall issue and sell to Holder), the number of fully paid and non-assessable
shares of Common Stock evidenced by this Warrant, upon surrender to the Company,
or its duly authorized agent, of this Warrant Certificate, with the form of
election to purchase attached hereto duly completed and signed, and upon payment
to the Company of the Exercise Price in full in cash or
-2-
check. No adjustment shall be made for any cash dividends on any shares of stock
issuable upon exercise of the Warrant. Upon surrender of the Warrant and payment
of the Exercise Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of the
registered Holder of the Warrant and (subject to receipt of evidence of
compliance with the Securities Act of 1933, as amended (the "Act") and any
applicable state securities laws in accordance with the provisions of Section 7
of this Warrant Certificate) in such name or names as Holder may designate, a
certificate or certificates for the number of full shares of stock so purchased
upon the exercise of the Warrant, together with cash, as provided in Section 6
of this Warrant Certificate, in respect of any fraction of a share otherwise
issuable upon such surrender. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such shares as of the date of the
surrender of the Warrant and payment of the Exercise Price as aforesaid. If, at
the date of surrender of this Warrant and payment of such Exercise Price, the
transfer books for the Common Stock, shall be closed, the certificates for the
shares in respect of which the Warrant is then exercised shall be issuable as of
the date on which such books shall next be opened and until such date the
Company shall be under no duty to deliver any certificate for such shares;
provided, however, that the transfer books shall not be closed at any one time
for a period longer than seventy-two (72) hours unless otherwise required by
law.
3. Payment of Taxes. The Company will pay all documentary stamp
----------------
taxes attributable to the issuance of shares issuable upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issue or delivery of any certificates for shares in a name other than that of
the registered Holder of this Warrant.
4. Mutilated or Missing Warrant. If this Warrant is mutilated,
----------------------------
lost, stolen or destroyed, the Company shall issue and deliver in lieu of and
substitution for the Warrant, a new Warrant of like tenor and representing an
equivalent right or interest; but only upon receipt of evidence reasonably
satisfactory to the Company of such mutilation, loss, theft or destruction of
this Warrant and indemnity, if requested, also reasonably satisfactory to the
Company. An applicant for a substitute Warrant shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
-3-
5. Reservation of Common Stock, etc. There have been reserved, and
---------------------------------
the Company shall at all times reserve as long as this Warrant remains
outstanding, out of the authorized and unissued shares of Common Stock a number
of shares sufficient to provide for the exercise of the rights of purchase
represented by this Warrant. If at any time the number of authorized but
unissued Common Stock shall not be sufficient to effect the exercise of this
Warrant, the Company shall take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose. The Warrant, when surrendered
on the exercise of the rights hereby evidenced, shall be cancelled, and the form
of election to purchase attached to the cancelled Warrant, as completed and
signed by the registered Holder hereof, shall constitute sufficient evidence of
the number of shares of stock which have been issued upon the exercise of the
Warrant. Prior to the Commencement Date and subsequent to the Expiration Date,
no shares of stock need be reserved in respect of this Warrant.
6. Fractional Interests. The Company shall not be obligated to
--------------------
issue fractions of shares of Common Stock on the exercise of this Warrant.
Instead of issuing fractional shares of Common Stock which would otherwise be
issuable upon exercise of this Warrant, the Company shall pay to the Holder a
cash adjustment in respect of such fractional shares in an amount equal to the
same fraction of the fair market value per share of the Common Stock as
determined by the Company's board of directors in its reasonable discretion.
7. Absence of Registration. Neither the Warrant nor the Warrant
-----------------------
Shares have been registered under the Act or any applicable state securities
laws. The Holder hereof represents and warrants to the Company that it will not
dispose of the Warrant or such Warrant Shares except as permitted by this
Warrant and pursuant to (i) a registration statement filed under the Act or (ii)
an opinion of counsel, reasonably satisfactory to counsel for the Company, that
such registration is not required under the Act.
8. Certificates to Bear Legends. The Warrant Shares shall be
----------------------------
subject to a stop transfer order and the certificate or certificates therefor
shall bear the following legends:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY APPLICABLE STATE SECURITIES LAWS AND MAY
NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED,
OFFERED FOR SALE OR SOLD IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE
-4-
SECURITIES UNDER SAID ACT AND SUCH LAWS OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
9. Governing Law. This Warrant shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware.
10. Not a Stockholder. No holder of this Warrant shall be entitled
-----------------
to vote or receive dividends or be deemed the holder of Common Stock for any
purpose, nor shall anything contained herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issue of stock,
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger, conveyance or otherwise), or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise, until
this Warrant shall have been exercised and the Warrant Shares purchasable upon
the exercise hereof shall have become deliverable.
11. Amendment of Warrants. This Warrant, together with each of the
---------------------
other warrants issued pursuant to the Stock Purchase Agreement (collectively,
the "Warrants"), may be amended, or provisions of the Warrants waived, upon the
written agreement of the Company and the holders of greater than 75% of the
voting power of the Warrant Shares issuable upon exercise of the Warrants, but
only as to all the Warrants; provided that the holder of any Warrant may waive
any right of such holder without affecting all the Warrants.
IN WITNESS WHEREOF, NBI, Inc., has caused this Warrant to be executed
by its President and Secretary.
DATED: January 1, 1995
NBI, INC.
By:______________________________
Title:___________________________
Attest:
______________________________
Secretary
-5-
FORM OF ELECTION TO PURCHASE
To be executed if holder desires to exercise the Warrant.
TO NBI, Inc.:
The undersigned hereby irrevocably elects to exercise the Warrant
represented by this Warrant Certificate to purchase __________ shares of Common
Stock of NBI, Inc., issuable upon the exercise of such Warrant and requests that
certificates for such shares be issued in the name of:
___________________________________
Name
___________________________________
Address
___________________________________
Federal Tax Identification Number
-6-
EXHIBIT C TO STOCK PURCHASE AGREEMENT
-------------------------------------
KRAZY COLORS, INC.
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT, made as of the 1st day of January, 1995,
by and among Krazy Colors, Inc. a Nevada corporation (the "Company"), NBI, Inc.,
a Delaware corporation ("NBI"), Jay H. Lustig, Glen Miller, Linda Reinhart and
any other person who becomes a party to this Agreement (collectively, the
"Shareholders").
WHEREAS, the Shareholders and the Company are parties to that certain
Stock Purchase Agreement dated as of January 1, 1995 (the "Stock Purchase
Agreement"); and
WHEREAS, the Shareholders own all of the issued and outstanding
capital stock of the Company; and
WHEREAS, the Shareholders desire to provide for continuity of
ownership of the Company to further the interests of the Company and its
shareholders;
NOW, THEREFORE, in consideration of the foregoing and the agreements
set forth below, the parties hereby agree with each other as follows:
1. Definition of Shares. As used in this Agreement, "Shares" shall
--------------------
mean and include all shares of the Company's common stock, no par value per
share (the "Common Stock"), now owned or hereafter acquired by a Shareholder.
2. Prohibited Transfers. No Shareholder shall sell, assign,
--------------------
transfer, pledge, hypothecate, mortgage, encumber or dispose of any of his
Shares except in compliance with the terms of this Agreement. Notwithstanding
anything to the contrary contained in this Agreement: (a) any Shareholder may
transfer without the necessity of prior approval all or any of his Shares by way
of gift to his spouse, to any of his lineal descendants or ancestors, or to any
trust for the benefit of any one or more of such Shareholder, his spouse or his
lineal descendants or ancestors; and (b) any Shareholder may transfer all or any
of his Shares by will or the laws of descent and distribution; provided that any
transferee under clause (a) or (b) of this Section 2 shall agree in writing with
the Company and the other Shareholders, as a condition to such transfer, to be
bound by all of the provisions of this Agreement.
3. Holding Period. Notwithstanding the provisions of Section 4
--------------
below, from the date of this Agreement until the date of the expiration of
NBI's option pursuant to Section 5.4 of the Stock Purchase Agreement, the
Shareholders may not offer or sell their Common Stock to any person other than a
Shareholder, which offers or sales shall be made pro rata in accordance with the
procedure set forth in Section 4. Thereafter, the Shareholders may sell their
Common Stock in accordance with the terms of this Agreement.
4. Right of First Refusal on Dispositions.
--------------------------------------
(a) If at any time a Shareholder (a "Selling Shareholder")
desires to sell or otherwise transfer all or any part of his Shares pursuant to
a bona fide offer from a third party (the "Proposed Transferee"), the Selling
Shareholder shall submit a written offer (the "Offer") by delivering the Offer
to the other Shareholders (the "Non-Selling Shareholders") and the Company, to
sell such Shares (the "Offered Shares") to the Non-Selling Shareholders and the
Company on terms and conditions, including price, not less favorable than those
on which the Selling Shareholder proposes to sell such Offered Shares to the
Proposed Transferee. The Offer shall disclose the identity of the Proposed
Transferee, the number of Offered Shares proposed to be sold, the total number
of Shares owned by the Selling Shareholder, the terms and conditions, including
price, of the proposed sale, and any other material facts relating to the
proposed sale.
(b) Each Non-Selling Shareholder shall have the right to
purchase that number of the Offered Shares as shall be equal to the number of
the Offered Shares multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock then owned by such Non-Selling Shareholder and
the denominator of which shall be the aggregate number of shares of Common Stock
then owned by all of the Non-Selling Shareholders who elect to purchase the
Offered Shares. The amount of such Offered Shares that each Non-Selling
Shareholder is entitled to purchase under this Section 4(b) shall be referred to
as his "Pro Rata Fraction."
(c) The Non-Selling Shareholders shall have a right of
oversubscription such that if any Non-Selling Shareholder fails to accept the
Offer as to his full Pro Rata Fraction, the remaining Non-Selling Shareholders
shall, among them, have the right to purchase up to the balance of such Offered
Shares not so purchased. Other Non-Selling Shareholders may exercise such right
of oversubscription by accepting the Offer as to more than their Pro Rata
Fraction. If, as a result thereof, such oversubscriptions exceed the total
number of the
Offered Shares available in respect of such oversubscription privilege, the
oversubscribing Non-Selling Shareholders shall be cut back with respect to
oversubscriptions on a pro rata basis in accordance with their respective Pro
Rata Fractions or as they may otherwise agree among themselves.
(d) The Company shall have the right to purchase any or all
of the Offered Shares not purchased by the Non-Selling Shareholders.
(e) Each Non-Selling Shareholder and the Company shall have
the right to purchase the permitted number of Offered Shares at the price stated
in the Offer or if such price is greater than the price derived from valuing the
outstanding Common Stock at 3.6 multiplied by the Company's Pre-Tax Cash Flow
(as defined in the Stock Purchase Agreement) for the twelve (12) full months
preceding the Offer (the "Fixed Price"), then at the Fixed Price.
(f) The Company and those Non-Selling Shareholders who desire
to purchase all or any part of the Offered Shares, shall communicate in writing
their election to purchase to the Selling Shareholder, which communication shall
state the number of Offered Shares such Non-Selling Shareholders desire to
purchase, and in the case of the Company the number of Offered Shares which are
not purchased by the Non-Selling Shareholders which the Company desires to
purchase, and shall be provided to the Selling Shareholder within fifteen (15)
days of the Offer. Such communication shall, when taken in conjunction with the
Offer, be deemed to constitute a valid, legally binding and enforceable
agreement for the sale and purchase of such Offered Shares (subject to the
aforesaid limitations as to the right of the Non-Selling Shareholders to
purchase more than their Pro Rata Fraction and the right of the Company to
purchase only those shares not purchased by the Non-Selling Shareholders).
Sales of such Offered Shares to be sold to the Non-Selling Shareholders and/or
the Company pursuant to this Section 4 shall be made at the offices of the
Company within 45 days following the date of the Offer.
(g) If the Non-Selling Shareholders and the Company do not
purchase all of the Offered Shares, the remaining Offered Shares may be sold by
the Selling Shareholder at any time within 90 days after the date the Offer was
made. Any such sale shall be to the Proposed Transferee, at not less than the
price and upon other terms and conditions, if any, not more favorable to the
Proposed Transferee than (i) those specified in the Offer or (ii) those under
which the Non-Selling Shareholders and/or the Company actually purchased the
Offered Shares. Any remaining Offered Shares not sold within such 90-day period
shall continue to be subject to the requirements of this
Section 4. If Offered Shares are sold pursuant to this Section 4 to any
purchaser who is not a party to this Agreement, the purchaser shall agree in
writing with the Company and the other Shareholders, as a condition to such
transfer, to be bound by all of the provisions of this Agreement.
5. Required Sale.
-------------
(a) A Shareholder (the "Forced-Sale Shareholder") shall be
required to sell its Common Stock to the other Shareholders or the Company at
the Fixed Price, if any one of the following events, acts or occurrences are
committed by, attributable to or directly involve such Shareholder (the
"Triggering Event"):
(i) commission of a material act of fraud, dishonesty
or misrepresentation;
(ii) a material violation of any law or regulation to
which the Company is subject;
(iii) conviction of a felony under the laws of the
United States or any State;
(iv) breach of obligations under the Stock Purchase
Agreement or any employment agreement such Shareholder has entered into with
the Company;
(v) application for or consent to appointment of a
receiver, trustee or liquidator for such Shareholder or all or a substantial
portion of it assets; has entered against it an order approving an involuntary
petition in bankruptcy that is not vacated within one hundred twenty (120) days
of entry thereof; or files a voluntary petition in bankruptcy, or a petition or
answer seeking reorganization, or an arrangement with creditors or seeking to
take advantage of any other law (whether federal or state) relating to relief of
debtors.
(b) Upon the occurrence of any of the Triggering Event, the
Forced-Sale Shareholder shall provide each of the remaining Shareholders (the
"Nonforced-Sale Shareholders") and the Company with written notice of the
occurrence of such Triggering Event. Upon receipt of such notice or, if no such
notice is sent or received, upon actual notice of such Triggering Event,
whichever is later (the "Forced-Sale Notice"), the Nonforced-Sale Shareholders
and the Company shall have the right to purchase the Forced-Sale Shareholder's
Common Stock (the "Forced-Sale Shares") in accordance with the following
procedures:
(i) Each Nonforced-Sale Shareholder shall have the
right to purchase that number of the Forced-Sale Shares as shall be equal to the
number of the Forced-Sale Shares multiplied by a fraction, the numerator of
which shall be the number of shares of Common Stock then owned by such
Nonforced-Sale Shareholder and the denominator of which shall be the aggregate
number of shares of Common Stock then owned by all of the Nonforced-Sale
Shareholders who elect to purchase the Forced-Sale Shares. The amount of such
Forced-Sale Shares that each Nonforced-Sale Shareholder is entitled to purchase
under this Section 5(b)(i) shall be referred to as his "Forced-Sale Pro Rata
Fraction."
(ii) The Nonforced-Sale Shareholders shall have a
right of oversubscription such that if any Nonforced-Sale Shareholder fails to
offer to purchase his full Forced-Sale Pro Rata Fraction, the remaining
Nonforced-Sale Shareholders shall, among them, have the right to purchase up to
the balance of such Forced-Sale Shares not so purchased. Other Nonforced-Sale
Shareholders may exercise such right of oversubscription by offering as to more
than their Forced-Sale Pro Rata Fraction. If, as a result thereof, such
oversubscriptions exceed the total number of the Forced-Sale Shares available in
respect of such oversubscription privilege, the oversubscribing Nonforced-Sale
Shareholders shall be cut back with respect to oversubscriptions on a pro rata
basis in accordance with their respective Forced-Sale Pro Rata Fractions or as
they may otherwise agree among themselves.
(iii) The Company shall have the right to purchase
any or all of the Forced-Sale Shares not purchased by the Nonforced-Sale
Shareholders.
(iv) The Company and those Nonforced-Sale Shareholders
who desire to purchase all or any part of the Forced-Sale Shares, shall
communicate in writing their election to purchase to the Forced-Sale
Shareholder, which communication shall state the number of Forced-Sale Shares
such Nonforced-Sale Shareholders desire to purchase, and in the case of the
Company the number of Forced-Sale Shares which are not purchased by the
Nonforced-Sale Shareholders which the Company desires to purchase, and shall be
provided to the Forced-Sale Shareholder within sixty (60) days of the date of
the notice provided in Section 5(b) above. Such communication shall, when taken
in conjunction with the requirements of this Section 5, be deemed to constitute
a valid, legally binding and enforceable agreement for the sale and purchase of
such Forced-Sale Shares (subject to the aforesaid limitations as to the right of
the Nonforced-Sale Shareholders to purchase more than their Pro Rata Fraction
and the right of the Company to purchase only those shares not purchased by the
Nonforced-Sale Shareholders). Sales
of such Forced-Sale Shares to be sold to the Nonforced-Sale Shareholders and/or
the Company pursuant to this Section 5 shall be made at the offices of the
Company within 90 days following the notice provided in Section 5(b) above.
(v) If the Nonforced-Sale Shareholders and the Company
do not purchase all of the Forced-Sale Shares, the remaining Forced-Sale Shares
may be held by the Forced-Sale Shareholder, but shall continue to be subject to
the requirements of this Section 5 as long as any Triggering Event continues.
Such Forced Shares which continue to be held by the Forced-Sale Shareholder
shall also remain subject to the terms and conditions of this Agreement.
6. Term. This Agreement shall terminate with respect to any
----
Shareholder when such Shareholder no longer holds any shares of Common Stock
or options, warrants or other rights to acquire Common Stock.
7. Failure to Deliver Shares. If a Shareholder becomes obligated to
-------------------------
sell any Shares to another Shareholder under this Agreement and fails to deliver
such Shares in accordance with the terms of this Agreement, such other
Shareholder may, at his option, in addition to all other remedies he may have,
send to the defaulting Shareholder the purchase price for such Shares as is
herein specified. Thereupon, the Company, upon written notice to the defaulting
Shareholder, (a) shall cancel on its books the certificate or certificates
representing the Shares to be sold and (b) shall issue, in lieu thereof, in the
name of such other Shareholder, a new certificate or certificates representing
such Shares, and thereupon all of the defaulting Shareholder's rights in and to
such Shares shall terminate.
8. Specific Enforcement. Each Shareholder expressly agrees that
--------------------
the other Shareholders and the Company may be irreparably damaged if this
Agreement is not specifically enforced. Upon a breach or threatened breach of
the terms, covenants and/or conditions of this Agreement by any Shareholder, the
other Shareholders and the Company shall, in addition to all other remedies,
each be entitled to apply for a temporary or permanent injunction, and/or a
decree for specific performance, in accordance with the provisions hereof.
9. Legend. Each certificate evidencing any of the Shares now owned
------
or hereafter acquired by the Shareholders shall bear a legend substantially as
follows:
Any sale, assignment, transfer or other disposition of the shares
represented by this certificate is restricted by, and subject to,
the terms and provisions of a Shareholder Agreement dated January 1,
1995, as it may be amended from time to time. A copy of said
Agreement is on file with the Secretary of the Corporation.
10. Notices. Notices given hereunder shall be deemed to have been
-------
duly given on the date of personal delivery (including by telecopier and courier
holding itself out as able to make delivery within one business day after
receipt) or three days following the date of postmark if mailed by certified or
registered mail, return receipt requested, to the party being notified at his or
its address as follows (or such other address as the addressee may subsequently
notify the other parties of in writing):
Krazy Colors, Inc.
6245 Harrison Drive
Suite 17
Las Vegas, Nevada 89120
Attention: Vice President
NBI, Inc.
1880 Industrial Circle, Suite F
Longmont, Colorado 80501
Attention: Marjorie A. Cogan
Jay H. Lustig
c/o JHL Holdings
1250 4th Street, 5th Floor
Santa Monica, California 90401
Glen Miller
6245 Harrison Drive
Suite 17
Las Vegas, Nevada 89120
Linda Reinhart
2080 Casual Court
Simi Valley, California 93065
11. Entire Agreement and Amendments. Agreement constitutes the
-------------------------------
entire agreement of the parties with respect to the subject matter hereof and
neither this Agreement nor any provision hereof may be waived, modified, amended
or terminated except by a written agreement signed by the parties hereto. Each
of the Shareholders represents that he is not a party to any other agreement
which would prevent him from performing his obligations hereunder. No waiver of
any breach or default hereunder shall be considered valid unless in writing,
and no such wavier shall be deemed a waiver of any subsequent breach or default
of the same or similar nature.
12. Governing Law; Successors and Assigns. This Agreement shall be
-------------------------------------
governed by the internal laws of the State of Delaware without giving effect to
the conflicts of laws principles thereof and, except as otherwise provided
herein, shall be binding upon the heirs, personal representatives, executors,
administrators, successors and assigns of the parties.
13. Severability. If any provision of this Agreement shall be held
------------
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
14. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
and year first above written.
COMPANY: KRAZY COLORS, INC., a Nevada corporation
By: ___________________________________
Title: ________________________________
SHAREHOLDERS: NBI, INC., a Delaware corporation
By: ___________________________________
Title: ________________________________
___________________________________
Jay H. Lustig
___________________________________
Glen Miller
___________________________________
Linda Reinhart