AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
99 CENTS ONLY STORES
ODD'S-N-END'S ACQUISITION CORP.
AND
ODD'S-N-END'S, INC.
MARCH 24, 1998
TABLE OF CONTENTS
PAGE
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R E C I T A L S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
A G R E E M E N T. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.1. ACTIONS TO BE TAKEN. . . . . . . . . . . . . . . . . . . . . .3
2.2. CONVERSION OF COMMON STOCK OF SUB.. . . . . . . . . . . . . . .4
2.3. CONVERSION OR CANCELLATION OF COMPANY COMMON STOCK. . . . . . .4
2.4. DISSENTING SHARES. . . . . . . . . . . . . . . . . . . . . . .4
2.5. PAYMENT FOR SHARES. . . . . . . . . . . . . . . . . . . . . . .5
2.6. NO FURTHER RIGHTS OR TRANSFERS. . . . . . . . . . . . . . . . .6
2.7. STOCK TRANSFER BOOKS. . . . . . . . . . . . . . . . . . . . . .7
2.8. STOCKHOLDERS' MEETINGS. . . . . . . . . . . . . . . . . . . . .7
2.9. FILING OF MERGER DOCUMENTS. . . . . . . . . . . . . . . . . . .7
2.10. RELATED AGREEMENT . . . . . . . . . . . . . . . . . . . . . . .7
3. CLOSING DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4. REPRESENTATIONS AND WARRANTIES OF COMPANY.. . . . . . . . . . . . . . .8
4.1. ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. . . . . . . . .8
4.2. AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . .8
4.3. NO CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . .8
4.4. CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . .9
4.5. SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . .9
4.6. SEC REPORTS AND FINANCIAL STATEMENT . . . . . . . . . . . . . 10
4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. . . . . . . . . . . . . 10
4.8. LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.9. PROPERTIES, ENCUMBRANCES. . . . . . . . . . . . . . . . . . . 11
4.10. COMPLIANCE WITH APPLICABLE LAW. . . . . . . . . . . . . . . . 11
4.11. NO BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.12. PROXY STATEMENT.. . . . . . . . . . . . . . . . . . . . . . . 12
4.13. INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 12
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. . . . . . . . . . . . . 12
5.1. ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. . . . . . . . 12
5.2. AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3. NO CONSENTS.. . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4. SEC REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . 13
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5.5. ABSENCE OF CERTAIN CHANGES OR EVENTS. . . . . . . . . . . . . 14
5.6. LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7. COMPLIANCE WITH APPLICABLE LAW. . . . . . . . . . . . . . . . 14
5.8. NO BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.9. PROXY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . 15
5.10. INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 15
6. PRE-MERGER COVENANTS OF PURCHASER AND COMPANY . . . . . . . . . . . . 15
6.1. CONDUCT OF BUSINESS BY COMPANY. . . . . . . . . . . . . . . . 15
6.2. INSPECTION OF RECORDS . . . . . . . . . . . . . . . . . . . . 17
6.3. STOCKHOLDER APPROVAL. . . . . . . . . . . . . . . . . . . . . 17
6.4. PROXY STATEMENT. . . . . . . . . . . . . . . . . . . . . . . 17
6.5. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.6. FILINGS; OTHER ACTION . . . . . . . . . . . . . . . . . . . . 18
6.7. PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 18
6.9 ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . 19
7. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. . . . . . 20
7.1. STOCKHOLDER APPROVAL. . . . . . . . . . . . . . . . . . . . . 20
8. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PURCHASER AND SUB . . . . . . 20
8.1. REPRESENTATIONS, COVENANTS, CERTIFICATE . . . . . . . . . . . 20
8.2. PERMITS AND APPROVALS . . . . . . . . . . . . . . . . . . . . 20
8.3. NO ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . 20
8.4. CERTAIN LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . 20
8.5. CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.6. TENDER FOR UNIVERSAL INTERNATIONAL. . . . . . . . . . . . . . 21
9. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF COMPANY . . . . . . . . . 21
9.1. NO LEGAL ACTION . . . . . . . . . . . . . . . . . . . . . . . 21
10. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.1. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.2. EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . 22
11. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . 22
11.1. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
11.2. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . 23
11.3. EXHIBITS AND SCHEDULES. . . . . . . . . . . . . . . . . . . . 23
11.4. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 23
11.5. NO ADVERSE CONSTRUCTION . . . . . . . . . . . . . . . . . . . 23
11.6. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . 23
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11.7. COSTS AND ATTORNEYS' FEES . . . . . . . . . . . . . . . . . . 23
11.8. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . 24
11.9. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.10. WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.11. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 24
11.12. BEST EFFORTS. . . . . . . . . . . . . . . . . . . . . . . . . 24
11.13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . 24
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made and
entered into as of March 24, 1998, by and between ODD'S-N-END'S, INC., a
Delaware corporation ("Company"), 99 CENTS ONLY STORES, a California
corporation ("Purchaser"), and ODD'S-N-END'S ACQUISITION CORP., a Delaware
corporation and a wholly-owned subsidiary of Purchaser ("Sub"), with respect
to the following:
R E C I T A L S
WHEREAS, the Boards of Directors of Purchaser, Sub and Company, deeming it
advisable for the mutual benefit of Purchaser, Sub and Company, and their
respective stockholders, that Purchaser acquire Company by a merger of Sub into
Company, under the terms and conditions hereinafter set forth (the "Merger"),
have by duly adopted resolutions approved this Agreement and Plan of
Reorganization (this "Agreement") and the transactions contemplated hereby;
WHEREAS, it is the intent of the parties that the Merger will be treated
for tax purposes as a taxable merger; and
WHEREAS, the Board of Directors of Company has resolved to recommend to its
stockholders approval of the Merger and approval and adoption of this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and of the
representations, warranties, covenants and agreements contained herein, the
parties to this Agreement hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, terms defined in the preamble
and recitals hereto shall have the respective meanings specified therein and the
following terms shall have the meanings set forth below:
(a) "AFFILIATE" means, when used with reference to a specified
Person, any Person that directly or indirectly through one or more
intermediaries controls or is controlled by, or is under common control with,
the specified Person.
(b) "AGREEMENT" shall mean this Agreement and Plan of
Reorganization.
(c) "CALIFORNIA LAW" shall mean the General Corporation Law of the
State of California.
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(d) "COMPANY" shall mean Odd's-N-End's, Inc., a Delaware
corporation.
(e) "COMPANY COMMON STOCK" shall mean the Common Stock, par value
$0.07 per share, of Company.
(f) "COMPANY SECURITIES" shall mean the Company Common Stock.
(g) "COMPANY STOCKHOLDERS" shall mean the stockholders of Company.
(h) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(i) "CONTROL" (including as used in the terms "controlling,"
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
(j) "DELAWARE LAW" shall mean the Delaware General Corporation Law.
(k) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
(l) "GAAP" shall mean generally accepted accounting principles.
(m) "MATERIAL ADVERSE EFFECT" means when used in connection with
Company or any of its Subsidiaries, or Purchaser or any of its Subsidiaries, as
the case may be, any condition, change or effect that, individually or when
taken together with all other such conditions, changes or effects that existed
or occurred prior to the date of determination of the existence or occurrence of
the Material Adverse Effect, is or is reasonably likely to be materially adverse
to the business, assets (including intangible assets), financial condition or
results of operations of Company and its Subsidiaries or Purchaser and its
Subsidiaries, in each case taken as a whole.
(n) "MERGER" shall have the meaning provided in the first recital
to this Agreement.
(o) "NYSE" shall mean the New York Stock Exchange.
(p) "PERSON" includes an individual, partnership, limited liability
company, limited liability partnership, trust, estate, corporation, joint
venture, unincorporated association, governmental bureau or agency or other
entity of whatsoever kind or nature.
(q) "SECURITIES ACT" means the Securities Act of 1933, as amended.
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(r) "PURCHASER COMMON STOCK" shall mean the Common Stock, no par
value per share, of Purchaser.
(s) "SEC" means the Securities and Exchange Commission.
(t) "SUBSIDIARY" of a corporation means (i) any corporation of
which equity securities possessing a majority of the ordinary voting power in
electing the board of directors are, at the time as of which such determination
is being made, owned by such corporation either directly or indirectly through
one or more Subsidiaries, and (ii) any Person (other than a corporation) in
which such corporation or any Subsidiary, directly or indirectly, has more than
a 10% ownership interest or over which it exercises control.
(v) "UNIVERSAL INTERNATIONAL" means Universal International, Inc.,
a Minnesota corporation.
2. THE MERGER.
2.1. ACTIONS TO BE TAKEN. (a) Upon the performance of all covenants
and obligations of the parties contained herein and upon the fulfillment (or
waiver) of all conditions to the obligations of the parties contained herein, at
the Effective Time (as defined below) and pursuant to Delaware Law, the
following will occur:
(i) Sub will be merged with and into Company, Company
shall be the surviving corporation (the "Surviving Corporation"), and the
separate existence and corporate organization of Sub shall cease, and thereupon
Sub and Company shall be a single corporation;
(ii) Company, as the Surviving Corporation, will succeed,
insofar as permitted by law, to all rights, assets, liabilities and obligations
of Sub in accordance with Delaware Law;
(iii) the Certificate of Incorporation of the Surviving
Corporation shall be amended to be substantially identical to the Certificate of
Incorporation of Sub;
(v) the Bylaws of the Surviving Corporation shall be
amended to be substantially identical to the Bylaws of Sub; and
(vi) the directors and officers of Sub immediately prior
to the Effective Time shall be the directors and officers of the Surviving
Corporation and shall hold office from the Effective Time until their respective
successors are duly elected and qualified in the manner provided in the
Certificate of Incorporation of the Surviving Corporation.
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(b) As soon as practicable after the terms and conditions
of this Agreement have been satisfied or waived, a Certificate of Merger,
properly completed and executed in accordance with Delaware Law (the
"Certificate of Merger"), will be filed with the Secretary of State of the State
of Delaware. The Merger shall be effective at such time as the Certificate of
Merger is filed in the office of the Secretary of State of the State of Delaware
(the "Effective Time").
2.2. CONVERSION OF COMMON STOCK OF SUB. At the Effective Time, by
virtue of the Merger and without any action on the part of Purchaser as the
holder thereof, all issued and outstanding shares of the common stock, $0.001
par value per share, of Sub will cease to be outstanding and will be converted
into the right to receive an aggregate of that number of shares of Company
Common Stock equal to 4,724,048, LESS 1,913,239, LESS any shares of Company
Common Stock purchased by Purchaser in transactions not involving the Company as
an issuer which are held by Purchaser at the Effective Time; PROVIDED that
shares of Company Common Stock which are purchased by Purchaser directly from
the Company from and after the date of this Agreement which are held by
Purchaser at the Effective Time shall not be so subtracted.
2.3. CONVERSION OR CANCELLATION OF COMPANY COMMON STOCK. At the
Effective Time, by virtue of the Merger and without any action on the part of
any holder thereof:
(a) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time, except for Perfected
Dissenting Shares and shares then owned by Purchaser or Universal International,
will cease to be outstanding and will, subject to the provisions of Section 2.4
hereof, be converted into the right to receive $0.30 (the "Merger
Consideration").
(b) Each share of Company Common Stock which, immediately
prior to the Effective Time, was issued and outstanding and held by Purchaser,
Sub or Universal International will continue to exist and remain outstanding.
(c) No Perfected Dissenting Shares will be converted into
the Merger Consideration under this Section 2.3, but such Perfected Dissenting
Shares will be subject to the provisions of Section 2.4 hereof.
(d) Each authorized but unissued share of Company Common
Stock will cease to exist.
2.4. DISSENTING SHARES. (a) Notwithstanding any provision of this
Agreement to the contrary, shares of Company Common Stock that are outstanding
immediately prior to the Effective Time and which are held of record or
beneficially owned by persons who have not voted such shares in favor of the
Merger and who shall have timely delivered a written demand for appraisal of
such shares in accordance with Section 262 of the Delaware Law are herein
referred to as a "Dissenting Shares". Dissenting Shares, the holders of which
have not effectively withdrawn or lost (for failure to timely file with Company
a demand for appraisal of their shares
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or otherwise) their dissenters' rights under Section 262 ("Perfected Dissenting
Shares"), shall not be converted into or represent a right to receive the Merger
Consideration pursuant to Section 2.3 hereof, but the holders thereof shall be
entitled only to such rights as are granted by Section 262. Each holder of
Dissenting Shares who becomes entitled to payment for such holder's Company
Common Stock pursuant to the provisions of Section 262 shall receive payment
therefor on a timely basis from the Surviving Corporation (but only after the
amount thereof shall have been agreed upon or finally determined pursuant to
such provisions); provided, however, that (i) if any such holder of Dissenting
Shares shall have failed to establish his entitlement to appraisal rights as
provided in Section 262 of the Delaware Law, (ii) if any such holder of
Dissenting Shares shall have effectively withdrawn his demand for appraisal of
such Shares or lost his right to appraisal and payment for his Shares under
Section 262 of the Delaware Law or (iii) if neither any holder of Dissenting
Shares nor the Surviving Corporation shall have filed a petition demanding a
determination of the value of all Dissenting Shares within the time provided in
Section 262 of the Delaware Law, such holder or holders (as the case may be)
shall forfeit the right to appraisal of such Shares and each such Share shall
thereupon be deemed to have been converted, as of the Effective Time, into and
represent the right to receive payment from the Surviving Corporation of the
Merger Consideration, without interest thereon, as provided in Section 2.3
hereof.
(b) If any holder of Dissenting Share has effectively
withdrawn or lost such holder's dissenter's rights under Section 262, such
Dissenting Shares shall be converted into the right to receive the Merger
Consideration pursuant to Section 2.3(a) hereof.
(c) Company will give Purchaser and Sub prompt notice of
any written demands for appraisal, withdrawals of demands for appraisal or
notices and any other instruments served pursuant to Section 262 and received by
Company and the opportunity to direct all negotiations with and proceedings with
respect to holders of Dissenting Shares. Company will not voluntarily make any
payment with respect to any demands for payment for shares under Section 262 and
will not, except with the prior written consent of Purchaser, settle or offer to
settle any such demands.
2.5. PAYMENT FOR SHARES. (a) Purchaser shall authorize an exchange
agent (the "Exchange Agent") hereunder. As soon as practicable following the
Effective Time, Purchaser will deliver to the Exchange Agent, funds (the
"Exchange Fund") necessary to make the payments contemplated by Section 2.3.
Out of the Exchange Fund, the Exchange Agent shall, pursuant to irrevocable
instructions, make the payments referred to in Section 2.3. The Exchange Fund
shall not be used for any other purpose. The Exchange Agent may invest portions
of the Exchange Fund, as directed by Purchaser (so long as such directions do
not impair the Exchange Agent's ability to make the payments referred to in
Section 2.3 hereof or otherwise impair the rights of holders of shares of
Company Common Stock), provided that no such investments may be made other than
in direct obligations of the United States of America, obligations for which the
full faith and credit of the United States of America is pledged to provide for
the payment of principal and interest, commercial paper rated of the highest
quality by Moody's Investors Services, Inc. or Standard & Poor's Corporation, or
certificates of deposit issued by a commercial bank having capital exceeding
$500,000,000. Any net earnings resulting from, or interest or
5
income produced by, such investments shall be paid to the Surviving Corporation
as and when requested by Purchaser. The Surviving Corporation shall replace any
monies lost through any investment made pursuant to this Section 2.5. Deposit
of funds pursuant hereto shall not relieve Purchaser or the Surviving
Corporation of their obligations to make payments in respect of shares of
Company Common Stock and Purchaser hereby guarantees the Surviving Corporation's
obligations in respect thereof.
(b) LETTER OF TRANSMITTAL. Promptly after the Effective
Time, the Surviving Corporation shall cause the Exchange Agent to mail to each
record holder, as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "Certificates") a form letter of transmittal (the "Letter or Transmittal")
for return to the Exchange Agent (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent) and instructions for
use in effecting the surrender of the Certificates, for payment therefor. Upon
surrender to the Exchange Agent of a Certificate, together with the Letter of
Transmittal duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor cash in an amount equal to the product of the
number of shares of Company Common Stock represented by such Certificate
multiplied by the Merger Consideration, subject to any required withholding
taxes, and such Certificate shall forthwith be canceled. No interest will be
paid or accrued on the cash payable upon the surrender of the Certificates. If
payment is to be made to a person other than the person in whose name the
Certificate surrendered is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or otherwise in proper
form of transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of the Certificate surrendered or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions of this Section
2.5, each Certificate (other than Certificates representing shares of Company
held by Purchaser, Sub, Universal International or any other wholly-owned
subsidiary of Purchaser, Company or any wholly-owned subsidiary of Company which
shall have been canceled, or Dissenting Shares) shall represent for all purposes
the right to receive the Merger Consideration in cash multiplied by the number
of shares of Company Common Stock evidenced by such Certificate, without any
interest thereon.
(c) RETURN OF UNCLAIMED FUNDS. Any cash provided to the
Exchange Agent pursuant to this Section 2.5 and not exchanged for Certificates
within six months after the Effective Time will be returned by the Exchange
Agent to the Surviving Corporation, which thereafter will act as Exchange Agent.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a holder of shares of Company Common Stock for any Merger
Consideration delivered to a public official pursuant to applicable abandoned
property, escheat and similar laws.
2.6. NO FURTHER RIGHTS OR TRANSFERS. At and after the Effective
Time, each holder of a Certificate that represented issued and outstanding
shares of Company Common Stock immediately prior to the Effective Time shall
cease to have any rights as a stockholder of
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Company, except for the right to surrender his or her Certificate or
Certificates in exchange for the payment provided pursuant to Section 2.3 hereof
or to perfect his or her right to receive payment for his or her Shares pursuant
to Section 262 of the Delaware Law and Section 2.4 hereof if such holder has
validly exercised and perfected and not withdrawn his or her right to receive
payment for his or her shares of Company Common Stock, and there shall be no
transfers on the stock transfer books of the Surviving Corporation of the shares
of Company which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates formerly representing shares of Company
Common Stock are presented to the Surviving Corporation, they shall be canceled
and exchanged for cash as provided in this Section 2.6, subject to applicable
laws in the case of Dissenting Shares.
2.7. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of Company shall be closed and no transfer of Company Common
Stock shall thereafter be made.
2.8. STOCKHOLDERS' MEETINGS. Purchaser and Company shall cooperate
in soliciting proxies, if required, from the stockholders of Company in favor
of approval of this Agreement and of the Merger pursuant to the terms of a proxy
statement (the "Proxy Statement") prepared and filed in accordance with Section
6.4 hereof.
2.9. FILING OF MERGER DOCUMENTS. As soon as practicable after the
requisite approvals of the stockholders of Company have been obtained as
provided in Section 2.9 hereof, and each other condition to the obligations of
Company, Purchaser and Sub hereunder has been satisfied or waived, Company and
Sub will deliver the Certificate of Merger for filing with the Secretary of
State of the State of Delaware, and Company, Purchaser and Sub will take such
other actions as may be required by the Delaware Law in connection with such
filing and the consummation of the Merger.
2.10. RELATED AGREEMENT. Each of the Principal Stockholders have
executed and delivered to Purchaser a separate agreement pursuant to which they
(i) agree to vote the shares of Company Common Stock held by them in favor of
this Agreement and the Merger at the Stockholders meeting called for that
purpose and have granted a proxy to Purchaser to do the same in their place and
stead, and (ii) agree not to sell, transfer, hypothecate or otherwise dispose of
any of their shares of Company Common Stock held by them as of the date hereof
until the earlier to occur of termination of this Agreement or the Effective
Time, except as expressly provided for therein. For purposes of this section,
"Principal Stockholders" shall mean all directors, executive officers and
holders of more than 5% of the Company Common Stock.
3. CLOSING DATE. The Closing of the Merger (the "Closing") shall, unless
another date or place is agreed to in writing by the parties, take place at the
offices of Troop Meisinger Steuber & Pasich, LLP, 10940 Wilshire Boulevard, Los
Angeles, California 90024 (except for the filing of the Certificates of Merger,
which shall take place in the office of the Secretary of State of the State of
Delaware) on the second business day following the satisfaction or waiver of all
conditions precedent to the Merger, including those set forth in Sections 7, 8
and 9 of this Agreement. The date of the Closing is referred to in this
Agreement as the "Closing Date."
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4. REPRESENTATIONS AND WARRANTIES OF COMPANY. Except as set forth in the
disclosure letter delivered at or prior to the execution of this Agreement by
Company, which shall refer to the relevant Sections of this Agreement (the
"Company Disclosure Letter"), Company represents and warrants to and agrees with
Purchaser and Sub as follows:
4.1. ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Company is qualified, licensed or domesticated as a
foreign corporation and is in good standing in all jurisdictions where the
character of its properties owned or held under lease or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified, licensed or domesticated would not have a Material Adverse Effect on
Company. Company has all requisite power and authority and all requisite
licenses, permits and franchises necessary to own, lease and operate its
properties and assets and to carry on its business in the manner and in the
locations as presently conducted, except where the failure to do so would not
have a Material Adverse Effect on Company. Copies of the Certificate of
Incorporation (as certified by the Delaware Secretary of State) and Bylaws of
Company have been delivered to Purchaser and are accurate and complete as of the
date hereof.
4.2. AUTHORIZATION. Company has the requisite corporate power and
authority to enter into and carry out the terms and conditions of this Agreement
and all the transactions contemplated hereunder. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by Company's Board of Directors and, other than the
Stockholder approval required pursuant to Section 6.3 hereof, all corporate
proceedings have been taken and no other corporate proceedings on the part of
Company are necessary to authorize the execution, delivery and performance by
Company of this Agreement. This Agreement has been duly executed and delivered
by Company and constitutes the valid and binding obligations of Company,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting creditors' rights generally from time to
time in effect and except that equitable remedies may not in all cases be
available (regardless of whether enforceability is considered in a proceeding at
law or in equity) (collectively, the "Remedies Exception"). The execution,
delivery and performance of this Agreement by Company will not conflict with or
constitute a breach, violation or default under Company's Certificate of
Incorporation or Bylaws, any statute, law or administrative regulation, or under
any judgment, decree, order, writ, governmental permit or license, any material
contract, agreement, lease, indenture or instrument to which Company or any of
its Subsidiaries is a party or by which Company or any of its Subsidiaries is
bound.
4.3. NO CONSENTS. No consent, authorization, order or approval of,
or filing with or registration with, any governmental authority, commission,
board or other regulatory body of the United States or any state or political
subdivision thereof, or any other Person, is required to be made or obtained by
Company for or in connection with the execution and delivery by Company of this
Agreement and the consummation by Company of the transactions contemplated
hereby.
8
4.4. CAPITAL STOCK. The authorized capital stock of Company
consists of 20,000,000 shares of Company Common Stock, par value $0.07 per
share. As of the date hereof, (i) there are 4,724,048 shares of Company Common
Stock issued and outstanding, all of which are duly authorized, validly issued,
fully paid and non-assessable and were not issued in violation of any preemptive
rights or any federal or state securities laws, and (ii) no shares of Company
Common Stock are held by Subsidiaries of Company. As of the date hereof, there
are (i) no options, warrants, purchase rights, calls, subscriptions, convertible
securities or other rights, (including preemptive rights), agreements,
understandings, arrangements or commitments of any character obligating the
Company now or at any time in the future to issue or sell any of its capital
stock or other equity interests of Company or any of its Subsidiaries
(including, without limitation, options or rights that may be issued and
outstanding under any Company stock option plan), and no shares of Company
Common Stock are reserved for future issuance for such purpose, (ii) there are
no obligations, contingent or otherwise, of Company or any of its Subsidiaries,
to repurchase, redeem or otherwise acquire any shares of capital stock or other
equity interests of Company or any of its Subsidiaries or to provide funds or to
make any investment (in the form of a loan, capital contribution or otherwise)
in any Subsidiary or another entity, other than guarantees of bank obligations
of Subsidiaries entered into in the ordinary course of business, (iii) there are
no outstanding bonds, debentures, notes or other obligations of Company the
holders of which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the Stockholders on
any matter, (iv) there are no obligations, contingent or otherwise, guaranteeing
the value of any of the shares of Company Common Stock or any of its
Subsidiaries either now or at any time in the future, and (v) there are no
voting trusts, proxies or other agreements or understandings to which Company is
a party or is bound with respect to the voting of any capital stock or other
equity interests of Company or any of its Subsidiaries.
4.5. SUBSIDIARIES. The Company Disclosure Letter sets forth a true
and correct list of each Subsidiary of Company as of the date hereof. All of
the outstanding capital stock of each such Subsidiary is owned entirely by
Company or by a Subsidiary of Company, as the case may be, as of the date
hereof, free and clear of all liens, charges, pledges, security interests or
other encumbrances, except for restrictions on transfer imposed by applicable
securities laws. All such shares of capital stock have been duly authorized and
validly issued and are fully paid and nonassessable. There are no agreements,
understandings or undertakings governing the rights and duties of Company or any
Subsidiary of Company as a stockholder of any Subsidiary, including, without
limitation, any agreement, arrangement or understanding under which Company is
or may become obligated, directly or indirectly, to acquire or dispose of any
equity interest in, make any capital contribution or extend credit to, or act as
guarantor, surety or indemnitor for any liability of any Subsidiary. Each such
Subsidiary is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization, has the corporate power and authority
to carry on its business as it is now being conducted and is duly qualified to
do business and is in good standing in all jurisdictions where the failure to be
so qualified would have a Material Adverse Effect on Company. Other than its
Subsidiaries, Company has no interest in any corporation, joint venture,
partnerships or other business enterprise.
9
4.6. SEC REPORTS AND FINANCIAL STATEMENTS. From and after January
1, 1994, Company and each subsidiary subject to the periodic reporting
requirements under the Exchange Act has filed with the SEC all forms, reports,
registration statements, proxy statements and other documents (collectively, the
"Company Reports") required to be filed by Company under the Securities Act, the
Exchange Act, and the rules and regulations promulgated thereunder
(collectively, the "Securities Laws"). Company has heretofore furnished
Purchaser with true and complete copies of all Company Reports filed as of the
date hereof. As of their respective dates, or, in the case of registration
statements, as of their effective dates, all of the Company Reports, including
all exhibits and schedules thereto and all documents incorporated by reference
therein, (i) complied as to form in all material respects with the requirements
of the Securities Laws applicable thereto, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements, in light of the
circumstances under which they were made, not misleading. Company has filed
with the SEC all documents and agreements which were required to be filed as
exhibits to the Company Reports. The audited consolidated financial statements
and unaudited interim consolidated financial statements of Company included or
incorporated by reference in Company Reports (collectively, the "Company
Financial Statements") have been prepared in accordance with GAAP applied on a
consistent basis in accordance with Company's historical practices which
practices conform to GAAP (except as may be indicated therein or in the notes
thereto) and fairly present the financial position of Company as of and at the
dates thereof and the results of operations and cash flows for the periods then
ended, subject in the case of the unaudited interim financial statements, to
normal, recurring year-end adjustments and any other adjustments described
therein, which were not and are not expected to be material in amount or effect.
Except as set forth or reflected in Company Financial Statements at December 31,
1996, or as set forth in the unaudited balance sheets included in the Company
Reports since that date, neither Company nor any of its Subsidiaries, has any
liabilities or obligations of any kind or nature (whether accrued, absolute,
contingent or otherwise) which would be required to be reflected or reserved
against in any balance sheet of Company or any of its Subsidiaries, or in the
notes thereto, prepared in accordance with GAAP consistently applied.
4.7. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Company Reports filed with the SEC prior to the date hereof, since September 30,
1997, Company and its Subsidiaries each has conducted its business in all
material respects in the ordinary and usual course consistent with past
practice, and there has not been (a) any event or occurrence which could result
in a Material Adverse Effect on Company, (b) any material change in accounting
methods, principles and practices by Company and its Subsidiaries (except for
any such changes required by reason of a concurrent change in GAAP or to conform
a Subsidiary's accounting methods, principles or practices to those of Company),
(c) any damage, destruction or loss, whether covered by insurance or not, having
a Material Adverse Effect on Company, (d) any entry by Company or any of its
Subsidiaries into any commitment or transaction material to Company which is not
in the ordinary course of business consistent with past practice, (e) any
declaration, payment or setting aside for payment of any dividends, or (f) any
grant to any officer or director of any increase in compensation (other than
periodic salary increases not in excess of 10% made in the ordinary course of
business consistent with past practice or increases resulting
10
from job promotions or expansions of employment responsibilities), or any loan
to any officer or director, or any adoption, amendment in any material respect
or termination of any bonus, profit sharing, stock option, employee stock
ownership, pension, retirement, deferred compensation, employment or consulting
or other plan, agreement or arrangement for the benefit of employees of Company.
4.8. LITIGATION. Company has disclosed in the Company Disclosure
Letter all information in its possession or custody or under its control with
respect to litigation pending as of the date hereof. Except as set forth in the
Company Disclosure Letter, Company has no litigation pending as of the date
hereof. To the best of Company's knowledge, the ultimate liability for damages
arising from such litigation (based upon assumptions that Company believes in
good faith to be reasonable under the circumstances) is either adequately
reserved against in the Company Financial Statements at December 31, 1996 or in
the unaudited balance sheets included in the Company Reports since that date or
will not have a Material Adverse Effect on Company. Except as set forth in
Company Disclosure Letter, there are no actions, suits or proceedings of any
nature pending, or, to the knowledge of Company, threatened, against or by
Company or any of its properties, assets or business, nor is Company or any of
its properties, assets or business, subject to any order, judgment, ruling, or
decree of any competent authority, which would have, or is reasonably likely to
have, a Material Adverse Effect on Company. Company has not received notice of
violation of any applicable statute, regulation, code, ordinance, rule, order,
judgment, decree or requirement relating to its operations or its owned or
leased properties and to Company's knowledge, no such violation exists, in each
case, other than a violation which would not have a Material Adverse Effect on
Company.
4.9. PROPERTIES, ENCUMBRANCES. Company and its Subsidiaries have
good and marketable title in fee simple to, or a valid leasehold interest in,
each of the real properties reflected on the Company Financial Statements or
which have been acquired after the date thereof or used by them as of the date
hereof (collectively, the "Company Properties"), in each case, free and clear of
all liens, mortgages or deeds of trust, claims against title, security interests
or other encumbrances on title ("Liens") or any rights of way, written
agreements, laws, ordinances or regulations affecting the use or occupancy of
such properties, or any reservations of an interest in title ("Restrictions")
except Liens and Restrictions included in the Company Disclosure Letter.
4.10. COMPLIANCE WITH APPLICABLE LAW. The businesses of Company and
its Subsidiaries are not being conducted in violation of any applicable law,
ordinance, regulation, decree or order of any governmental entity. Neither
Company nor any Company Subsidiary is a party to or subject to any judgment,
decree, or order entered in any suit or proceeding brought by any governmental
agency or by any other person, enjoining Company or any Company Subsidiary with
respect to any business practice, the acquisition of any property, or the
conduct of business in any area.
4.11. NO BROKERS. Neither Company nor any Company Subsidiary has
entered into any contract, arrangement or understanding with any Person or firm
which may result in the obligation of Company, the Surviving Corporation or
Purchaser to pay any finder's fee, brokerage
11
or agent's commissions or other like payments in connection with the
negotiation, execution or performance of this Agreement and Company is not aware
of any claim for any such payment.
4.12. PROXY STATEMENT. None of the information supplied by Company
for inclusion in the Proxy Statement, at the time of the mailing thereof to the
Company Stockholders and at the time of the Company Stockholders meeting,
contains any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4.13. INFORMATION. All written information provided to Purchaser or
its respective agents by or on behalf of Company or any of its representatives
(including, without limitation, each representation and warranty of Company set
forth in this Agreement) is, and Company covenants that any such information
provided hereafter shall be, true and correct in all material respects and does
not, or shall not, omit any material fact required to be included therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Except as set forth in
the disclosure letter delivered at or prior to the execution of this Agreement
by Purchaser, which shall refer to the relevant Sections of this Agreement (the
"Purchaser Disclosure Letter"), Purchaser and Sub jointly and severally
represent, warrant, covenant and agree with Company as follows:
5.1. ORGANIZATION AND STANDING; ARTICLES AND BYLAWS. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California. Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Purchaser is qualified, licensed or domesticated as a foreign corporation and is
in good standing in all jurisdictions where the character of its properties
owned or held under lease or the nature of its activities make such
qualification necessary, except where the failure to be so qualified, licensed
or domesticated would not have a Material Adverse Effect on Purchaser. Sub has
not conducted any business prior to the date hereof and has no material assets
and liabilities other than those incident to its formation. Purchaser has all
requisite power and authority and all requisite licenses, permits and franchises
necessary to own, lease and operate its properties and assets and to carry on
its business in the manner and in the locations as presently conducted, except
where the failure to do so would not have a Material Adverse Effect on
Purchaser. Copies of the Articles of Incorporation (as certified by the
California Secretary of State and the Delaware Secretary of State, respectively)
and Bylaws of each of Purchaser and Sub have been delivered to Company and are
accurate and complete as of the date hereof.
5.2. AUTHORIZATION. Each of Purchaser and Sub has the requisite
corporate power and authority to enter into and carry out the terms and
conditions of this Agreement and all the transactions contemplated hereunder.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by Purchaser's and
Sub's Board of Directors and all corporate proceedings have been taken and no
other corporate proceedings on the part of Purchaser and Sub are necessary to
authorize the
12
execution, delivery and performance by each of Purchaser and Sub of this
Agreement. This Agreement has been duly executed and delivered by each of
Purchaser and Sub and constitutes the legal, valid and binding obligations of
each of Purchaser and Sub, enforceable in accordance with its terms, subject to
the Remedies Exception. The execution, delivery and performance of this
Agreement by each of Purchaser and Sub will not conflict with or constitute a
breach, violation or default under Purchaser's or Sub's Articles of
Incorporation or Bylaws, any statute, law or administrative regulation, or under
any judgment, decree, order, writ, governmental permit or license, any material
contract, agreement, lease, indenture or instrument to which Purchaser or Sub or
any of the Subsidiaries of Purchaser is a party or by which Purchaser or any of
the Subsidiaries of Purchaser is bound, which breach, violation or default would
have a Material Adverse Effect on Purchaser.
5.3. NO CONSENTS. No consent, authorization, order or approval of,
or filing with or registration with, any governmental authority, commission,
board or other regulatory body of the United States or any state or political
subdivision thereof, or any other Person, is required to be made or obtained by
Purchaser or Sub for or in connection with the execution and delivery by
Purchaser and Sub of this Agreement and the consummation by Purchaser and Sub of
the transactions contemplated hereby, the absence of which would have a Material
Adverse Effect on Purchaser, other than the filing of the Certificate of Merger
with the Delaware Secretary of State, and compliance with the Securities Laws.
5.4. SEC REPORTS. Purchaser has filed with the SEC all forms,
reports, registration statements, proxy statements and other documents
(collectively, the "Purchaser Reports") required to be filed by Purchaser under
the Securities Laws, except failures to file which, individually or
collectively, do not have a Material Adverse Effect on Purchaser. As of their
respective dates, or, in the case of registration statements, as of their
effective dates, all of Purchaser Reports, including all exhibits and schedules
thereto and all documents incorporated by reference therein, (i) complied as to
form in all material respects with the requirements of the Securities Laws
applicable thereto, and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Purchaser has filed with the SEC all documents and
agreements which were required to be filed as exhibits to Purchaser Reports,
except failures to file, if any, which, individually or collectively, do not
have a Material Adverse Effect on Purchaser. The audited consolidated financial
statements and unaudited interim consolidated financial statements of Purchaser
included or incorporated by reference in Purchaser Reports (collectively, the
"Purchaser Financial Statements") have been prepared in accordance with GAAP
applied on a consistent basis (except as may be indicated therein or in the
notes thereto) and fairly present the financial position of Purchaser as of and
at the dates thereof and the results of operations and cash flows for the
periods then ended, subject in the case of the unaudited interim financial
statements, to normal, recurring year-end adjustments and any other adjustments
described therein, which were not and are not expected to be material in amount
or effect. Except as set forth or reflected in Purchaser Financial Statement at
September 30, 1997, or as set forth in the unaudited balance sheets included in
Purchaser Reports since that date, neither Purchaser nor any of its
Subsidiaries, has any liabilities or obligations of any kind
13
or nature (whether accrued, absolute, contingent or otherwise) which would be
required to be reflected or reserved against in any balance sheet of Purchaser
or any of its Subsidiaries, or in the notes thereto, prepared in accordance with
GAAP consistently applied, except liabilities since September 30, 1997, either
(i) in the ordinary course of business or (ii) which, individually or
collectively, would not have a Material Adverse Effect on Purchaser.
5.5. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Purchaser Reports filed with the SEC prior to the date hereof, since
September 30, 1997, Purchaser and its Subsidiaries have conducted their business
in all material respects in the ordinary and usual course consistent with past
practice, and there has not been (a) any event or occurrence which could result
in a Material Adverse Effect on Purchaser, (b) any material change in accounting
methods, principles and practices by Purchaser and its Subsidiaries (except for
any such changes required by reason of a concurrent change in GAAP or to conform
a Subsidiary's accounting methods, principles or practices to those of
Purchaser), (c) any damage, destruction or loss, whether covered by insurance or
not, having a Material Adverse Effect on Purchaser, (d) any entry by Purchaser
or any of its Subsidiaries into any commitment or transaction material to
Purchaser which is not in the ordinary course of business consistent with past
practice, or (e) any declaration, payment or setting aside for payment of any
dividends.
5.6. LITIGATION. Purchaser has disclosed in the Purchaser
Disclosure Letter all information in its possession or custody or under its
control with respect to litigation pending as of the date hereof. Except as set
forth in the Purchaser Disclosure Letter, Purchaser has no material litigation
pending as of the date hereof. To the best of Purchaser's knowledge, the
ultimate liability for damages arising from such litigation (based upon
assumptions that Purchaser believes in good faith to be reasonable under the
circumstances) is either adequately reserved against in the Purchaser Financial
Statement at December 31, 1996 or in the unaudited balance sheets included in
Purchaser Reports since that date or will not have a Material Adverse Effect on
Purchaser. Except as set forth in Purchaser Disclosure Letter, there are no
actions, suits or proceedings of any nature pending, or, to the knowledge of
Purchaser, threatened, against or by Purchaser or any of its properties, assets
or business, nor is Purchaser or any of its properties, assets or business,
subject to any order, judgment, ruling, or decree of any competent authority,
which would have, or is reasonably likely to have, a Material Adverse Effect on
Purchaser. Purchaser has not received notice of violation of any applicable
statute, regulation, code, ordinance, rule, order, judgment, decree or
requirement relating to its operations or its owned or leased properties and to
Purchaser's knowledge, no such violation exists, in each case, other than a
violation which would not have a Material Adverse Effect on Purchaser.
5.7. COMPLIANCE WITH APPLICABLE LAW. The businesses of Purchaser
and its Subsidiaries are not being conducted in violation of any applicable law,
ordinance, regulation, decree or order of any governmental entity, except for
violations which either singly or in the aggregate do not and are not expected
to have a Material Adverse Effect on Purchaser. Neither Purchaser nor any
Purchaser Subsidiary is a party to or subject to any judgment, decree, or order
entered in any suit or proceeding brought by any governmental agency or by any
other person,
14
enjoining Purchaser or any Purchaser Subsidiary with respect to any business
practice, the acquisition of any property, or the conduct of business in any
area.
5.8. NO BROKERS. Neither Purchaser nor any of its Subsidiaries has
entered into any contract, arrangement or understanding with any Person or firm
which may result in the obligation of Purchaser, the Surviving Corporation or
Company to pay any finder's fee, brokerage or agent's commissions or other like
payments in connection with the negotiation, execution or performance of this
Agreement and Purchaser is not aware of any claim for any such payment.
5.9. PROXY STATEMENT. None of the information supplied by Purchaser
for inclusion or incorporation by reference in the Proxy Statement will, at the
time of the mailing thereof to the stockholders of Company and at the time of
such stockholders meeting, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
5.10. INFORMATION. All written information provided to Company or
its agents by or on behalf of Purchaser or any of its representatives
(including, without limitation, each representation and warranty of Purchaser
set forth in this Agreement) is, and Purchaser covenants that any such
information provided hereafter shall be, true and correct in all material
respects and does not, or shall not, omit any material fact required to be
included therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6. PRE-MERGER COVENANTS OF PURCHASER AND COMPANY. Each of Purchaser and
Company covenants and agrees with the other that:
6.1. CONDUCT OF BUSINESS BY COMPANY. During the period from the
date of this Agreement until the earlier to occur of the termination of this
Agreement or the Effective Time, except as contemplated by this Agreement,
unless Purchaser has consented in writing thereto, Company (i) shall, and shall
cause each of its Subsidiaries to, conduct its operations only in, and Company
and its Subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice, and (ii) shall use its
reasonable commercial efforts, and shall cause each of its Subsidiaries to use
its reasonable commercial efforts, to preserve intact its respective business
organizations and goodwill, keep available the services of its respective
officers and employees and maintain satisfactory relationships with those
persons having business relationships with it, and (iii) shall confer on a
regular basis with one or more representatives of Purchaser to report
operational matters of materiality and any proposals to engage in any material
transactions. By way of amplification and not limitation, and except as noted
above, neither Company nor any of its Subsidiaries shall, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, directly or indirectly, do, or propose
to do, any of the following without the prior written consent of Purchaser:
15
(a) amend or otherwise change its Articles of Incorporation or
Bylaws;
(b) split, combine, reclassify or amend the terms of any of its
capital stock;
(c) declare, set aside or pay any dividend or distribution
payable in cash, stock or property or any combination thereof with respect to
shares of its capital stock;
(d) authorize, issue, sell, pledge, encumber or agree to
authorize, issue, sell, pledge or encumber any additional shares of its capital
stock of any class or any other securities in respect of, in lieu of or in
substitution of Company Common Stock outstanding as of the date hereof or any
options, warrants, conversion rights or other rights to acquire capital stock of
Company or any of its Subsidiaries;
(e) redeem or otherwise acquire any of its outstanding equity
securities or any outstanding options or rights to purchase any such equity
securities or make any commitment to take such action;
(f) accelerate, amend or change (or permit any acceleration,
amendment or change of) the period of exercisability of any Company Purchase
Right or authorize cash payments in exchange for any Company Purchase Right
(other than pursuant to the express terms of such Company Purchase Right);
(g) sell, pledge, dispose of or encumber any material assets of
Company or any of its Subsidiaries, except in the ordinary course of business
consistent with past practice;
(h) acquire (by merger, consolidation or acquisition of stock
or assets) any corporation, partnership or any other business organization or
division thereof;
(i) incur any indebtedness for borrowed money, or assume,
guarantee or otherwise as an accommodation become responsible for, the
obligations of any other person or entity (in the case of any such indebtedness,
Purchaser's consent shall not be unreasonably withheld or delayed);
(j) authorize any capital expenditures or purchase of fixed
assets for Company and its Subsidiaries which are in the aggregate more than
$10,000;
(k) increase the compensation or benefits payable or to become
payable to its officers or employees, except in amounts consistent with past
practices; or grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other employee
of Company or any of its Subsidiaries; or establish any collective bargaining,
bonus, profit sharing, compensation, stock option, pension, retirement,
16
deferred compensation, employment or consulting or other plan, agreement, trust,
fund, plan, policy or arrangement for the benefit of any current or former
directors, officers or employees;
(l) take any action to change accounting policies or
procedures;
(m) make any material tax election inconsistent with past
practices or settle or compromise any material federal, state, local or foreign
tax liability;
(n) pay, discharge or satisfy any material claims, liabilities
or obligations other than in the ordinary course of business and consistent with
past practices;
(o) take or agree to take, any action which would cause a
material breach of any of the representations or warranties of Company contained
in this Agreement or prevent Company from performing or cause Company not to
perform its covenants hereunder in any material respect; or
(p) submit any matters to the Stockholders for a vote prior to
the Closing other than the Merger.
6.2. INSPECTION OF RECORDS. From the date hereof to the earlier to
occur of the termination of this Agreement and the Effective Time, Company shall
allow the duly authorized and appropriate officers, attorneys, accountants and
other representatives of the other access at all reasonable times to the records
and files, correspondence, audits and properties, as well as to all information
relating to commitments, contracts, titles and financial position, or otherwise
pertaining to, the business and affairs of Company and its Subsidiaries.
6.3. STOCKHOLDER APPROVAL. In order to consummate the Merger,
Company, acting through the Board, shall, in accordance with applicable law and
Company's Certificate of Incorporation and Bylaws, (i) duly call, give notice
of, convene and hold a special meeting of its stockholders as soon as
practicable for the purpose of considering and taking action on this Agreement
and the Merger and (ii), (A) include in the Proxy Statement the unanimous
recommendation of the Board that the holders of the Shares approve and adopt
this Agreement and the Merger and (B) use its reasonable efforts to obtain such
approval and adoption of the holders of shares of Company Common Stock. At the
stockholders' meeting, Purchaser and Sub shall cause all shares of Company
Common Stock then owned directly or indirectly by them and their subsidiaries to
be voted in favor of the approval and adoption of this Agreement and the Merger.
6.4. PROXY STATEMENT. As promptly as reasonably practicable,
Company shall file the Proxy Statement with the SEC under the Exchange Act, and
shall use its reasonable efforts to have the Proxy Statement cleared by the SEC.
Purchaser, Sub and Company shall cooperate with each other in the preparation of
the Proxy Statement, and Company shall notify Purchaser of the receipt of any
comments of the SEC with respect to the Proxy Statement and of any requests by
the SEC for any amendment or supplement thereto or for additional information
and shall provide to Purchaser promptly copies of all correspondence between
Company or any
17
representative of Company and the SEC. Company shall give Purchaser and its'
counsel the reasonable opportunity to review the Proxy Statement prior to its
being filed with the SEC and shall give Purchaser and its counsel the
opportunity to review all amendments and supplements to the Proxy Statement and
all responses to requests for additional information and replies to comments
prior to their being filed with, or sent to, the SEC. Each of Purchaser, Sub
and Company agrees to use its reasonable efforts, after consultation with the
other parties hereto, to respond promptly to all such comments of, and requests
by, the SEC and to cause the Proxy Statement and all required amendments and
supplements thereto to be mailed to the holders of shares of Common Stock
entitled to vote at the Company stockholders meeting at the earliest practicable
time.
6.5. EXPENSES. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses except as
expressly provided herein and except that the filing fee in connection with the
filing of the Proxy Statement with the SEC and the expenses incurred in
connection with printing and mailing the Proxy Statement, shall be paid by
Purchaser.
6.6. FILINGS; OTHER ACTION. Subject to the terms and conditions
herein provided, Company and Purchaser shall use all reasonable efforts to
cooperate with one another in (i) determining which filings are required to be
made prior to the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from
states and foreign jurisdictions in connection with the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
and (ii) timely making all such filings and timely seeking all such consents,
approvals, permits or authorizations; and use all reasonable efforts to take, or
cause to be taken, all other action and do, or cause to be done, all other
things necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors of Purchaser and
Company shall take all such necessary action.
6.7. PUBLICITY. The initial press release relating to this
Agreement shall be a joint press release in a form mutually agreeable to
Purchaser and Company, and Purchaser and Company shall, subject to their
respective legal obligations of public companies, use reasonable efforts to
agree upon the text of any other press release before issuing any such press
release or otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any federal or state
governmental or regulatory agency or with any national securities exchange with
respect thereto.
6.8. INDEMNIFICATION. From and after the Effective Time, Purchaser
shall cause the Surviving Corporation to, and the Surviving Corporation shall,
include as part of its Certificate of Incorporation and Bylaws provisions
relating to the indemnification of all current and former directors, officers,
employees and agents of Company which are substantially similar to the
provisions contained in Company's Certificate of Incorporation and Bylaws. Such
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provisions shall not be amended, repealed or otherwise modified after the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at any time prior to the Effective Time were directors,
officers, employees or agents of Company in respect to actions or omissions
occurring at or prior to the Effective Time (including, without limitation,
actions or omissions which occur in connection with the transactions
contemplated by this Agreement), unless such modification is required by law.
6.9 ACQUISITION PROPOSALS. Prior to the Effective Time, Company
agrees (a) that neither it nor any of its Subsidiaries shall, and it shall
direct and use its best efforts to cause its officers, directors, employees,
agents and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its Stockholders) with respect to a merger,
acquisition, consolidation or similar transaction involving, or any purchase of
all or any significant portion of the assets or any equity securities of, the
Company or any of its Subsidiaries (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal") or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal;
(b) that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing and will take the necessary steps to inform
the individuals or entities referred to above of the obligations undertaken in
this Section 6.9; and (c) that it will notify Purchaser immediately if any such
inquiries or proposals are received by, any such information is received from,
or any such negotiations or discussions are sought to be initiated or continued
with, it; PROVIDED, HOWEVER, that nothing contained in this Section 6.9 shall
prohibit the Board of Directors of the Company from (i) furnishing information
to or entering into discussions or negotiations with, any person or entity that
makes an unsolicited bona fide proposal to acquire the Company pursuant to a
merger, consolidation, share exchange, purchase of a substantial portion of the
assets, business combination or other similar transaction, if, and only to the
extent that (A) the Board of Directors determines in good faith that such action
is required for the Board of Directors to comply with its fiduciary duties to
stockholders imposed by law, (B) the Board of Directors has received a legal
opinion from its counsel that such action is required for the Board of Directors
to comply with its fiduciary duties to stockholders imposed by law, (C) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, Company provides written notice to the effect that
it is furnishing information to, or entering into discussions or negotiations
with, such person or entity, and (D) subject to any confidentiality agreement
with such person or entity (which such party determined in good faith was
required to be executed in order for the Board of Directors to comply with its
fiduciary duties to stockholders imposed by law), Company keeps Purchaser
informed of the status (not the terms) of any such discussions or negotiations;
and (ii) to the extent applicable, complying with Rule 14e-2 promulgated under
the Exchange Act with regard to an Acquisition Proposal. Nothing in this
Section 6.9 shall (x) permit any party to terminate this Agreement (except as
specifically provided in Section 10 hereof), (y) permit any party to enter into
any agreement with respect to an Acquisition Proposal during the term of this
19
Agreement (it being agreed that during the term of this Agreement, no party
shall enter into any agreement with any person that provides for, or in any way
facilitates, an Acquisition Proposal (other than a confidentiality agreement in
customary form)), or (z) affect any other obligation of any party under this
Agreement.
7. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following condition:
7.1. STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of Company
to the extent required by Delaware Law and the Certificate of Incorporation of
Company.
8. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PURCHASER AND SUB. All
obligations of Purchaser and Sub under this Agreement are subject to the
fulfillment at or prior to the Closing of the following additional conditions,
any of which may be waived in writing in whole or in part by Purchaser:
8.1. REPRESENTATIONS, COVENANTS, CERTIFICATE. Company shall have
performed in all material respects its agreements contained in this Agreement
required to be performed on or prior to the Effective Time, and the
representations and warranties of Company herein contained shall be true in all
material respects as of the date of this Agreement and the Effective Time.
8.2. PERMITS AND APPROVALS. All material filings, registrations,
covenants, permits, authorizations and regulatory approvals of governmental
authorities necessary for the consummation of the Merger shall have been duly
obtained or made and shall be in full force and effect.
8.3. NO ADVERSE CHANGE. There shall not have occurred any change in
the financial condition, business or operations of Company and its subsidiaries
that would have or would be reasonably likely to have a Material Adverse Effect
on Company.
8.4. CERTAIN LEGAL MATTERS. There shall not have been any statute,
rule, regulation or order promulgated, enacted, entered, enforced or deemed
applicable to the Merger by any United States federal or state government or
governmental authority, nor shall there be in effect an order or judgment
entered by any United States federal or state court, which (i) would make the
consummation of the Merger illegal or would materially delay the Effective Time,
(ii) would require the divestiture by Purchaser, Company or any of their
respective Subsidiaries of any of the shares of Company Common Stock or of a
material portion of the business, assets, or property of either Purchaser or any
of its Subsidiaries, or of Company or any of its Subsidiaries, or impose any
material limitation on the ability of any of them to conduct their respective
businesses and own their respective assets or property, or (iii) impose any
limitations on the ability
20
of Purchaser, directly or indirectly, to control in any material respect the
business or operations of Company, or any of its Subsidiaries.
8.5. CERTIFICATE. Purchaser shall have received a certificate of
Company dated the Effective Time, signed by a senior officer of Company,
certifying that (i) all representations and warranties of Company were true and
correct in all material respects when made and are true and correct in all
material respects on the Effective Time as if made on the Effective Time, and
(ii) Company has performed and complied in all material respects with all
covenants and agreements required in this Agreement to be performed or complied
with by it on or prior to the Effective Time.
8.6. TENDER FOR UNIVERSAL INTERNATIONAL. Purchaser shall have
completed its tender offer for shares of Universal International and shall have
acquired a number of shares of common stock of Universal International such
that, when added to the shares it owned prior to the commencement of the tender
offer, it shall own at least eighty percent (80%) of the issued and outstanding
common stock of Universal International.
9. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF COMPANY. All obligations
of Company under this Agreement are subject to the fulfillment at or prior to
the Closing of the following additional condition, which may be waived in
writing, in whole or in part, by Company:
9.1. NO LEGAL ACTION. No preliminary or permanent injunction or
other order, decree or ruling issued by any court of competent jurisdiction, or
by any governmental, administrative or regulatory agency or commission, in the
United States preventing the consummation of the Merger shall be in effect.
10. TERMINATION.
10.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding the approval thereof by the
stockholders of Company or Purchaser:
(a) By Purchaser, if any material condition to the
obligations of Purchaser set forth in Section 7 or 8 is not substantially
satisfied at the time or times contemplated thereby and such condition is not
waived by Purchaser or, by Company, if any material condition to the obligations
of Company set forth in Section 7 or 9 is not substantially satisfied at the
time or times contemplated thereby and such condition is not waived by Company.
Each party's right to terminate under this Section 10.1.(a) shall relate only to
conditions to that party's obligations;
(b) By Purchaser, upon a breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement such that the conditions to the obligations of Purchaser set forth
herein would not be satisfied;
21
(c) By either Purchaser or Company if the Merger shall not
have been consummated on or before December 31, 1998;
(d) By either Purchaser or Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued a non-appealable final order, degree or ruling or taken any
other action, in each case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger;
(e) By mutual written consent of Company and Purchaser
authorized by their respective Boards of Directors.
10.2. EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except that (a) the agreement
contained in Section 6.5 shall survive the termination hereof and (b) if
termination of this Agreement shall be judicially determined to have been caused
by willful breach of this Agreement, then, in addition to other remedies at law
or equity for breach of this Agreement, the party so found to have willfully
breached this Agreement shall indemnify the other parties for their respective
costs, fees and expenses of their counsel, accountants and other experts and
advisors as well as fees and expenses incident to negotiation, preparation and
execution of this Agreement and related documentation.
11. MISCELLANEOUS PROVISIONS.
11.1. NOTICES. All notices, demands or other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered in person, on the date actually given, (ii) by United States mail,
certified or registered, with return receipt requested, on the date which is two
business days after the date of mailing, or (iii) if sent by telex or facsimile
transmission, with a copy mailed on the same day in the manner provided in (ii)
above, on the date transmitted provided receipt is confirmed by telephone:
(a) if to Purchaser to:
99 CENTS Only Stores
4000 East Union Pacific Avenue
City of Commerce, California 90023
Attention: David Gold
Telecopy No.: (213) 980-8160
With copies to:
Troop Meisinger Steuber & Pasich, LLP
10940 Wilshire Boulevard
Los Angeles, California 90024
Attention: C.N. Franklin Reddick III, Esq.
Telecopy No.: (310) 443-8512
22
(b) if to Company to:
Odd's-N-End's, Inc.
5000 Winnetka Avenue North
New Hope, Minnesota 55428
Attention: Richard Ennen, President and Chief
Executive Officer
Telecopy No.: (612) 533-1158
or at such other address as may have been furnished by such Person in writing to
the other parties.
11.2. SEVERABILITY. Should any Section or any part of a Section
within this Agreement be rendered void, invalid or unenforceable by any court of
law for any reason, such invalidity or unenforceability shall not void or render
invalid or unenforceable any other Section or part of a Section in this
Agreement.
11.3. EXHIBITS AND SCHEDULES. Each Exhibit and Schedule delivered
pursuant to the terms of this Agreement and each document, instrument and
certificate delivered by the parties in connection with the transactions
contemplated hereby constitutes an integral part of this Agreement.
11.4. GOVERNING LAW. Except to the extent the laws of the State of
Delaware are applicable, this Agreement shall be governed by, and construed in
accordance with, the laws of the State of California applicable to contracts
executed in and to be performed in that State. All actions and proceedings
arising out of or relating to this Agreement shall be heard and determined in
any U.S. federal court located in the City of Los Angeles. The parties hereto
hereby (i) submit to the exclusive jurisdiction of any U.S. federal court
located in the City of Los Angeles for the purpose of any action arising out of
or based upon this Agreement or the Merger brought by any party hereto, and (ii)
waive, and agree not to assert by way of motion, as a defense, or otherwise, in
any such action, any claim that it is not subject personally to the jurisdiction
of the above-named courts, that its property is exempt or immune from attachment
or execution, that the action is brought in an inconvenient forum, that the
venue of the Action is improper, or that this Agreement or the Merger may not be
enforced in any or by any of the above-named courts.
11.5. NO ADVERSE CONSTRUCTION. The rule that a contract is to be
construed against the party drafting the contract is hereby waived, and shall
have no applicability in construing this Agreement or any provisions hereof.
11.6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
11.7. COSTS AND ATTORNEYS' FEES. In the event that any action, suit,
or other proceeding is instituted concerning or arising out of this Agreement,
the prevailing party shall
23
recover all of such party's costs, and reasonable attorneys' fees incurred in
each and every such action, suit, or other proceeding, including any and all
appeals or petitions therefrom.
11.8. SUCCESSORS AND ASSIGNS. All rights, covenants and agreements
of the parties contained in this Agreement shall, except as otherwise provided
herein, be binding upon and inure to the benefit of their respective successors
and assigns.
11.9. AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken by their respective Boards of Directors at any time
before or after approval hereof by the stockholders, but after any such
approval, no amendment shall be made which changes the Merger Consideration, or
which is otherwise not permitted by the California or Delaware Laws, without the
further approval of the stockholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
11.10. WAIVER. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, at any time before or after
approval hereof by the Stockholders of Company, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties of the other
parties contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto shall be valid if set forth in an
instrument in writing signed on behalf of such party by a duly authorized
officer.
11.11. ENTIRE AGREEMENT. This Agreement, the attached Exhibits and
Schedules, the other schedules referred to in this Agreement and the
Confidentiality Agreement contain the entire understanding of the parties and
there are no further or other agreements or understandings, written or oral, in
effect between the parties relating to the subject matter hereof unless
expressly referred to herein.
11.12. BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each party will use its best efforts to take, or cause to be taken,
all actions and do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement.
11.13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties, covenants and agreements contained herein and in
any certificate or other writing delivered pursuant hereto shall not survive the
Effective Time.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
99 CENTS ONLY STORES,
A CALIFORNIA CORPORATION
By: /s/ David Gold
--------------------
Name: David Gold
Title: President and Chief Executive Officer
ODD'S-N-END'S, INC.,
A DELAWARE CORPORATION
By: /s/ Richard Ennen
--------------------
Name: Richard Ennen
Title: President and Chief Executive Officer
ODDS'S-N-END'S ACQUISITION CORP.,
A DELAWARE CORPORATION
By: /s/ David Gold
--------------------
Name: David Gold
Title: President and Chief Executive Officer
25