SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
October 2, 1996
Date of Report (Date of Earliest Event Reported)
BABY SUPERSTORE, INC.
(Exact name of registrant as specified in its charter)
South Carolina 0-24614 57-0527831
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1201 Woods Chapel Road
Duncan, South Carolina 29334
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (864) 968-9292<PAGE>
Item 5. Other Events.
On October 2, 1996, Baby Superstore, Inc., a South
Carolina corporation (the "Company") and Toys "R" Us, Inc., a
Delaware corporation ("Toys"), announced their execution of an
Agreement and Plan of Merger (the "Merger Agreement") pursuant
to which the Company will merge with and into Toys (the "Merg-
er"). As a result of the Merger, Jack P. Tate, Chairman and
Chief Executive Officer of the Company, will receive .5150 of a
share of the common stock, $0.10 par value per share, of Toys
("Toys Stock") for each share of the Company's common stock, no
par value ("Company Common Stock"), and other shareholders of
the Company will receive .8121 of a share of Toys Stock for
each share of Company Common Stock. The Merger is conditioned
upon, among other things, approval by shareholders of the Com-
pany, the effectiveness of Toys' registration statement on Form
S-4 to be filed with the Securities and Exchange Commission,
the acceptance of the Toys Stock to be issued in the Merger for
listing on the New York Stock Exchange, subject to official
notice of issuance, and the expiration of any waiting period
applicable to the Merger under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. The Merger is also conditioned upon
the receipt of an opinion of counsel that the Merger will be
treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended, and that no gain or loss will be rec-
ognized by Toys, the Company, or, subject to the discussion below,
the shareholders of the Company, as a result of the Merger.
While not free from doubt, a shareholder of the Company may be
required to recognize income equal to the excess of the value of
.8121 of a share of Toys Stock over the blended per share value of
the total consideration paid in the Merger times the number of
shares of Company Common Stock held by such shareholder.
Concurrently with the Merger Agreement, Jack P. Tate
and Linda M. Robertson, President of the Company, entered into
a Shareholders Agreement with Toys (the "Shareholders Agree-
ment") whereby, among other things, Jack P. Tate has agreed to
vote, and has granted Toys "R" Us an irrevocable proxy to vote,
his approximately 46.8% of Company Common Stock in favor of the
Merger.
The above descriptions of the Merger Agreement and
the Shareholders Agreement are qualified in their entirety by
reference to the Merger Agreement and the Shareholders
Agreement, which are filed herewith as Exhibits 1 and 2,
respectively, and incorporated herein by reference.
A copy of the joint press release, dated October 2,
1996, issued by the Company and Toys relating to the Merger is
attached as Exhibit 3 hereto and is incorporated herein by ref-
erence.
-2-<PAGE>
Item 7. Financial Statements and Exhibits.
1. Agreement and Plan of Merger among Toys "R" Us,
Inc., Baby Superstore, Inc. and Jack P. Tate
dated as of October 1, 1996.
2. Shareholders Agreement, dated October 1, 1996 by
and among Toys "R" Us, Inc., Jack P. Tate and
Linda M. Robertson.
3. Joint Press Release, dated October 2, 1996, re-
lating to the transactions with Toys "R" Us,
Inc.
-3-<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Ex-
change Act of 1934, the Company has duly caused this report to
be signed on its behalf by the undersigned hereunto duly au-
thorized.
BABY SUPERSTORE, INC.
By: /s/ Jodi L. Taylor
Name: Jodi L. Taylor
Title: Chief Financial Officer
Date: October 11, 1996
-4-<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
1. Agreement and Plan of Merger among Toys "R"
Us, Inc., Baby Superstore, Inc. and Jack P.
Tate dated as of October 1, 1996.
2. Shareholders Agreement, dated October 1, 1996
by and among Toys "R" Us, Inc., Jack P. Tate
and Linda M. Robertson.
3. Joint Press Release, dated October 2, 1996,
relating to the transactions with Toys "R"
Us, Inc.
EXHIBT 1
[EXECUTION COPY]
AGREEMENT AND PLAN OF MERGER
AMONG
TOYS "R" US, INC.,
BABY SUPERSTORE, INC.
AND
JACK P. TATE
Dated October 1, 1996<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
The Merger; Effective Time; Closing
1.1. The Merger......................................... 2
1.2. Effective Time..................................... 2
1.3. Closing............................................ 2
1.4. Effects of the Merger.............................. 2
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1. Certificate of Incorporation....................... 3
2.2. The By-Laws........................................ 3
ARTICLE III
Directors and Officers
of the Surviving Corporation
3.1. Directors.......................................... 3
3.2. Officers........................................... 3
ARTICLE IV
Merger Consideration; Conversion
or Cancellation of Shares in the Merger
4.1. Share Consideration for the Merger; Conversion
or Cancellation of Shares in the Merger............ 3
4.2. Exchange Procedures................................ 6
4.3. Dividends, Fractional Shares, Etc. ................ 7
4.4. Dissenting Shares.................................. 10
i<PAGE>
Page
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company...... 11
(a) Corporate Organization and Qualification...... 11
(b) Capitalization................................ 11
(c) Approvals; Fairness Opinion................... 12
(d) Authority Relative to This Agreement.......... 12
(e) Consents and Approvals; No Violation.......... 13
(f) Litigation; Compliance with Laws.............. 14
(g) SEC Reports; Financial Statements............. 15
(h) Undisclosed Liabilities; Absence of
Certain Changes or Events................... 16
(i) Employment Agreements......................... 17
(j) Brokers and Finders........................... 17
(k) S-4 Registration Statement and Proxy
Statement/Prospectus........................ 17
(l) Taxes......................................... 18
(m) Employee Benefits............................. 20
(n) Title to Properties; Assets Other Than
Real Property Interests..................... 22
(o) Intangible Property........................... 24
(p) Certain Contracts............................. 25
(q) Insurance..................................... 26
(r) Unlawful Payments and Contributions........... 26
(s) Listings...................................... 27
(t) Environmental Matters......................... 27
(u) State Takeover Statutes....................... 28
(v) Inventories; Receivables; Payables............ 28
(w) Transactions With Affiliates.................. 28
(x) Disclosure.................................... 29
5.2. Representations and Warranties of Acquiror......... 29
(a) Corporate Organization and Qualification...... 29
(b) Capitalization................................ 29
(c) Authorization for Acquiror Common Shares...... 30
(d) Authority Relative to This Agreement.......... 30
(e) Consents and Approvals; No Violation.......... 31
(f) SEC Reports; Financial Statements............. 32
(g) Undisclosed Liabilities; Absence of
Certain Changes or Events................... 32
(h) Litigation.................................... 33
(i) S-4 Registration Statement and Proxy
Statement/Prospectus........................ 33
(j) Brokers and Finders........................... 33
(k) Ownership of Shares........................... 34
(1) Disclosure.................................... 34
5.3. Representations and Warranties of Tate............. 34
(a) Authority Relative to This Agreement and
Shareholders' Agreement..................... 34
ii<PAGE>
Page
(b) The Tate Shares............................... 34
(c) Consents and Approvals; No Violation.......... 34
(d) Certain Acknowledgements...................... 35
ARTICLE VI
Additional Covenants and Agreements
6.1. Conduct of Business................................ 35
6.2. No Solicitation.................................... 39
6.3. Meeting of Shareholders............................ 41
6.4. S-4 Registration Statement; Proxy Statement........ 41
6.5. Access to Information.............................. 42
6.6. Publicity.......................................... 43
6.7. Indemnification of Directors and Officers.......... 43
6.8. Affiliates of the Company.......................... 44
6.9. Taxes.............................................. 44
6.10. Maintenance of Insurance.......................... 44
6.11. Representations and Warranties.................... 44
6.12. Antitrust Notification............................ 45
6.13. Reasonable Best Efforts; Other Action............. 45
6.14. Notification of Certain Matters................... 46
6.15. Blue Sky Permits.................................. 47
6.16. NYSE Listing...................................... 47
6.17. Comfort Letter.................................... 47
6.18. Benefit Matters................................... 47
6.19. Convertible Notes................................. 47
ARTICLE VII
Conditions
7.1. Conditions to the Obligations of Acquiror.......... 48
(a) Certificate................................... 48
(b) Company Shareholder Approval.................. 48
(c) No Litigation................................. 48
(d) S-4 Registration Statement.................... 49
(e) Listing of Acquiror Common Shares............. 49
(f) Governmental Filings and Consents; HSR
Act......................................... 49
(g) Third-Party Consents.......................... 49
(h) Delivery of Comfort Letter.................... 50
(i) Affiliate Letters............................. 50
(j) Delivery of Tax Opinion....................... 50
7.2. Conditions to the Obligations of the Company....... 50
iii<PAGE>
Page
(a) Certificate................................... 50
(b) Company Shareholder Approval.................. 51
(c) Injunction.................................... 51
(d) S-4 Registration Statement.................... 51
(e) Listing of Acquiror Common Shares............. 51
(f) HSR Act....................................... 51
(g) Delivery of Tax Opinion....................... 51
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent...................... 52
8.2. Termination by Either Acquiror or the Company...... 52
8.3. Termination by Acquiror............................ 52
8.4. Termination by the Company......................... 53
8.5. Effect of Termination and Abandonment.............. 53
ARTICLE IX
Miscellaneous and General
9.1. Payment of Expenses................................ 54
9.2. Survival of Representations and Warranties......... 54
9.3. Modification or Amendment.......................... 54
9.4. Waiver of Conditions............................... 55
9.5. Counterparts....................................... 55
9.6. Governing Law...................................... 55
9.7. Notices............................................ 55
9.8. Entire Agreement; Assignment....................... 56
9.9. Parties in Interest................................ 56
9.10. Certain Definitions............................... 56
(a) "Affiliate"................................... 56
(b) "subsidiary".................................. 57
(c) "Material Adverse Effect"..................... 57
(d) "Person"...................................... 57
9.11. Severability...................................... 57
9.12. Specific Performance.............................. 57
9.13. Captions.......................................... 57
EXHIBITS
Shareholders Agreement.......................... Exhibit A
Registration Rights Agreement................... Exhibit B
Affiliate Letter................................ Exhibit C
iv<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of October 1, 1996, among Toys "R" Us, Inc., a Delaware
corporation ("Acquiror"), Baby Superstore, Inc., a South Carolina
corporation (the "Company"), and Jack P. Tate ("Tate").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Acquiror and the
Company each have determined that it is in the best interests of
their respective stockholders for the Company to merge with and
into the Acquiror upon the terms and subject to the conditions of
this Agreement;
WHEREAS, for federal income tax purposes, it is
intended that the Merger (as defined in Section 1.1) shall
qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, Tate is the beneficial owner and holder of
record of 9,000,000 shares of Common Stock, no par value, of the
Company (collectively, the "Tate Shares").
WHEREAS, concurrently with the execution hereof,
certain holders (each, a "Shareholder" and, collectively, the
"Shareholders") of Shares (as defined in Section 4.1(b)),
including Tate, are entering into the Shareholders Agreement, a
copy of which is attached as Exhibit A hereto (the "Shareholders
Agreement") and the Registration Rights Agreement, a copy of
which is attached as Exhibit B hereto (the "Registration Rights
Agreement"); and
WHEREAS, Acquiror and the Company desire to make
certain representations, warranties, covenants and agreements in
connection with the Merger.
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements set forth
herein, Acquiror and the Company hereby agree as follows:<PAGE>
ARTICLE I
The Merger; Effective Time; Closing
1.1. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with
the General Corporation Law of the State of Delaware (the "DGCL")
and the Business Corporation Act of the State of South Carolina
(the "BCA"), at the Effective Time (as defined in Section 1.2
below), Acquiror and the Company shall consummate a merger (the
"Merger") in which (a) the Company shall be merged with and into
Acquiror and the separate corporate existence of the Company
shall thereupon cease, and (b) Acquiror shall continue as the
surviving corporation in the Merger ("Surviving Corporation") and
shall succeed to and assume all of the rights, properties,
liabilities and obligations of the Company.
1.2. Effective Time. Subject to the provisions of
this Agreement, Acquiror and the Company shall cause the Merger
to be consummated by filing a Certificate of Merger (the
"Certificate of Merger") with the Secretary of State of the State
of Delaware and an Articles of Merger (the "Articles of Merger")
with the Secretary of State of the State of South Carolina, in
such form as required by, and executed in accordance with, the
relevant provisions of the DGCL and the BCA, respectively, as
soon as practicable on or after the Closing Date (as defined in
Section 1.3). The Merger shall become effective upon such filing
or at such time thereafter as is provided in the Certificate of
Merger and the Articles of Merger (the "Effective Time").
1.3. Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have
been abandoned pursuant to Article VIII, and subject to the
satisfaction or waiver of the conditions set forth in Article
VII, the closing of the Merger (the "Closing") shall take place
at 10:00 a.m., New York City time, on the second business day
after satisfaction of the conditions set forth in Article VII (or
as soon as practicable thereafter following satisfaction or
waiver of the conditions set forth in Article VII) (the "Closing
Date"), at the offices of Weil, Gotshal & Manges LLP, 767 Fifth
Avenue, New York, New York 10153, unless another date, time or
place is agreed to in writing by the parties hereto.
1.4. Effects of the Merger. The Merger shall have the
effects set forth in the applicable provisions of the DGCL and
the BCA.
2<PAGE>
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1. Certificate of Incorporation. At the Effective
Time, the Restated Certificate of Incorporation of Acquiror as in
effect immediately prior to the Effective Time shall become the
Restated Certificate of Incorporation of the Surviving
Corporation.
2.2. The By-Laws. At the Effective Time, the Restated
By-Laws of Acquiror as in effect immediately prior to the
Effective Time shall become the Restated By-Laws of the Surviving
Corporation.
ARTICLE III
Directors and Officers
of the Surviving Corporation
3.1. Directors. The directors of Acquiror at the
Effective Time shall, from and after the Effective Time, be the
directors of the Surviving Corporation until their successors
have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the
Surviving Corporation's Restated Certificate of Incorporation and
Restated By-Laws.
3.2. Officers. The officers of Acquiror at the
Effective Time shall, from and after the Effective Time, be the
officers of the Surviving Corporation until their successors have
been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the
Surviving Corporation's Restated Certificate of Incorporation and
Restated By-Laws.
ARTICLE IV
Merger Consideration; Conversion
or Cancellation of Shares in the Merger
4.1. Share Consideration for the Merger; Conversion or
Cancellation of Shares in the Merger. The manner of converting
or canceling shares of the Company in the Merger shall be as
follows:
3<PAGE>
(a) Subject to Section 4.4, at the Effective Time,
each share of common stock, no par value, of the Company (the
"Shares") issued and outstanding immediately prior to the
Effective Time (other than Shares owned by Acquiror or any direct
or indirect wholly owned subsidiary of Acquiror (collectively,
"Acquiror Companies") or by the Company) shall, by virtue of the
Merger and without any action on the part of the holder thereof,
be converted into: (i) for each Share other than the Tate
Shares, the right to receive 0.8121 of a Share of Common Stock,
par value $0.10 per share, of Acquiror ("Acquiror Common Shares")
and (ii) for each Tate Share, the right to receive 0.5150 of an
Acquiror Common Share (as applicable, the "Merger
Consideration"). If, prior to the Effective Time, Acquiror
should split or combine the Acquiror Common Shares, or pay a
stock dividend or other stock distribution in Acquiror Common
Shares, then the Merger Consideration will be appropriately
adjusted to reflect such split, combination, dividend or other
distribution.
(b) Each Share that is directly owned by any of the
Acquiror Companies and each Share that is directly owned by the
Company shall be canceled and retired and shall cease to exist
and no consideration shall be delivered or deliverable in
exchange therefor.
(c) All Shares to be converted pursuant to this
Section 4.1 shall, by virtue of the Merger and without any action
on the part of the holders thereof, cease to be outstanding, be
canceled and retired and cease to exist, and each holder of a
certificate representing any such Shares (a "Company
Certificate") shall thereafter cease to have any rights with
respect to such Shares, except the right to receive for each of
the Shares, upon the surrender of such certificate in accordance
with Section 4.2, the Merger Consideration and cash in lieu of
fractional Acquiror Common Shares as contemplated by Section
4.4(c).
(d) At the Effective Time, each share of capital stock
of Acquiror issued and outstanding immediately prior to the
Effective Time shall remain an issued and outstanding share of
the same class of capital stock of the Surviving Corporation.
(e) Subject to Section 4.1(f), at the Effective Time,
each outstanding option to purchase Shares (each, an "Option")
issued pursuant to the 1988 non-qualified stock option plan and
the 1988 qualified stock option plan of the Company
(collectively, the "1988 Plans"), the 1994 Baby Superstore, Inc.
Stock Incentive Plan (the "1994 Plan"), the 1995 Stock Option
Plan for Outside Directors of the Company (the "1995 Plan")
(collectively, the 1988 Plans, the 1994 Plan and the 1995 Plan
4<PAGE>
are referred to herein as the "Option Plans") whether vested or
unvested, shall be assumed by Acquiror and shall constitute an
option to acquire, on substantially the same terms and subject to
substantially the same conditions as were applicable under such
Option, including, without limitation, term, exercisability,
vesting schedule, status as an "incentive stock option" under
Section 422 of the Code, acceleration and termination provisions,
the same number of Acquiror Common Shares, rounded down to the
nearest whole share, determined by multiplying the number of
Shares subject to such Option immediately prior to the Effective
Time by 0.8121, at an exercise price per share of Acquiror Common
Shares (increased to the nearest whole cent) equal to the
exercise price per share of Shares immediately prior to the
Effective Time divided by 0.8121; provided, however, that in the
case of any Option to which Section 421 of the Code applies by
reason of its qualification as an incentive stock option under
Section 422 of the Code, the conversion formula shall be adjusted
if necessary to comply with Section 424(a) of the Code.
Employment with the Company shall be credited to the optionees
for purposes of determining the number of vested Acquiror Common
Shares subject to exercise under converted Options after the
Effective Time. Except as set forth in Section 5.1(m) of the
Company Disclosure Schedule (as defined in Section 5.1), none of
the Options that are unvested at the Effective Time shall become
vested as a result of the execution and delivery of this
Agreement or the consummation of the Merger. As soon as
practicable after the Effective Time, but no later than 30 days
thereafter, Acquiror shall deliver to the holders of Options
appropriate notices informing such holders that such Options have
been assumed by Acquiror and will constitute options to purchase
Acquiror Common Shares on substantially the same terms and
conditions as their Options (subject to the adjustments required
by this Section 4.1 after giving effect to the Merger).
(f) On the date hereof, Tate is the holder of 202,500
Options and Linda M. Robertson ("Robertson") is the holder of
67,500 Options. At the Effective Time, (i) each then outstanding
vested Option held by Tate shall be settled by the Company in
exchange for an amount of cash equal to the difference between
(A) 0.5150 multiplied by the closing per share sales price of the
Acquiror Common Shares on the NYSE composite tape on the Closing
Date (the "Closing Price") and (B) the exercise price per share
of such Option, subject to any required withholding of taxes and
(ii) each then outstanding vested Option held by Robertson shall
be settled by the Company in exchange for an amount of cash equal
to the difference between (A) 0.8121 multiplied by the Closing
Price and (B) the exercise price per share of such Option,
subject to any required withholding of taxes (each such amount
being hereinafter referred to as, the "Option Consideration").
From and after the Effective Time, such Options shall represent
5<PAGE>
only the right of Tate and Robertson to receive the Option
Consideration upon the surrender thereof. Upon receipt of the
Option Consideration, the corresponding Option shall be canceled.
The surrender by Tate and Robertson of such Options to the
Company in exchange for the Option Consideration shall be deemed
a release of any and all rights which Tate and Robertson had or
may have had in respect of such Options.
(g) Acquiror shall use its best efforts to cause there
to be effective as of a date as soon as practicable after the
Effective Time a registration statement on Form S-8 (or any
successor form) or another appropriate form, with respect to the
Acquiror Common Shares subject to such Options, and shall use its
best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for
so long as such Options remain outstanding.
(h) At the Effective Time, the warrants to purchase
Shares listed in Section 5.1(b)(2) of the Company Disclosure
Schedule (each, a "Warrant" and, collectively, the "Warrants")
shall be assumed by Acquiror pursuant to the terms of the
Warrants, and shall be deemed to constitute a warrant to acquire,
on the terms and conditions as were applicable under such
Warrant, the same number of Acquiror Common Shares as the holder
of such Warrant would have been entitled to receive pursuant to
the Merger had such holder exercised such Warrant in full
immediately prior to the Effective Time (not taking into account
whether such Warrant was in fact exercisable at such time), at a
price per share equal to (x) the aggregate exercise price for the
Shares subject to such Warrant divided by (y) the number of
Acquiror Common Shares deemed purchasable pursuant to such
Warrant; provided, however, that the number of Acquiror Common
Shares that may be purchased upon exercise of such Warrant shall
not include any fractional share and, upon exercise of the
Warrant, a cash payment shall be made for any fractional share
based upon the closing price of an Acquiror Common Share on the
NYSE on the trading day immediately preceding the date of
exercise.
4.2. Exchange Procedures. (a) Prior to the Effective
Time, Acquiror shall designate a bank or trust company to act as
exchange agent in the Merger (the "Exchange Agent"), and Acquiror
shall deposit with the Exchange Agent as of the Effective Time
(or otherwise when requested by the Exchange Agent from time to
time in order to effect any exchange pursuant to this Section
4.2) for the benefit of the holders of the Shares for exchange in
accordance with this Article IV, through the Exchange Agent,
certificates evidencing the Acquiror Common Shares issuable
pursuant to Section 4.1 in exchange for outstanding Shares. Such
6<PAGE>
Acquiror Common Shares, together with any dividends or
distributions with respect thereto with a record date after the
Effective Time, shall hereinafter be referred to as the "Exchange
Fund." The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the Acquiror Common Shares pursuant to
Section 4.1 out of the Exchange Fund.
(b) As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of
record of Shares immediately prior to the Effective Time
(excluding any Shares which will be canceled pursuant to Section
4.1(b) or which are subject to Section 4.4) (i) a letter of
transmittal (the "Letter of Transmittal") (which shall specify
that delivery shall be effected, and risk of loss and title to
the Company Certificates shall pass, only upon delivery of such
Company Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Acquiror shall specify)
and (ii) instructions for use in effecting the surrender of the
Company Certificates in exchange for the Merger Consideration
with respect to the Shares formerly represented thereby.
(c) Upon surrender of a Company Certificate for
cancellation to the Exchange Agent, together with the Letter of
Transmittal, duly executed, and such other documents as Acquiror
or the Exchange Agent shall reasonably request, the holder of
such Company Certificate shall be entitled to receive in exchange
therefor (i) Acquiror Certificates representing that number of
Acquiror Common Shares, if any, which such holder has the right
to receive pursuant to this Article IV and (ii) a certified or
bank cashier's check in the amount equal to any cash in lieu of
fractional shares which such holder is entitled to receive
pursuant to Section 4.3(c) (in each case less the amount of any
required withholding taxes, if any, determined in accordance with
Section 4.4(g)), and the Company Certificate so surrendered shall
forthwith be canceled. Until surrendered as contemplated by this
Section 4.2, each Company Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive
the Merger Consideration with respect to the Shares formerly
represented thereby.
4.3. Dividends, Fractional Shares, Etc.
(a) Notwithstanding any other provisions of this
Agreement, no dividends or other distributions declared after the
Effective Time on Acquiror Common Shares shall be paid with
respect to any whole Acquiror Common Shares represented by a
Company Certificate until such Company Certificate is surrendered
for exchange as provided herein. Subject to the effect of
applicable laws, following surrender of any such Company
Certificate, there shall be paid to the holder of the Acquiror
7<PAGE>
Certificates issued in exchange therefor, without interest, (i)
at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time
theretofore payable with respect to such whole Acquiror Common
Shares and not paid, less the amount of any withholding taxes
which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with
a record date after the Effective Time but prior to surrender and
a payment date subsequent to surrender payable with respect to
such whole Acquiror Common Shares, less the amount of any
withholding taxes which may be required thereon.
(b) At or after the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the
Shares which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Company Certificates
representing any such shares are presented to the Surviving
Corporation, they shall be canceled and exchanged for
certificates for the Merger Consideration deliverable in respect
thereof pursuant to this Agreement in accordance with the
procedures set forth in this Article IV. Company Certificates
surrendered for exchange by any Person constituting an
"affiliate" of the Company for purposes of Rule 145(c) under the
Securities Act shall not be exchanged until Acquiror has received
a written agreement from such Person as provided in Section 6.8.
(c) (i) No certificates or scrip evidencing
fractional Acquiror Common Shares shall be issued upon the
surrender for exchange of Company Certificates, and such
fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of
Acquiror. In lieu of any such fractional shares, the
Exchange Agent shall, on behalf of all holders of fractional
Acquiror Common Shares, as soon as practicable after the
Effective Time, aggregate all such fractional interests
collectively, the "Fractional Shares") and, at Acquiror's
option, such Fractional Shares shall be purchased by
Acquiror or otherwise sold by the Exchange Agent as agent
for the holders of such Fractional Shares, in either case at
the then prevailing price on the NYSE, all in the manner
provided hereinafter. Until the net proceeds of such sale
or sales have been distributed to the holders of Fractional
Shares, the Exchange Agent shall retain such proceeds in
trust for the benefit of such holders. Acquiror shall pay
all commissions, transfer taxes and other out-of-pocket
transaction costs, including expenses and compensation of
the Exchange Agent, incurred in connection with such sale of
the Fractional Shares.
8<PAGE>
(ii) To the extent not purchased by Acquiror, the sale
of the Fractional Shares by the Exchange Agent shall be
executed on the NYSE or through one or more member firms of
the NYSE and will be executed in round lots to the extent
practicable. In either case, the Exchange Agent will
determine the portion, if any, of the net proceeds of such
sale to which each holder of Fractional Shares is entitled,
by multiplying the amount of the aggregate net proceeds of
the sale of the Fractional Shares by a fraction, the
numerator of which is the amount of Fractional Shares to
which such holder is entitled and the denominator of which
is the aggregate amount of Fractional Shares to which all
holders of Fractional Shares are entitled.
(iii) As soon as practicable after the determination
of the amount of cash, if any, to be paid to holders of
Fractional Shares in lieu of such Fractional Shares, the
Exchange Agent shall mail such amounts, without interest, to
such holders; provided, however, that no such amount will be
paid to any holder of such Fractional Shares prior to the
surrender by such holder of the Company Certificates
formerly representing such holder's Shares.
(d) Any portion of the Exchange Fund that remains
undistributed to the holders of Shares for six months after the
Effective Time shall be delivered to Acquiror, upon demand, and
any holders of Shares who have not theretofore complied with this
Article IV shall thereafter look only to Acquiror for the Merger
Consideration, net cash proceeds from the sale of Fractional
Shares and unpaid dividends and distributions on the Acquiror
Common Shares to which they are entitled. All interest accrued
in respect of the Exchange Fund shall inure to the benefit of and
be paid to Acquiror.
(e) None of Acquiror, the Company or the Exchange
Agent shall be liable to any holder of Shares for any Acquiror
Common Shares, net cash proceeds from the sale of Fractional
Shares or unpaid dividends or distributions with respect to
Acquiror Common Shares from the Exchange Fund delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law. If any Company Certificates shall not
have been surrendered prior to seven years after the Effective
Time (or immediately prior to such earlier date on which any
Acquiror Common Shares, net cash proceeds from the sale of
Fractional Shares or unpaid dividends or distributions with
respect to Acquiror Common Shares in respect of such Company
Certificates would otherwise escheat to or become the property of
any governmental authority), any such Acquiror Common Shares,
cash or unpaid dividends or distributions in respect of such
9<PAGE>
Company Certificates shall, to the extent permitted by applicable
laws, become the property of the Surviving Corporation.
(f) In the event that any Company Certificate shall
have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Company
Certificate to be lost, stolen or destroyed and, if required by
Acquiror, the posting by such Person of a bond in such reasonable
amount as Acquiror may direct as indemnity against any claim that
may be made against it with respect to such Company Certificate,
the Exchange Agent (or Acquiror, as the case may be) will issue
in exchange for such lost, stolen or destroyed Company
Certificate the Merger Consideration, cash in lieu of fractional
shares, and unpaid dividends and distributions on Acquiror Common
Shares deliverable in respect thereof pursuant to this Agreement.
(g) Acquiror shall be entitled to, or shall be
entitled to cause the Exchange Agent to, deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to
any holder of Shares such amounts as are required to be deducted
and withheld with respect to the making of such payment under the
Code, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by Acquiror or the
Exchange Agent, as the case may be, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid
to the holder of the Shares in respect of which such deduction
and withholding was made by Acquiror or the Exchange Agent.
4.4. Dissenting Shares. Notwithstanding any other
provisions of this Agreement to the contrary, Shares that are
outstanding immediately prior to the Effective Time and which are
held by shareholders who shall have not voted in favor of the
Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such shares in
accordance with Article XIII of the BCA (collectively, the
"Dissenting Shares") shall not be converted into or represent the
right to receive the Merger Consideration. Such shareholders
instead shall be entitled to receive payment of the appraised
value of such Shares held by them in accordance with the
provisions of Article III of the BCA, except that all Dissenting
Shares held by shareholders who shall have failed to perfect or
who effectively shall have withdrawn or lost their rights to
appraisal of such Shares under Article III of the BCA shall
thereupon be deemed to have been converted into and to have
become exchangeable, as of the Effective Time, for the right to
receive, without any interest thereon, the Merger Consideration
upon surrender in the manner provided in Section 4.1, of the
Company Certificate or Certificates that, immediately prior to
the Effective Time, evidenced such Shares.
10<PAGE>
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company.
The Company hereby represents and warrants to Acquiror that
(except to the extent set forth on the Disclosure Schedule
previously delivered by the Company to Acquiror (the "Company
Disclosure Schedule")):
(a) Corporate Organization and Qualification. Each of
the Company and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and is qualified and in
good standing as a foreign corporation in each jurisdiction where
the properties owned, leased or operated, or the business
conducted, by it require such qualification, except where failure
to so qualify or be in good standing would not have a Material
Adverse Effect (as defined in Section 9.10) with respect to the
Company and its subsidiaries. Each of the Company and its
subsidiaries has all requisite power and authority (corporate or
otherwise) to own its properties and to carry on its business as
it is now being conducted. All of the subsidiaries of the
Company, together with an organizational chart, are set forth in
Section 5.1(a) of the Company Disclosure Schedule. The Company
has heretofore made available to Acquiror complete and correct
copies of its Amended and Restated Articles of Incorporation and
By-Laws.
(b) Capitalization. The authorized capital stock of
the Company consists of (i) 50,000,000 Shares, of which, as of
October 1, 1996, 19,235,533 Shares were issued and outstanding
and no Shares were held in treasury, and (ii) 10,000,000 shares
of preferred stock, none of which are issued or outstanding. All
of the outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and
nonassessable. The Company has no outstanding stock appreciation
rights. Except as set forth in Section 5.1(b) of the Company
Disclosure Schedule, no Shares are owned by any subsidiary of the
Company. Except as set forth in Section 5.1(b) of the Company
Disclosure Schedule, all outstanding shares of capital stock or
other equity interests of the subsidiaries of the Company are
owned by the Company or a direct or indirect wholly owned
subsidiary of the Company, free and clear of all liens, charges,
encumbrances, claims and options of any nature. Except for (i)
options outstanding on the date hereof to purchase 1,125,625
Shares under the Option Plans, (ii) 146,357 Shares issuable under
the Baby Superstore, Inc. Employee Stock Purchase Plan, a true,
complete and correct copy of which the Company has delivered to
Acquiror prior to the date hereof, (iii) the Warrants, true,
11<PAGE>
complete and correct copies of which have been delivered to
Acquiror prior to the date hereof, (iv) $115,000,000 aggregate
outstanding principal amount of the Company's 4-7/8% Convertible
Subordinated Notes due October 1, 2000 (the "Convertible Notes")
which are convertible into Shares at a conversion price of
$53.875 per share, and (iv) as set forth in Section 5.1(b) of the
Company Disclosure Schedule, there are not as of the date hereof
and there will not be at the Effective Time any outstanding or
authorized options, warrants, calls, rights (including preemptive
rights), commitments or any other agreements of any character to
which the Company or any of its subsidiaries is a party, or by
which it may be bound, requiring it to issue, transfer, sell,
purchase, redeem or acquire any shares of capital stock or any
securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of capital
stock of the Company or any of its subsidiaries. There are not
as of the date hereof and there will not be at the Effective Time
any shareholder agreements (other than the Shareholders
Agreement), voting trusts or other agreements or understandings
to which the Company is a party or to which it is bound relating
to the voting of any shares of the capital stock of the Company.
(c) Approvals; Fairness Opinion.
(i) The Board of Directors at a meeting duly called
and held, has (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger are
fair to and in the best interests of the shareholders of the
Company and has approved the same, and (ii) resolved to
recommend that the holders of the Shares approve this
Agreement and the transactions contemplated hereby,
including the Merger. Except for the approval of the
holders of a majority of the outstanding Shares required by
the BCA and the Company's Articles of Incorporation, no
other approval of the stockholders of the Company is
required in order to consummate the transactions
contemplated by this Agreement.
(ii) The Board of Directors of the Company has received
an opinion from CS First Boston Corporation to the effect
that the exchange ratio to be offered to the holders of
Shares (other than Tate) in the Merger is fair to such
holders from a financial point of view. As of the date
hereof, such opinion has not been withdrawn, revoked or
modified.
(d) Authority Relative to This Agreement. The Company
has the requisite corporate power and authority to approve,
authorize, execute and deliver this Agreement and to consummate
the transactions contemplated hereby (subject to the approval of
12<PAGE>
the Merger by the affirmative vote of the holders of a majority
of the votes entitled to be cast by the holders of Shares in
accordance with the BCA and the Company's Articles of
Incorporation). This Agreement and the consummation by the
Company of the transactions contemplated hereby have been duly
and validly authorized by the Board of Directors of the Company
and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than the approval of the
Merger by the affirmative vote of the holders of a majority of
the votes entitled to be cast by the holders of Shares in
accordance with the BCA and the Company's Articles of
Incorporation). This Agreement has been duly and validly
executed and delivered by the Company and, assuming this
Agreement constitutes the valid and binding agreement of
Acquiror, constitutes the valid and binding agreement of the
Company, enforceable against the Company in accordance with its
terms, subject, as to enforceability, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general principles of
equity.
(e) Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated
hereby will (i) conflict with or result in any breach of any
provision of the respective Articles of Incorporation (or other
similar documents) or By-Laws (or other similar documents) of the
Company or any of its subsidiaries; (ii) require any consent,
approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority or any
other Person, except (A) in connection with the applicable
requirements, if any, of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (B)
pursuant to the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder, and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder, (C) the filing of the
Certificate of Merger and the Articles of Merger pursuant to the
DGCL and the BCA, respectively, and appropriate documents with
the relevant authorities of other states in which the Company is
authorized to do business, (D) such filings and consents as may
be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required
approval triggered by the Merger or the transactions contemplated
by this Agreement, as set forth in Section 5.1(e) of the Company
Disclosure Schedule, (E) the consents, approvals, orders,
authorizations, registrations, declarations and filings required
under the laws of foreign countries, as set forth in Section
13<PAGE>
5.1(e) of the Company Disclosure Schedule, (F) the approval of
the holders of a majority of the outstanding Shares required by
the BCA and the Company's Articles of Incorporation, (G) such
filings as may be required with the NASDAQ National Market or (H)
where the failure to obtain such consent, approval, authorization
or permit, or to make such filing or notification, would not in
the aggregate have a Material Adverse Effect with respect to the
Company and its subsidiaries or adversely affect the ability of
the Company to consummate the transactions contemplated hereby;
(iii) except as set forth in Section 5.1(e) of the Company
Disclosure Schedule, result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation
or acceleration or result in the creation of any lien or other
charge or encumbrance) under any of the terms, conditions or
provisions of any note, license, agreement or other instrument or
obligation to which the Company or any of its subsidiaries or any
of their assets may be bound, except for such violations,
breaches and defaults (or rights of termination, cancellation or
acceleration or creations of lien or other charge or encumbrance)
as to which requisite waivers or consents have been obtained or
which, in the aggregate, would not have a Material Adverse Effect
with respect to the Company and its subsidiaries or adversely
affect the ability of the Company to consummate the transactions
contemplated hereby; or (iv) assuming the consents, approvals,
authorizations or permits and filings or notifications referred
to in this Section 5.1(e) are duly and timely obtained or made
and the approval of the Merger and the approval of this Agreement
by the Company's stockholders has been obtained, violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its subsidiaries or to any of
their respective assets, except for violations which would not in
the aggregate have a Material Adverse Effect with respect to the
Company and its subsidiaries or adversely affect the ability of
the Company to consummate the transactions contemplated hereby.
Except as set forth in Section 5.1(e) of the Company Disclosure
Schedule, the Company does not know of any pending or proposed
legislation, regulation or order (other than those affecting
businesses such as the Company's generally) applicable to the
Company or any of its subsidiaries or to the conduct of the
business or operations of the Company or any of its subsidiaries
which, if enacted or adopted, could have a Material Adverse
Effect with respect to the Company and its subsidiaries.
(f) Litigation; Compliance with Laws. Except as
disclosed in the Company SEC Reports (as defined in Section
5.1(g)) filed and publicly available prior to the date of this
Agreement or as disclosed in Section 5.1(f) of the Company
Disclosure Schedule, there are no actions, suits, or proceedings
14<PAGE>
pending or, to the best knowledge of the Company, threatened
against the Company or any of its subsidiaries which could,
individually or in the aggregate, if adversely determined,
reasonably be expected to have a Material Adverse Effect with
respect to the Company and its subsidiaries, nor is there any
judgment, decree, injunction, rule or order of any governmental
or regulatory authority or arbitrator outstanding against the
Company or any of its subsidiaries, which could, individually or
in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to the Company and its subsidiaries.
Except as set forth in Section 5.1(f) of the Company Disclosure
Schedule, as of the date of this Agreement, no investigation or
review by any governmental or regulatory authority with respect
to the Company or any of its subsidiaries is to the knowledge of
the Company, pending or threatened, nor has the Company received
any notice from any governmental or regulatory authority
indicating an intention to conduct the same. Neither the Company
nor any of its subsidiaries has violated or failed to comply with
any statute, law, ordinance, regulation, rule, judgment, decree
or order of any governmental authority or regulatory agency
applicable to its business or operations, except for violations
and failures to comply that could not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse
Effect with respect to the Company and its subsidiaries.
(g) SEC Reports; Financial Statements.
(i) Since September 27, 1994, the Company has filed
all forms, reports and documents with the Securities and
Exchange Commission (the "SEC") required to be filed by it
pursuant to the federal securities laws and the SEC rules
and regulations thereunder, all of which complied in all
material respects with all applicable requirements of the
Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder (collectively, the
"Company SEC Reports"). None of the Company SEC Reports,
including, without limitation, any financial statements or
schedules included therein, at the time filed contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(ii) The consolidated balance sheets and the related
consolidated statements of income, stockholders' equity
(deficit) and cash flows (including the related notes
thereto) of the Company included in the Company SEC Reports
complied as to form in all material respects with applicable
accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been
15<PAGE>
prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a basis consistent with prior
periods (except as otherwise noted therein), and present
fairly the consolidated financial position of the Company
and its consolidated subsidiaries as of their respective
dates, and the consolidated results of their operations and
their cash flows for the periods presented therein (subject,
in the case of the unaudited interim financial statements,
to normal year-end adjustments). Except as set forth in
Section 5.1(g) of the Company Disclosure Schedule, since
January 1, 1993, there has not been any material change, or
any application or request for any material change, by the
Company or any of its subsidiaries in accounting principles,
methods or policies for financial accounting purposes that
have affected or will affect the Company's consolidated
financial statements included in the Company SEC Reports or
for tax purposes, except as required by concurrent changes
in GAAP.
(h) Undisclosed Liabilities; Absence of Certain
Changes or Events. Neither the Company nor any of its
subsidiaries has any material indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or
otherwise, and whether due or to become due or asserted or
unasserted), and, to the best knowledge of the Company, there is
no basis for the assertion of any claim or liability of any
nature against the Company or any of its subsidiaries, which is
not fully reflected in, reserved against or otherwise described
in the financial statements included in the Company SEC Reports
filed and publicly available prior to the date of this Agreement.
Except as disclosed in the Company SEC Reports filed and publicly
available prior to the date of this Agreement or in Section
5.1(h) of the Company Disclosure Schedule, or as contemplated by
this Agreement, since January 1, 1996, the business of the
Company and its subsidiaries has been carried on only in the
ordinary and usual course and there has not been (i) any damage,
destruction or loss, whether covered by insurance or not, which
has, or insofar as reasonably can be foreseen in the future is
reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect with respect to the Company and its
subsidiaries; (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or
property) with respect to the Shares or any redemption, purchase
or other acquisition of the Shares; (iii) any change, occurrence
or circumstance in the business, results of operations,
properties, assets, liabilities, prospects or condition
(financial or otherwise) of any character (whether or not in the
ordinary course of business) which, individually or in the
aggregate, has had or is reasonably likely to have, a Material
Adverse Effect with respect to the Company and its subsidiaries;
16<PAGE>
or (iv) other than in the ordinary course of business consistent
with past practice, any increase in the benefits payable under or
establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option
(including without limitation the granting of stock options,
stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any
other increase in the compensation payable or to become payable
to any officers or key employees of the Company or any of its
subsidiaries.
(i) Employment Agreements. Except as set forth in
Section 5.1(i) of the Company Disclosure Schedule, the Company is
not a party to any employment, consulting, non-competition,
severance, golden parachute, indemnification agreement or any
other agreement providing for payments or benefits or the
acceleration of payments or benefits upon the change of control
of the Company (including, without limitation, any contract to
which the Company is a party involving employees of the Company).
(j) Brokers and Finders. Except for the fees and
expenses payable to CS First Boston Corporation and Invemed
Associates, Inc., which fees and expenses are reflected in its
agreement with the Company, a true and complete copy of which
(including all amendments) has been furnished to Acquiror, the
Company has not employed any investment banker, broker, finder,
consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or
commission in connection with this Agreement or the transactions
contemplated hereby.
(k) S-4 Registration Statement and Proxy Statement/
Prospectus. None of the information supplied or to be supplied
by the Company for inclusion or incorporation by reference in the
S-4 Registration Statement or the Proxy Statement (as such terms
are defined in Section 6.4) will (i) in the case of the S-4
Registration Statement, at the time it becomes effective or at
the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading, or (ii) in the case of the Proxy Statement, at the
time of the mailing of the Proxy Statement and at the time of the
Shareholder Meeting (as such term is defined in Section 6.3),
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at
any time prior to the Effective Time any event with respect to
the Company, its officers and directors or any of its
17<PAGE>
subsidiaries should occur which is required to be described in a
supplement to the S-4 Registration Statement or the Proxy
Statement such event shall be so described, and such supplement
shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Company. The Proxy
Statement will (only with respect to the Company) comply as to
form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated
thereunder.
(l) Taxes. (i) The Company and each of its
subsidiaries, and each affiliated group (within the meaning
of Section 1504 of the Code) of which the Company or any of
its subsidiaries is or has ever been a member, has timely
filed all Federal income Tax Returns (as defined below) and
all other material Tax Returns and reports required to be
filed by it. All such Tax Returns are complete and correct
in all material respects. The Company and each of its
subsidiaries has paid (or the Company has paid on its
subsidiaries' behalf) all Taxes (as defined below) shown due
on such Tax Returns. The most recent consolidated financial
statements contained in the SEC Reports reflect an adequate
reserve for all Taxes payable by the Company and its
subsidiaries for all taxable periods and portions thereof
through the date of such financial statements.
(ii) Except as disclosed on Section 5.1(1) of the
Company Disclosure Schedule, no material deficiencies for
any Taxes have been proposed, asserted or assessed against
the Company or any of its subsidiaries that have not been
fully paid or adequately provided for in the appropriate
financial statements of the Company and its subsidiaries, no
requests for waivers of the time to assess any Taxes are
pending, and no power of attorney with respect to any Taxes
has been executed or filed with any taxing authority. No
material issues relating to Taxes have been raised in
writing by the relevant taxing authority during any
presently pending audit or examination.
(iii) No material liens for Taxes exist with respect
to any assets or properties of the Company or any of its
subsidiaries, except for statutory liens for Taxes not yet
due.
(iv) Except as disclosed on Section 5.1(1) of the
Company Disclosure Schedule and other than with respect to
contractual tax indemnity obligations of the Company and its
subsidiaries involving claims for state and local Taxes
which are not material in amount, none of the Company or any
of its subsidiaries is a party to or is bound by any tax
18<PAGE>
sharing agreement, tax indemnity obligation or similar
agreement, arrangement or practice with respect to Taxes
(including any advance pricing agreement, closing agreement
or other agreement relating to Taxes with any taxing
authority).
(v) None of the Company or any of its subsidiaries has
taken or agreed to take any action that would prevent the
Merger from constituting a reorganization qualifying under
the provisions of Section 368(a)(1) of the Code.
(vi) The Company and its subsidiaries have complied in
all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of
Taxes.
(vii) Except as disclosed in Section 5.1(1) of the
Company Disclosure Schedule, no Federal, state, local or
foreign audits or other administrative proceedings or court
proceedings are presently pending with regard to any Federal
income or material state, local or foreign Taxes or Tax
Returns of the Company or its subsidiaries and neither the
Company nor any of its subsidiaries has received a written
notice of any pending audit or proceeding.
(viii) Neither the Company nor any of its subsidiaries
has agreed to or is required to make any adjustment under
Section 481(a) of the Code.
(ix) Neither the Company nor any of its subsidiaries
has, with regard to any assets or property held or acquired
by any of them, filed a consent to the application of
Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company or any of its
subsidiaries.
(x) No property owned by the Company or any of its
subsidiaries (i) is property required to be treated as being
owned by another Person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended and in effect immediately prior to the enactment of
the Tax Reform Act of 1986; (ii) constitutes "tax exempt use
property" within the meaning of Section 168(h)(1) of the
Code; or (iii) is tax exempt bond financed property within
the meaning of Section 168(g) of the Code. The Company and
each of its subsidiaries are not currently, have not been
within the past five years, and do not anticipate becoming a
19<PAGE>
"United States real property holding corporation" within the
meaning of Section 897(c) of the Code.
(xi) For purpose of the Agreement, (A) the terms "Tax"
or "Taxes" shall mean all taxes, charges, fees, imposts,
levies, gaming or other assessments, including, without
limitation, all net income, gross receipts, capital, sales,
use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise,
severance, stamp, occupation, property and estimated taxes,
customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties,
fines, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign) and shall include any
transferee liability in respect of Taxes, any liability in
respect of Taxes imposed by contract, tax sharing agreement,
tax indemnity agreement or any similar agreement and (B) the
term "Tax Return" shall mean any report, return, document,
declaration or any other information or filing required to
be supplied to any taxing authority or jurisdiction (foreign
or domestic) with respect to Taxes, including, without
limitation, information returns, any document with respect
to or accompanying payments or estimated Taxes, or with
respect to or accompanying requests for the extension of
time in which to file any such report, return document,
declaration or other information.
(m) Employee Benefits. Section 5.1(m) of the Company
Disclosure Schedule contains an accurate and complete list of all
Company Benefit Plans (as defined below). None of the Company
Benefit Plans is a "multiemployer plan" as defined in Section
3(37) of ERISA or a multiple employer plan covered by Section
4063 or 4064 of ERISA.
(i) Except as disclosed in Section 5.1(m) of the
Company Disclosure Schedule, each Company Benefit Plan
intended to qualify under Section 401 of the Code does so
qualify and the trust maintained pursuant thereto is exempt
from federal income taxation under Section 501 of the Code.
Nothing has occurred with respect to the operation of such
plans which could cause the loss of such qualification or
exemption or the imposition of any liability, penalty, or
tax under ERISA or the Code.
(ii) True and correct copies of the following
documents with respect to each Company Benefit Plans have
been made available or delivered to Acquiror by the Company:
(A) any plans, and amendments thereto, (B) the most recent
forms 5500 and any financial statements attached thereto,
20<PAGE>
(C) the last Internal Revenue Service determination letter
(if any), (D) summary plan descriptions, (E) the two most
recent actuarial reports, including any such reports for
purposes of FASB 87, 106 and 112, and (F) written
descriptions of all material, non-written agreements
relating to the Company Benefit Plans.
(iii) The Company Benefit Plans have been maintained
in accordance with their terms and with all provisions of
ERISA and other applicable law. Neither the Company nor any
of its subsidiaries has any liability with respect to a non-
exempt prohibited transaction within the meaning of Section
4975 of the Code or Section 406 of ERISA.
(iv) Neither the Company nor any ERISA Affiliate
maintains any Company Benefit Plan subject to Title IV of
ERISA has unfunded benefit liabilities, as defined in
Section 4001(a)(18) of ERISA.
(v) Except as disclosed in Section 5.1(m) of the
Company Disclosure Schedule, neither the Company nor any of
its subsidiaries maintains retiree life insurance or retiree
health plans which are "welfare benefit plans" within the
meaning of Section 3(1) of ERISA and which provide for
continuing benefits or coverage for any participant or any
beneficiary of a participant after such participant's
termination of employment where such participant was an
employee of the Company or any subsidiary of the Company,
other than as required by Part 6 of Title I of ERISA.
(vi) Except as disclosed in Section 5.1(m) of the
Company Disclosure Schedule, neither the execution and
delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (A) result in any
payment (including, without limitation, bonus or other
compensation severance, unemployment compensation, golden
parachute or otherwise) becoming due to any employee of the
Company under any Company Benefit Plan, any individual
agreement or otherwise, (B) increase any benefits otherwise
payable under any Company Benefit Plan, or (C) result in the
acceleration of the time of payment or vesting of any such
benefits.
(vii) (A) None of the employees of the Company or any
of its subsidiaries is represented in his or her capacity as
an employee of such company by any labor organization;
(B) neither the Company nor any of its subsidiaries has
recognized any labor organization nor has any labor
organization been elected as the collective bargaining agent
of any of their employees, nor has the Company or any of its
21<PAGE>
subsidiaries signed any collective bargaining agreement or
union contract recognizing any labor organization as the
bargaining agent of any of their employees; and (C) to the
best knowledge of the Company, there is no active or current
union organization activity involving the employees of the
Company or any subsidiary of the Company, nor has there ever
been union representation involving employees of the Company
and/or its subsidiaries.
(viii) For the purposes of this Agreement: (A) the
term "Company Benefit Plan" shall include all employee
benefit plans (as defined in Section 3(3) of ERISA) and all
other employee benefit plans, arrangements or payroll
practices, including, without limitation, severance pay,
sick leave, vacation pay, salary continuation for
disability, scholarship programs, deferred compensation,
incentive compensation, stock option or restricted stock
plans maintained by the Company or any ERISA Affiliate of
the Company (whether formal or informal, whether for the
benefit of a single individual or for more than one
individual and whether for the benefit of current or former
employees or their beneficiaries) on behalf of the Company
or any of the employees of the Company or any of its
subsidiaries or to which or under which or pursuant to which
the Company or any ERISA Affiliate of the Company has
contributed or is obligated to make contributions on behalf
of the Company or any employees of the Company or any of its
subsidiaries; (B) the term "ERISA" shall refer to the
Employee Retirement Income Security Act of 1974, as amended;
and (C) the term "ERISA Affiliate" shall refer to any trade
or business (whether or not incorporated) under common
control or treated as a single employer with the Company
within the meaning of Section 414(b), (c), (m) or (o) of the
Code.
(n) Title to Properties; Assets Other Than Real
Property Interests. (i) Section 5.1(n) of the Company
Disclosure Schedule sets forth a complete list of all real
property and interests in real property owned or leased by
the Company or any of its subsidiaries, and indicates
whether such property is owned or leased (each such owned
property, an "Owned Property" and each such leased property,
a "Leased Property", and collectively "Real Property").
Except as set forth in Section 5.1(n) of the Company
Disclosure Schedule, each of the Company or one of its
subsidiaries has good and marketable title to each Owned
Property, or a valid leasehold interest in each Leased
Property, in each case free and clear of all liens and
except for easements, restrictive covenants and similar
encumbrances of record that, individually or in the
22<PAGE>
aggregate, do not and will not materially interfere with its
ability to conduct its business as currently conducted.
Except as set forth in Section 5.1(n) of the Company
Disclosure Schedule, each of the Company and each of its
subsidiaries has complied in all material respects with the
terms of all material leases to which it is a party, and all
such leases are in full force and effect. Each of the
Company and each of its subsidiaries enjoys peaceful and
undisturbed possession under all such material leases.
(ii) The Company or one of its subsidiaries has good
and valid title to all its properties and assets, in each
case free and clear of all liens, except (A) such as are set
forth in Section 5.1(n) of the Company Disclosure Schedule,
(B) mechanics', carriers', workmen's, repairmen's or other
similar liens arising or incurred in the ordinary course of
business, (C) liens arising under conditional sales
contracts and equipment leases with third parties entered
into in the ordinary course of business, (D) liens for Taxes
which are not due and payable or which may thereafter be
paid without penalty, (E) liens which secure debt that is
reflected as a liability on the most recent financial
statement included in the Company SEC Reports filed and
publicly available prior to the date of this Agreement and
the existence of which is indicated in the notes thereto and
(F) other imperfections of title or encumbrances, if any,
which do not, individually or in the aggregate, materially
impair the continued use and operation of the assets to
which they relate in the business of the Company and its
subsidiaries. This paragraph (ii) does not relate to Real
Property or interests in Real Property, such items being the
subject of paragraph (i) above.
(iii) The occupancies and uses of the Real Property,
as well as the development, construction, management,
maintenance, servicing and operation of the Real Property,
comply in all material respects with all applicable laws,
ordinances, rules, regulations, orders and requirements of
all governmental authorities having jurisdiction and are not
in material violation of any thereof; and the certificate(s)
of occupancy and all other licenses and permits required by
law for the proper use and operation of the Real Property
are in full force and effect. All approvals, consents,
permits, utility installations and connections, curb cuts
and street openings required for the development,
construction, maintenance, operation and servicing of the
Real Property have been granted, effected, or performed and
completed (as the case may be), and all fees and charges
therefor have been fully paid. The Company has not received
written notice of, and does not otherwise have knowledge of,
23<PAGE>
any material violations, suits, orders, decrees or judgments
relating to zoning, building use and occupancy, traffic,
fire, health, sanitation, air pollution, ecological,
environmental or other laws or regulations, against, or with
respect to, the Real Property.
(iv) There is adequate access between each Owned
Property or Leased Property and public roads and there are
no pending or threatened proceedings that could have the
effect of impairing or restricting such access. There are
sufficient parking spaces on material Owned Property or
Leased Property to comply with all applicable provisions of
any agreements to which such Real Property is subject, local
zoning requirements and all other applicable laws and
governmental requirements. The material improvements upon
the Real Property contain no asbestos and there are no
material defects in the roof, foundation, sprinkler mains,
structural, mechanical and HVAC systems and masonry walls in
any of the material improvements upon the Real Property and
no significant repairs thereof are required, and all
periodic maintenance has been done and is being done which
is consistent with first class maintenance standard for Real
Property of similar size and age in the vicinity of such
Real Property.
(o) Intangible Property. (i) Section 5.1(o) of the
Company Disclosure Statement sets forth a list of each
patent, trademark, trade name, service mark, brand mark,
brand name, industrial design and copyright owned or used in
business by the Company and its subsidiaries, as well as all
registrations thereof and pending applications therefor, and
each license or other contract relating thereto
(collectively with any other intellectual property owned or
used in the business by the Company and its subsidiaries,
and all of the goodwill associated therewith, the
"Intangible Property") and indicates, with respect to each
item of Intangible Property listed thereon, the owner
thereof and, if applicable, the name of the licensor and
licensee thereof and the terms of such license or other
contract relating thereto. Except as set forth in Section
5.1(o) of the Company Disclosure Schedule, each of the
foregoing is owned free and clear of any and all liens,
mortgages, pledges, security interests, levies, charges,
options or any other encumbrances, restrictions or
limitations of any kind whatsoever and none of the Company
or any of its subsidiaries has received any notice to the
effect that any other entity has any claim of ownership with
respect thereto. To the best knowledge of the Company, the
use of the foregoing by the Company and its subsidiaries
does not conflict with, infringe upon, violate or interfere
24<PAGE>
with or constitute an appropriation of any right, title,
interest or goodwill, including, without limitation, any
intellectual property right, patent, trademark, trade name,
service mark, brand mark, brand name, computer program,
industrial design, copyright or any pending application,
therefor of any other entity. Except as set forth in
Section 5.1(o) of the Company Disclosure Schedule, no claims
have been made, and none of the Company or any of its
subsidiaries has received any notice, that any of the
foregoing is invalid, conflicts with the asserted rights of
other entities, or has not been used or enforced (or has
failed to be used or enforced) in a manner that would result
in the abandonment, cancellation or unenforceability of any
item of the Intangible Property.
(ii) The Company and its subsidiaries possess all
Intangible Property, including, without limitation, all
know-how, formulae and other proprietary and trade rights
necessary for the conduct of their businesses as now
conducted. None of the Company or any of its subsidiaries
has taken or failed to take any action that would result in
the forfeiture or relinquishment of any such Intangible
Property used in the conduct of their respective businesses
as now conducted.
(p) Certain Contracts. Section 5.1(p) of the Company
Disclosure Schedule lists all of the following contracts to which
the Company or a subsidiary is a party or by which any one of
them or any of their properties or assets may be bound ("Listed
Agreements"): (i) all employment or other contracts with any
employee, consultant, officer or director of the Company or any
subsidiary of the Company (or any company which is controlled by
any such individual) whose total rate of annual remuneration is
estimated to exceed $100,000 in 1996; (ii) union, guild or
collective bargaining contracts relating to employees of the
Company or any subsidiary; (iii) instruments for money borrowed
(including, without limitation, any indentures, guarantees, loan
agreements, sale and leaseback agreements, or purchase money
obligations incurred in connection with the acquisition of
property other than in the ordinary course of business) in excess
of $500,000; (iv) underwriting, purchase or similar agreements
entered into in connection with the Company's or any of its
subsidiaries' currently existing indebtedness; (v) agreements for
acquisitions or dispositions (by merger, purchase or sale of
assets or stock or otherwise) of material assets entered into
within the last two years, as to which the transactions
contemplated have been consummated or are currently pending;
(vi) joint venture or partnership agreements entered into;
(vii) material licensing, merchandising and distribution
contracts; (viii) contracts granting any person or other entity
25<PAGE>
registration rights; (ix) guarantees, suretyships,
indemnification and contribution agreements, in excess of
$500,000; and (x) other contracts which materially affect the
business, properties or assets of the Company and its
subsidiaries taken as a whole, and are not otherwise disclosed in
this Agreement or were entered into other than in the ordinary
course of business. A true and complete copy (including all
amendments) of each Listed Agreement has been made available to
Acquiror. Neither the Company nor any subsidiary (i) is in
breach or default under any of the Listed Agreements or (ii) has
any knowledge of any other breach or default under any Listed
Agreement by any other party thereto or by any other person or
entity bound thereby, except in the case of (i) or (ii) breaches
or defaults which would not, individually or in the aggregate,
have a Material Adverse Effect with respect to the Company and
its subsidiaries. At the Effective Time, no person will have the
right, by contract or otherwise, to become, nor does any entity
have the right to designate or cause the Company to appoint a
person as, a director of the Company.
(q) Insurance. The Company and its subsidiaries have
obtained and maintained in full force and effect insurance with
responsible and reputable insurance companies or associations in
such amounts, on such terms and covering such risks, including
fire and other risks insured against by extended coverage, as is
usually carried by companies engaged in similar businesses and
owning similar properties similarly situated or otherwise
required by law, and each has maintained in full force and effect
public liability insurance, insurance against claims for personal
injury or death or property damage occurring in connection with
any of the activities of the Company or its subsidiaries or any
of the properties owned, occupied or controlled by the Company or
its subsidiaries, in such amount as reasonably deemed necessary
by the Company or its subsidiaries. To the extent the Company
self-insures against such risks or damages, the liabilities
reflected or reserved against in the Company's most recent
financial statements (or the notes thereto) included in the
Company SEC Reports filed and publicly available prior to the
date of this Agreement are adequate to cover against such risks
and damages.
(r) Unlawful Payments and Contributions. None of the
Company, any subsidiary of the Company or, to the knowledge of
the Company, any of their respective directors, officers or any
of their respective employees or agents has, with respect to the
businesses of the Company and its subsidiaries, (i) used any
funds for any unlawful contribution, endorsement, gift,
entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment to
any foreign or domestic government official or employee; (iii)
26<PAGE>
violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any
bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any person or entity.
(s) Listings. The Company's securities are not listed
or quoted for trading on any U.S. domestic or foreign securities
exchange, except as set forth in Section 5.1(s) of the Company
Disclosure Schedule.
(t) Environmental Matters. Except as disclosed in
Section 5.1(t) of the Company Disclosure Schedule or in the
Company SEC Reports filed and publicly available prior to the
date of this Agreement, (i) the Company and its subsidiaries and
the operations thereof are in material compliance with all
Environmental Laws (as defined below); (ii) there are no judicial
or administrative actions, suits or proceedings pending or, to
the knowledge of the Company, threatened and, to the knowledge of
the Company, there are no investigations pending or threatened
against the Company or any subsidiary of the Company alleging the
violation of any Environmental Law and neither the Company nor
any subsidiary of the Company has received notice from any
governmental body or person alleging any violation of or
liability under any Environmental Laws, in either case which
could reasonably be expected to result in material Environmental
Costs and Liabilities; and (iii) to the knowledge of the Company,
there are no facts, circumstances or conditions relating to,
arising from, associated with or attributable to the Company or
its subsidiaries or any real property currently or previously
owned, operated or leased by the Company or its subsidiaries that
could reasonably be expected to result in material Environmental
Costs and Liabilities. For the purpose of this Section 5.1(t),
the following terms have the following definitions: (A)
"Environmental Costs and Liabilities" means any losses,
liabilities, obligations, damages, fines, penalties, judgments,
actions, claims, costs and expenses (including, without
limitation, fees, disbursements and expenses of legal counsel,
experts, engineers and consultants and the costs of investigation
and feasibility studies, remedial or removal actions and cleanup
activities) arising from or under any Environmental Law; (B)
"Environmental Laws" means any applicable federal, state, local,
or foreign law (including common law), statute, code, ordinance,
rule, regulation or other requirement relating to the
environment, natural resources, or public or employee health and
safety; (C) "Hazardous Material" means any substance, material or
waste regulated by federal, state or local government, including,
without limitation, any substance, material or waste which is
defined as a "hazardous waste," "hazardous material," "hazardous
substance," "toxic waste" or "toxic substance" under any
27<PAGE>
provision of Environmental Law and including but not limited to
petroleum and petroleum products.
(u) State Takeover Statutes. Neither the South
Carolina Control Share Acquisition Statute (Sections 35-2-101 et
seq. of the BCA) nor the South Carolina Business Combination
Statute (Sections 35-2-201 et seq. of the BCA), nor, to the
Company's knowledge, any other state takeover statute or similar
statute or regulation, is applicable to the Merger and the other
transactions contemplated by this Agreement.
(v) Inventories; Receivables; Payables. (i) The
inventories of the Company and its subsidiaries are in good
and marketable condition, and are saleable in the ordinary
course of business. Adequate reserves have been reflected
on the most recent balance sheet included in the Company SEC
Documents and, after the date of the most recent balance
sheet included in the Company SEC Documents, will be
reflected on the books of the Company, for shorts, drops,
off-cuts, obsolete or otherwise unusable inventory, which
reserves were calculated in accordance with GAAP
consistently applied.
(ii) All accounts receivable of the Company and its
subsidiaries have arisen from bona fide transactions in the
ordinary course of business. All accounts receivable of the
Company and its subsidiaries reflected on the most recent
balance sheet included in the Company SEC Documents are good
and collectible at the aggregate recorded amounts thereof,
net of any applicable reserve for returns or doubtful
accounts reflected thereon, which reserves are adequate and
were calculated in accordance with GAAP consistently
applied. All accounts receivable arising after the date of
the most recent balance sheet included in the Company SEC
Documents are good and collectible at the aggregate recorded
amounts thereof, net of any applicable reserve for returns
or doubtful accounts, which reserves are adequate and were
calculated in accordance with GAAP consistently applied.
(iii) All accounts payable of the Company and its
subsidiaries reflected on the most recent balance sheet
included in the Company SEC Documents or arising after the
date thereof are the result of bona fide transactions in the
ordinary course of business and have been paid or are not
yet due and payable.
(w) Transactions With Affiliates. Other than the
transactions contemplated by this Agreement and except to the
extent disclosed in the Company SEC Reports filed and publicly
available prior to the date of this Agreement, or as set forth in
28<PAGE>
Section 5.1(w) of the Company Disclosure Schedule, since January
1, 1994, there have been no transactions, agreements,
arrangements or understandings between the Company or its
subsidiaries, on the one hand, and the Company's Affiliates
(other than wholly owned subsidiaries of the Company) or other
Persons, on the other hand, that would be required to be
disclosed under Item 404 of Regulation S-K under the Securities
Act.
(x) Disclosure. No representation or warranty by the
Company in this Agreement and no statement contained in the
Company Disclosure Schedules or any certificate delivered by the
Company to Acquiror pursuant to this Agreement, contains any
untrue statement of a material fact or omits any material fact
necessary to make the statements herein or therein not misleading
when taken together in light of the circumstances in which they
were made, it being understood that as used in this Section
5.1(x) "material" means material to the Company and its
subsidiaries taken as a whole.
5.2. Representations and Warranties of Acquiror.
Acquiror represents and warrants to the Company that:
(a) Corporate Organization and Qualification. Each of
Acquiror and its Significant Subsidiaries (within the meaning of
Rule 1-02 of Regulation S-X promulgated by the SEC) is a
corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation
and is qualified and in good standing as a foreign corporation in
each jurisdiction where the properties owned, leased or operated,
or the business conducted, by it require such qualification,
except where the failure to so qualify or be in such good
standing would not have a Material Adverse Effect with respect to
Acquiror and its subsidiaries. Each of Acquiror and its
Significant Subsidiaries has all requisite power and authority
(corporate or otherwise) to own its properties and to carry on
its business as it is now being conducted.
(b) Capitalization. The authorized capital stock of
Acquiror consists of 650,000,000 Acquiror Common Shares of which,
as of August 3, 1996, approximately 274,235,794 Acquiror Common
Shares were issued and outstanding. All of the outstanding
shares of capital stock of Acquiror have been duly authorized and
validly issued and are fully paid and nonassessable. All
outstanding shares of capital stock or other equity interests of
the subsidiaries of Acquiror are owned by Acquiror or a direct or
indirect wholly owned subsidiary of Acquiror, free and clear of
all liens, charges, encumbrances, claims and options of any
nature. Except as set forth in the Acquiror SEC Reports (as
defined in Section 5.2(f)) or as contemplated by this Agreement,
29<PAGE>
there are not, as of the date hereof, any outstanding or
authorized options, warrants, calls, rights (including preemptive
rights), commitments or any other agreements of any character
which Acquiror or any of its subsidiaries is a party to, or may
be bound by, requiring it to issue, transfer, sell, purchase,
redeem or acquire any Acquiror Common Shares or any shares of
capital stock or any of its securities or rights convertible
into, exchangeable for, or evidencing the right to subscribe for,
any shares of capital stock of Acquiror or any of its
subsidiaries. There are not as of the date hereof and there will
not be at the Effective Time any stockholder agreements, voting
trusts or other agreements or understandings to which Acquiror is
a party or to which it is bound relating to the voting of any
shares of the capital stock of Acquiror. Acquiror has reserved
for issuance under a stock option plan or plans of Acquiror a
sufficient number of Acquiror Common Shares to cover the exercise
of the Options and Warrants to be assumed by Acquiror in
accordance with Section 4.1(d).
(c) Authorization for Acquiror Common Shares.
Acquiror has taken all necessary action to permit it to issue the
number of Acquiror Common Shares required to be issued pursuant
to the Merger. The Acquiror Common Shares issued pursuant to
Article IV will, when issued, be validly issued, fully paid and
nonassessable and no person will have any preemptive right of
subscription or purchase in respect thereof. The Acquiror Common
Shares issued pursuant to the Merger will, when issued, be
registered under the Securities Act and the Exchange Act and
registered or exempt from registration under any applicable state
securities laws and will, when issued, be listed on the NYSE,
subject to official notice of issuance.
(d) Authority Relative to This Agreement. Acquiror
has the requisite corporate power and authority to approve,
authorize, execute and deliver this Agreement and to consummate
the transactions contemplated hereby. This Agreement and the
consummation by Acquiror of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors
of Acquiror, and no other corporate proceedings on the part of
Acquiror are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Acquiror and,
assuming this Agreement constitutes the valid and binding
agreement of the Company, constitutes a valid and binding
agreement of Acquiror, enforceable against it in accordance with
its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to
general principles of equity.
30<PAGE>
(e) Consents and Approvals; No Violation. Neither the
execution and delivery of this Agreement by Acquiror nor the
consummation by Acquiror of the transactions contemplated hereby
will (i) conflict with or result in any breach of any provision
of the Restated Certificate of Incorporation and the Restated By-
Laws of Acquiror; (ii) require any consent, approval,
authorization or permit of, or filing with or notification to,
any governmental or regulatory authority or any other Person,
except (A) in connection with the applicable requirements, if
any, of the HSR Act, (B) pursuant to the applicable requirements
of the Securities Act and the Exchange Act, (C) the filing of the
Certificate of Merger and the Articles of Merger pursuant to the
DGCL and the BCA, respectively, and appropriate documents with
the relevant authorities of other states in which Acquiror is
authorized to do business, (D) as may be required by any
applicable state securities or takeover laws, (E) such filings
and consents as may be required under any environmental, health
or safety law or regulation pertaining to any notification,
disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, (F) such filings,
consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the laws of any
foreign country, (G) filings with, and approval of, the NYSE or,
(H) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification,
would not in the aggregate have a Material Adverse Effect with
respect to Acquiror and its subsidiaries or adversely affect the
ability of Acquiror to consummate the transactions contemplated
hereby; (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or
acceleration or result in the creation of any lien or other
charge or encumbrance) under any of the terms, conditions or
provisions of any note, license, agreement or other instrument or
obligation to which Acquiror or any of its subsidiaries or any of
their assets may be bound, except for such violations, breaches
and defaults (or rights of termination, cancellation, or
acceleration or creations of lien or other charge or encumbrance)
as to which requisite waivers or consents have been obtained or
which, in the aggregate, would not have a Material Adverse Effect
with respect to Acquiror and its subsidiaries or adversely affect
the ability of Acquiror to consummate the transactions
contemplated hereby; or (iv) assuming the consents, approvals,
authorizations or permits and filings or notifications referred
to in this Section 5.2(e) are duly and timely obtained or made,
violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Acquiror or any of its subsidiaries or
to any of their respective assets, except for violations which
would not in the aggregate have a Material Adverse Effect with
respect to Acquiror and its subsidiaries or adversely affect the
31<PAGE>
ability of Acquiror to consummate the transactions contemplated
hereby.
(f) SEC Reports; Financial Statements.
(i) Since January 1, 1993, Acquiror has filed all
forms, reports and documents with the SEC required to be
filed by it pursuant to the federal securities laws and the
SEC rules and regulations thereunder, all of which complied
in all material respects with all applicable requirements of
the Securities Act and the Exchange Act (the "Acquiror SEC
Reports"). None of Acquiror SEC Reports, including, without
limitation, any financial statements or schedules included
therein, at the time filed contained any untrue statement of
a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading.
(ii) The consolidated balance sheets and the related
statements of income, stockholders' equity and cash flow
(including the related notes thereto) of Acquiror included
in the Acquiror SEC Reports comply as to form in all
material respects with applicable accounting requirements
and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP
applied on a basis consistent with prior periods (except as
otherwise noted therein), and present fairly the
consolidated financial position of Acquiror and its
consolidated subsidiaries as of their respective dates, and
the results of its operations and its cash flow for the
periods presented therein (subject, in the case of the
unaudited interim financial statements, to normal year-end
adjustments).
(g) Undisclosed Liabilities; Absence of Certain
Changes or Events. Neither Acquiror nor any of its subsidiaries
has any material indebtedness, obligations or liabilities of any
kind (whether accrued, absolute, contingent or otherwise, and
whether due or to become due or asserted or unasserted), and, to
the best knowledge of Acquiror, there is no basis for the
assertion of any claim or liability of any nature against
Acquiror or any of its subsidiaries, which is not fully reflected
in, reserved against or otherwise described in the financial
statements included in the Acquiror SEC Reports filed and
publicly available prior the date of this Agreement. Except as
disclosed in Acquiror SEC Reports filed and publicly available
prior to the date of this Agreement or as contemplated by this
Agreement, since January 1, 1996, the business of Acquiror and
its subsidiaries has been carried on only in the ordinary and
32<PAGE>
usual course and there has not been any adverse change in its
business, properties, operations or financial condition and no
event has occurred and no fact or set of circumstances has arisen
which has resulted in or could reasonably be expected to result
in a Material Adverse Effect with respect to Acquiror and its
subsidiaries.
(h) Litigation. Except as disclosed in the Acquiror
SEC Reports filed and publicly available prior to the date of
this Agreement, there are no actions, suits or proceedings
pending or, to the best knowledge of Acquiror threatened (or to
the best knowledge of Acquiror any investigation pending or
threatened) against Acquiror or any of its subsidiaries which
could, individually or in the aggregate, if adversely determined,
reasonably be expected to have a Material Adverse Effect with
respect to Acquiror and its subsidiaries, nor is there any
judgment, decree, injunction, rule or order of any governmental
or regulatory authority or arbitration outstanding against
Acquiror or any of its subsidiaries, which could, individually or
in the aggregate, reasonably be expected to have a Material
Adverse Effect with respect to Acquiror and its subsidiaries.
(i) S-4 Registration Statement and Proxy Statement/
Prospectus. None of the information to be supplied by Acquiror
for inclusion or incorporation by reference in the S-4
Registration Statement or the Proxy Statement will, (i) in the
case of the S-4 Registration Statement, at the time it becomes
effective and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein not misleading, or (ii) in the case of the Proxy
Statement, at the time of the mailing of the Proxy Statement and
at the time of the Shareholder Meeting, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the
Effective Time any event with respect to Acquiror, its officers
and directors or any of its subsidiaries shall occur which is
required to be described in the S-4 Registration Statement, such
event shall be so described, and an amendment or supplement shall
be promptly filed with the SEC and, as required by law,
disseminated to the shareholders of the Company. The S-4
Registration Statement will comply (only with respect to
Acquiror) as to form in all material respects with the provisions
of the Securities Act and the rules and regulations promulgated
thereunder.
(j) Brokers and Finders. Except for Goldman, Sachs &
Co., Acquiror has not employed any investment banker, broker,
33<PAGE>
finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement which would be
entitled to any investment banking, brokerage, finder's or
similar fee or commission in connection with this Agreement or
the transactions contemplated hereby.
(k) Ownership of Shares. As of the date hereof, none
of the Acquiror Companies owns any Shares.
(l) Disclosure. No representation or warranty by
Acquiror in this Agreement and no statement contained in the
Acquiror Disclosure Schedules or any certificate delivered by
Acquiror to the Company pursuant to this Agreement, contains any
untrue statement of a material fact or omits any material fact
necessary to make the statements herein or therein not misleading
when taken together in light of the circumstances in which they
were made, it being understood that as used in this Section
5.2(l) "material" means material to Acquiror and its subsidiaries
taken as a whole.
5.3. Representations and Warranties of Tate. Tate
hereby represents and warrants to Acquiror:
(a) Authority Relative to This Agreement and
Shareholders' Agreement. Tate has the requisite power and
authority to enter into, execute and deliver this Agreement and
the Shareholders Agreement and to perform fully his obligations
hereunder and thereunder. Each of this Agreement and the
Shareholders Agreement has been duly executed and delivered by
Tate and constitutes the valid and binding agreement of Tate,
enforceable against Tate in accordance with its terms.
(b) The Tate Shares. All of the Tate Shares are owned
of record and beneficially by Tate, free and clear of all liens,
charges, encumbrances, claims and options of any nature.
(c) Consents and Approvals; No Violation. The
execution and delivery of this Agreement will not (i) require any
consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority or any
other Person, except in connection with the applicable
requirements, if any, of the HSR Act pursuant to the applicable
requirements of the Securities Act and the rules and regulations
promulgated thereunder, and the Exchange Act and the rules and
regulations promulgated thereunder; or (ii) result in a violation
or breach of, or default (or give rise to any right of
termination, cancellation or acceleration or result in the
creation of any lien or other charges or encumbrance) under any
of the terms, conditions or provision of any note, license,
agreement or other instrument or obligation to which Tate may be
34<PAGE>
bound, except for such violations, breaches and defaults (or
rights of termination, cancellation or acceleration or creations
of liens or other charges or encumbrances) as to which requisite
waivers or consents have been obtained or which, in the
aggregate, would not adversely affect the ability of Acquiror to
consummate the Merger.
(d) Certain Acknowledgements. Tate acknowledges that
he is an informed and sophisticated investor and, together with
his advisors, has undertaken such investigation as he has deemed
necessary, including the review of this Agreement and the
Shareholders Agreement, to enable him to make an informed and
intelligent decision with respect to the Agreement and the
Shareholders Agreement and the transactions contemplated hereby
and thereby, including the Merger. Tate acknowledges that
pursuant to the Merger he will receive less consideration per
Share than will other holders of Shares.
ARTICLE VI
Additional Covenants and Agreements
6.1. Conduct of Business.
(a) The Company covenants and agrees that, during the
period from the date of this Agreement to the Effective Time
(unless Acquiror shall otherwise agree in writing, which
agreement shall not be unreasonably withheld, and except as
otherwise contemplated by this Agreement), the Company will, and
will cause each of its subsidiaries to, conduct its operations
according to its ordinary and usual course of business consistent
with past practice and, to the extent consistent therewith, with
no less diligence and effort than would be applied in the absence
of this Agreement, seek to preserve intact its current business
organizations, keep available the service of its current officers
and employees and preserve its relationships with customers,
suppliers and others having business dealings with it to the end
that goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the generality of the
foregoing, and except as otherwise permitted in this Agreement or
disclosed in Section 6.1 of the Company Disclosure Schedule,
prior to the Effective Time, neither the Company nor any of its
subsidiaries will, without the prior written consent of Acquiror,
which consent shall not be unreasonably withheld:
(i) (A) declare, set aside or pay any dividends on,
or make any other distributions in respect of, any of its
capital stock, other than dividends and distributions by any
direct or indirect wholly owned subsidiary of the Company to
35<PAGE>
its parent, (B) split, combine or reclassify any of its
capital stock or, except pursuant to the exercise of
options, warrants, conversion rights, exchange rights and
other contractual rights existing on the date hereof, issue
or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital
stock or other equity interests or (C) purchase, redeem or
otherwise acquire or amend any shares of capital stock or
other equity interests of the Company or any of its
subsidiaries or any other securities thereof or any rights,
warrants or options to acquire any such shares, interests or
other securities;
(ii) issue, deliver, sell, pledge or otherwise
encumber or amend any shares of its capital stock, any other
voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares,
interests, voting securities or convertible securities,
including pursuant to the Option Plans, other than (A) the
issuance of Shares upon the conversion of Convertible Notes
outstanding on the date of this Agreement in accordance with
their present terms, (B) the issuance of Shares upon the
exercise of Options outstanding on the date of this
Agreement in accordance with their present terms and (C) the
issuance of Shares upon the exchange of the Warrants
outstanding on the date of this Agreement in accordance with
their present terms;
(iii) amend its Articles of Incorporation, By-Laws or
other comparable charter or organizational documents;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion
of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, association or
other business organization or division thereof or (B) any
asset requiring or involving an expenditure or purchase
price in excess of $100,000, except (x) mergers and
consolidations between or among one or more wholly owned
subsidiaries of the Company that will not create adverse tax
consequences to the Company or its subsidiaries, and
(y) purchases of inventory in the ordinary course of
business consistent with past practice;
(v) sell, lease, license, mortgage or otherwise
encumber or subject to any lien or otherwise dispose of any
of its properties or assets, except in the ordinary course
of business consistent with past practice;
36<PAGE>
(vi) (A) other than incurrences of indebtedness (which
term shall be deemed not to include trade payables incurred
in the ordinary course of business) in the ordinary course
of business which, in the aggregate, do not exceed $50,000,
incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt
securities of the Company or any of its subsidiaries,
guarantee any debt securities of another person, enter into
any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any
arrangement having the economic effect of any of the
foregoing or (B) make any loans, advances or capital
contributions to, or investments in, any other person other
than to the Company or any direct or indirect wholly owned
subsidiary of the Company;
(vii) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the
payment, discharge, settlement or satisfaction, in
accordance with their terms of liabilities reflected or
reserved against in the most recent consolidated financial
statements (or the notes thereto) of the Company included in
the Company SEC Reports filed and publicly available prior
to the date of this Agreement or incurred in the ordinary
course of business consistent with past practice since the
date of such financial statements, or waive the benefits of,
or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which the Company or any
of its subsidiaries is a party;
(viii) (A) adopt, enter into, terminate or amend any
Company Benefit Plan or other arrangement for the benefit or
welfare of any director, officer or current or former
employee of the Company or any of its subsidiaries,
(B) increase in any manner the compensation or fringe
benefits of, or pay any bonus to, any such director, officer
or employee (except for normal increases or bonuses as
contractually required pursuant to agreements disclosed in
the Company SEC Reports filed and publicly available prior
to the date of this Agreement or in the ordinary course of
business consistent with past practice to employees other
than directors and executive officers of the Company and
that, in the aggregate, do not result in any material
increase in benefits or compensation expense to the Company
and its subsidiaries relative to the level in effect prior
to such action (but in no event shall the aggregate amount
of the increases granted to any such director, officer or
employee exceed 5% of the aggregate annualized compensation
37<PAGE>
of such director, officer or employee and in no event shall
the aggregate amount of all such increases exceed 1% of the
aggregate annualized compensation expense of the Company and
its subsidiaries reported in the most recent consolidated
financial statements of the Company included in the Company
SEC Reports filed and publicly available prior to the date
of this Agreement) and except as contractually required
pursuant to agreements included as part of a Company SEC
Reports filed and publicly available prior to the date of
this Agreement), (C) pay any benefit not provided for under
any Company Benefit Plan, (D) except for payments or awards
in cash permitted by clause (B), grant any awards under any
bonus, incentive, performance or other compensation plan or
arrangement or Company Benefit Plan (including the grant of
stock options, stock appreciation rights, stock-based or
stock-related awards, performance units or restricted stock,
or the removal of existing restrictions in any Company
Benefit Plans or agreements or awards made thereunder) or
(E) take any action to fund or in any other way secure the
payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or Company Benefit Plan;
(ix) make or agree to make any capital expenditure or
expenditures other than for maintenance purposes;
(x) modify, amend or terminate any contract or
agreement set forth in the Company SEC Reports or any real
property lease to which the Company or any of its
subsidiaries is a party, or waive, release or assign any
material rights or claims thereunder;
(xi) take or agree to take any action that would
prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a)(1) of the
Code;
(xii) conduct its business in a manner or take, or
cause to be taken, any other action that would or might
reasonably be expected to prevent or materially delay the
Company or Acquiror from consummating the transactions
contemplated hereby in accordance with the terms of this
Agreement (regardless of whether such action would otherwise
be permitted or not prohibited hereunder), including,
without limitation, any action which may materially limit
the ability of the Company or Acquiror to consummate the
transactions contemplated hereby as a result of antitrust or
other regulatory concerns; or
(xiii) authorize any of, or commit or agree to take
any of, the foregoing actions.
38<PAGE>
(b) Acquiror covenants and agrees that, during the
period from the date of this Agreement to the Effective Time,
neither Acquiror or any of its subsidiaries will, without the
prior written consent of the Company, which consent shall not be
unreasonably withheld:
(i) take or agree to take any action that would
prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a)(1) of the
Code;
(ii) conduct its business in a manner or take, or cause
to be taken, any other action that would or might reasonably
be expected to prevent or materially delay Acquiror or the
Company from consummating the transactions contemplated
hereby in accordance with the terms of this Agreement
(regardless of whether such action would otherwise be
permitted or not prohibited hereunder), including, without
limitation, any action which may materially limit the
ability of Acquiror or the Company to consummate the
transactions contemplated hereby as a result of antitrust or
other regulatory concerns; or
(iii) authorize any of, or commit or agree to take any
of, the foregoing actions.
6.2. No Solicitation. (a) The Company, its
subsidiaries and their respective officers, directors, employees,
representatives, agents or affiliates (including, without
limitation, any investment banker, attorney or accountant
retained by the Company or any of its subsidiaries)
(collectively, the "Company's Representatives") shall immediately
cease any discussions or negotiations with any party that may be
ongoing with respect to a Competing Transaction (as defined
below). From and after the date hereof until the termination of
this Agreement, neither the Company nor any of its subsidiaries
will, nor will the Company authorize or permit any of its
subsidiaries or any of the Company Representatives to, directly
or indirectly, initiate, solicit or knowingly encourage
(including by way of furnishing non-public information), or take
any other action to facilitate, any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to
lead to, any Competing Transaction, or participate in any
discussions or negotiations regarding any Competing Transaction
or agree to or endorse any Competing Transaction, and the Company
shall notify Acquiror orally (within one business day) and in
writing (as promptly as practicable) of all of the relevant
details relating to all inquiries and proposals which it or any
of its subsidiaries or any such Company Representative may
receive relating to any of such matters and, if such inquiry or
39<PAGE>
proposal is in writing, the Company shall deliver to Acquiror a
copy of such inquiry or proposal promptly; provided, however,
that nothing contained in this Section 6.2 shall prohibit the
Company or its Board of Directors from (i) taking and disclosing
to its stockholders a position contemplated by Exchange Act Rule
14e-2 or (ii) making any disclosure to its stockholders that, in
the good faith judgment of its Board of Directors, after
consultation with and based upon the advice of independent legal
counsel (who may be the Company's regularly engaged independent
legal counsel), is required under applicable law; provided
further, that nothing contained in this Section 6.2 shall
prohibit the Company from furnishing information to, or entering
into discussions or negotiations with, any person or entity that
after the date hereof states in an unsolicited writing that it
has a bona fide serious interest to make a Superior Proposal (as
defined below) if (1) (x) the Board of Directors of the Company,
after consultation with and based upon the advice of independent
legal counsel (who may be the Company's regularly engaged
independent legal counsel), determines in good faith that such
action is necessary for the Board of Directors of the Company to
comply with its fiduciary duties to stockholders under applicable
law and (y) after consultation with and based upon the advice of
an independent financial advisor (who may be the Company's
regularly engaged independent financial advisor) determines in
good faith that such person or entity is capable of making,
financing and consummating a Superior Proposal and (2) prior to
taking such action, the Company (x) provides at least two
business days' notice to Acquiror to the effect that it is taking
such action and (y) receives from such person or entity an
executed confidentiality agreement on terms no less restrictive
than the Confidentiality Agreement (as defined below). For
purposes of this Agreement, "Competing Transaction" shall mean
any of the following (other than the transactions between the
Company Acquiror contemplated hereunder) involving the Company:
(i) any merger, consolidation, share exchange, recapitalization,
business combination, or other similar transaction; (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other
disposition of all or a substantial portion of the assets of the
Company and its subsidiaries, taken as a whole, or of more than
25% of the equity securities of the Company or any of its
subsidiaries, in any case in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 25% or
more of the outstanding shares of capital stock of the Company or
the filing of a registration statement under the Securities Act
in connection therewith; or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
(b) Except as set forth in this Section 6.2, the Board
of Directors of the Company shall not (i) withdraw or modify, or
40<PAGE>
propose to withdraw or modify, in a manner adverse to Acquiror,
the approval or recommendation by such Board of Directors of this
Agreement or the Merger, or (ii) approve or recommend, or cause
the Company to enter into any agreement with respect to, any
Competing Transaction. Notwithstanding the foregoing, if the
Board of Directors of the Company, after consultation with and
based upon the advice of independent legal counsel (who may be
the Company's regularly engaged independent legal counsel),
determines in good faith that it is necessary to do so in order
to comply with its fiduciary duties to stockholders under
applicable law, the Board of Directors of the Company may modify
or withdraw its approval or recommendation of this Agreement and
the Merger, approve or recommend a Superior Proposal (as defined
below) or cause the Company to enter into an agreement with
respect to a Superior Proposal, but in each case only after
providing at least two business days' written notice to Acquiror
(a "Notice of Superior Proposal") advising Acquiror that the
Board of Directors of the Company has received a Superior
Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior
Proposal. In addition, if the Company proposes to enter into an
agreement with respect to any Competing Transaction, it shall
concurrently with entering into such an agreement pay, or cause
to be paid, to Acquiror the fee required by Section 8.5(a)
hereof. For purposes of this Agreement, a "Superior Proposal"
means any bona fide proposal to acquire, directly or indirectly,
for consideration consisting of cash and/or securities, all or
substantially all the Shares then outstanding or all or
substantially all the assets of the Company and otherwise on
terms which the Board of Directors of the Company determines in
its good faith judgment (based on the advice of a financial
advisor of nationally recognized reputation) to be more favorable
to the Company's shareholders than the Merger.
6.3. Meeting of Shareholders. The Company will take
all action necessary in accordance with applicable law and its
Articles of Incorporation and By-Laws to convene a meeting of its
shareholders (the "Shareholder Meeting") as promptly as
practicable to consider and vote upon the approval of this
Agreement. Subject to the fiduciary duties of the Company's
Board of Directors under applicable law after consultation with
and based upon the advice of independent legal counsel, except as
otherwise provided in Section 6.2, the Board of Directors of the
Company shall recommend and declare advisable such approval and
the Company shall use its best efforts to solicit, and use its
best efforts to obtain, such approval.
6.4. S-4 Registration Statement; Proxy Statement.
Acquiror will, as promptly as practicable, prepare and file with
the SEC a registration statement on Form S-4 (the "S-4
41<PAGE>
Registration Statement"), containing a proxy statement/prospectus
and a form of proxy, in connection with the registration under
the Securities Act of Acquiror Common Shares issuable pursuant to
the Merger. The Company will, as promptly as practicable,
prepare and file with the SEC a proxy statement that will be the
same proxy statement/prospectus contained in the S-4 Registration
Statement and a form of proxy, in connection with the vote of the
Company's stockholders with respect to this Agreement (such proxy
statement/prospectus, together with any amendments thereof or
supplements thereto, in each case in the form or forms mailed to
the Company's stockholders, is herein called the "Proxy
Statement"). Acquiror and the Company will, and will cause their
accountants and lawyers to, use their best efforts to have or
cause the S-4 Registration Statement declared effective as
promptly as practicable, including, without limitation, causing
their accountants to deliver necessary or required instruments
such as opinions and certificates, and will take any other action
required or necessary to be taken under federal or state
securities laws or otherwise in connection with the registration
process. The Company will cause the Proxy Statement to be mailed
to stockholders of the Company at the earliest practicable date
and will coordinate and cooperate with Acquiror with respect to
the timing of the Shareholder Meeting and shall hold such
Shareholder Meeting as soon as practicable after the date hereof.
6.5. Access to Information. Upon reasonable notice,
the Company shall (and shall cause each of its subsidiaries to)
afford to officers, employees, counsel, accountants and other
authorized representatives of Acquiror ("Acquiror's
Representatives") reasonable access, during normal business hours
throughout the period prior to the Effective Time, to its
properties, books and records and, during such period, shall (and
shall cause each of its subsidiaries to) furnish promptly to
Acquiror's Representatives all information concerning the
business, properties and personnel of the Company and its
subsidiaries as may reasonably be requested, including the
opportunity to observe the full physical chain-wide inventory
count of the Company and its subsidiaries to be taken in October
1996 (which inventory count shall be completed no later than
October 31, 1996), provided that no investigation pursuant to
this Section 6.5 shall affect or be deemed to modify any of the
representations or warranties made by the Company. Acquiror
agrees that it will not, and will cause Acquiror's
Representatives not to, use any information obtained pursuant to
this Section 6.5 for any purpose unrelated to the consummation of
the transactions contemplated by this Agreement. In connection
with the foregoing, the Company agrees to cause the Company's
independent accountants to provide their workpapers to Acquiror
upon the terms and subject to the conditions on which such
workpapers have previously been provided to Acquiror. The
42<PAGE>
Confidentiality Agreement, dated July 16, 1996 (the
"Confidentiality Agreement"), between Acquiror and the Company
shall apply with respect to the information furnished hereunder
and survive any termination of this Agreement, subject to the
terms and conditions set forth in such Confidentiality Agreement.
6.6. Publicity. The parties hereto agree that they
will consult with each other concerning any proposed press
release or public announcement pertaining to the Merger and the
other transactions contemplated hereby in order to seek to agree
upon the text of any such press release or the making of such
public announcement.
6.7. Indemnification of Directors and Officers.
(a) From and after the Effective Time and for a period
of six years thereafter, the Surviving Corporation shall
indemnify, defend and hold harmless each person who is now, or
has been at any time prior to the date hereof or who becomes
prior to the Effective Time, an officer or director of the
Company or any of its subsidiaries (the "Indemnified Parties")
against all losses, claims, damages, costs, expenses (including
attorneys' fees and expenses), liabilities or judgments or
amounts that are paid in settlement of or in connection with any
threatened or actual claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director or
officer of the Company or any of its subsidiaries, whether
pertaining to any matter existing or occurring at or prior to the
Effective Time and whether asserted or claimed prior to, or at or
after, the Effective Time ("Indemnified Liabilities"), including,
without limitation, all Indemnified Liabilities based in whole or
in part on, or arising in whole or in part out of, or pertaining
to this Agreement or the transactions contemplated hereby, in
each case to the fullest extent a corporation is permitted under
the BCA to indemnify its own directors or officers, as the case
may be; provided, however, that all right to indemnification in
respect of any claim asserted or made within such period shall
continue until the disposition of such claim. In the event of an
Indemnified Liability, (i) Acquiror shall pay the reasonable fees
and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to Acquiror,
promptly after statements therefor are received and otherwise
advance to such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred, in either case to the
extent not prohibited by the BCA and upon receipt of any
affirmation and undertaking required by the BCA, (ii) Acquiror
will cooperate in the defense of any such matter and (iii) any
determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth
43<PAGE>
under the BCA shall be made by independent counsel mutually
acceptable to Acquiror and the Indemnified Party; provided,
however, that Acquiror shall not be liable for any settlement
effected without its written consent (which consent shall not be
reasonably withheld). The Indemnified Parties as a group may
retain only one law firm with respect to each related matter
except to the extent there is, in the opinion of counsel to an
Indemnified Party, under applicable standards of professional
conduct, a conflict on any significant issue between positions of
any two or more Indemnified Parties.
(b) This Section 6.7 is intended to benefit the
Indemnified Parties and shall be binding on all successors and
assigns of Acquiror, the Company and the Surviving Corporation.
6.8. Affiliates of the Company. Prior to the Closing
Date, the Company shall identify to Acquiror all persons (each, a
"Company Affiliate") who may be deemed to be "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The,
Company shall use its best reasonable efforts to cause each
Company Affiliate to deliver to Acquiror, on or prior to the
Closing Date, a written agreement substantially in the form
attached hereto as Exhibit C.
6.9. Taxes. In respect of Tax Returns of the Company
or any subsidiary not required to be filed prior to the date
hereof, the Company shall, to the extent permitted by law without
any penalty, delay (or cause such subsidiary to delay) the filing
of any such Tax Returns until after the Effective Time; provided,
however, that the Company shall notify Acquiror of its intention
to delay (or cause such subsidiary to delay) any such filing and
shall not so delay the filing of a Tax Return if Acquiror and the
Company agree that so delaying the filing of such Tax Return is
not in the best interests of either the Company or Acquiror. If
any such Tax Return is required to be filed on or prior to the
Effective Time, the Company or its subsidiaries, as the case may
be, shall prepare and timely file such Tax Return in a manner
consistent with prior years and all applicable laws and
regulations; provided, however, that Acquiror shall be notified
and given an opportunity to review and to comment, prior to the
filing thereof, on any such Tax Return.
6.10. Maintenance of Insurance. Between the date
hereof and through the Effective Time the Company will maintain
in full force and effect all of its presently existing policies
of insurance or insurance comparable to the coverage afforded by
such policies.
6.11. Representations and Warranties. None of the
Company, Acquiror or Tate will take any action that would cause
44<PAGE>
any of the representations and warranties set forth in Section
5.1, 5.2 or 5.3, as the case may be, not to be true and correct
(subject to the standard set forth in the proviso of Section
7.1(a) or 7.2(a), respectively) at and as of the Effective Time.
6.12. Antitrust Notification. The Company and
Acquiror shall as promptly as practicable, but in no event later
than ten Business Days following the execution and delivery of
this Agreement, file with the United States Federal Trade
Commission (the "FTC") and the United States Department of
Justice (the "DOJ") the notification and report form required for
the transactions contemplated hereby and any supplemental
information requested in connection therewith pursuant to the HSR
Act. Any such notification and report form and supplemental
information shall be in substantial compliance with the
requirements of the HSR Act. The Company and Acquiror shall
furnish to each other such necessary information and reasonable
assistance as the other may request in connection with its
preparation of any filing or submission which is necessary under
the HSR Act. The Company and Acquiror shall keep each other
apprised of the status of any communications with, and any
inquiries or requests for additional information from, the FTC
and the DOJ and shall comply promptly with any such inquiry or
request. The Company and Acquiror shall use reasonable efforts
to obtain any clearance required under the HSR Act for the
completion of the Merger, which efforts for purposes of this
Section 6.12 shall not require Acquiror to agree to any
prohibition, limitation or other requirement of the type set
forth in clauses (B), (C) and (D) of Section 7.1(c).
6.13. Reasonable Best Efforts; Other Action. (a)
Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable best
efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated
by this Agreement, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from all
applicable governmental and regulatory authorities and the making
of all necessary registrations and filings (including filings
with governmental and regulatory authorities, if any) and the
taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by,
any governmental and regulatory authority, (ii) the obtaining of
all necessary consents, approvals or waivers from all other
Persons, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of any of the transactions
45<PAGE>
contemplated by this Agreement, including seeking to have any
stay or temporary restraining order entered by any court or other
governmental or regulatory authority vacated or reversed and (iv)
the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. Each party
hereto will notify the other party promptly of the receipt of any
comments from the SEC or its staff and of any other governmental
officials for amendments or supplements to the S-4 Registration
Statement, the Proxy Statement or any other filing described in
or made pursuant to Section 6.12 or this Section 6.13 hereof and
will supply the other with copies of all correspondence between
such party or any of its representatives, on the one hand, and
the SEC, its staff or any other governmental officials, on the
other hand, with respect to the S-4 Registration Statement, the
Proxy Statement or such other filings.
6.14. Notification of Certain Matters. Each of the
Company and Acquiror shall give prompt notice to the other of (a)
any notice of, or other communication relating to, a default or
event which, with notice or lapse of time or both, would become a
default, received by it or any of its subsidiaries subsequent to
the date of this Agreement and prior to the Effective Time, under
any contract material to the financial condition, properties,
businesses or results of operations of it and its subsidiaries
taken as a whole to which it or any of its subsidiaries is a
party or is subject, (b) any notice or other communication from
any third party alleging that the consent of such third party is
or may be required in connection with the transactions
contemplated by this Agreement, (c) any material adverse change
in their respective (together with their respective subsidiaries
taken as a whole) businesses, results of operations, properties,
assets, liabilities, prospects or condition (financial or
otherwise), other than changes resulting from general economic
conditions, (d) any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate in any
material respect (including in the case of representations or
warranties by the Company or Acquiror, as applicable, such
party's receiving knowledge of any fact, event or circumstance
which may cause any representation qualified as to the knowledge
of such party to be or become untrue or inaccurate in any
material respect) or (e) the failure by it to comply with or
satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements
of the parties or the conditions to the obligations of the
parties under this Agreement.
46<PAGE>
6.15. Blue Sky Permits. Acquiror shall use its best
efforts to obtain, prior to the effective date of the S-4
Registration Statement, all necessary state securities laws or
"blue sky" permits and approvals required to carry out the
transactions contemplated by this Agreement, and will pay all
expenses incident thereto.
6.16. NYSE Listing. Acquiror shall use its best
efforts to cause the Acquiror Common Shares to be issued pursuant
to the Merger to be listed, prior to the Effective Time, on the
NYSE, subject to notice of official issuance thereof.
6.17. Comfort Letter. The Company shall cause to be
delivered to Acquiror a letter of Deloitte & Touche LLP,
independent public accountants to the Company, dated a date
within two business days before the date on which the S-4
Registration Statement shall become effective and addressed to
Acquiror, in form and substance reasonably satisfactory to
Acquiror and customary in scope and substance for letters
delivered by independent public accountants in connection with
registration statements similar to the S-4 Registration
Statement.
6.18. Benefit Matters. The employees of the Company
and its subsidiaries shall be eligible to participate in the
Acquiror 401(k), profit sharing, stock option and stock purchase
plans and Acquiror medical, life insurance, disability insurance
and vacation plans (the "Plans") effective (a) February 2, 1997
or (b) if the Effective Time is after February 2, 1997, the first
day of the month following the Effective Time (the "Eligibility
Date"). Participation in the Plans shall be subject to the
eligibility requirements and the terms and conditions of each of
the Plans. For purposes of the eligibility and vesting
requirements of the Plans, service credit will be given for
employment with the Company and its Subsidiaries prior to the
Effective Time. The medical plan of the Acquiror shall not
include pre-existing condition exclusions with respect to
employees of the Company and its subsidiaries as of the Effective
Time, except to the extent such exclusions were applicable under
the medical plan of the Company on the Effective Time. Effective
as of the Eligibility Date, all welfare benefit plans and the
vacation plan of the Company and its subsidiaries will be
terminated. Acquiror shall cause the Company to perform the
Company's obligations under all employment, consulting and other
compensation arrangements disclosed in Sections 5.1(i) and (m) of
the Company Disclosure Schedule.
6.19. Convertible Notes. Following the Effective
Time, pursuant to the terms of Article Eight of the Indenture,
dated as of October 3, 1995, between the Company and Nationsbank
47<PAGE>
Georgia, National Association, as trustee, Acquiror shall assume
the Convertible Notes and comply with the other provisions set
forth therein.
ARTICLE VII
Conditions
7.1. Conditions to the Obligations of Acquiror. The
obligations of Acquiror to consummate the Merger are subject to
the fulfillment at or prior to the Effective Time of the
following conditions, any or all of which may be waived in whole
or in part by Acquiror to the extent permitted by applicable law.
(a) Certificate. The representations and warranties
of the Company and Tate set forth in this Agreement shall be true
and correct in all material respects on and as of the Effective
Time with the same force and effect as though the same had been
made on and as of the Effective Time (except to the extent they
relate to a particular date), the Company and Tate shall have
performed in all material respects all of its material
obligations under this Agreement theretofore to be performed, and
Acquiror shall have received at the Effective Time a certificate
to that effect dated the Effective Time and executed by the Chief
Executive Officer or President of the Company, provided, however,
that no representation or warranty of the Company contained in
Section 5.1 hereof shall be deemed untrue or incorrect as a
consequence of the existence of any fact, circumstance or event
unless such fact, circumstance or event, individually or taken
together with all other facts, circumstances or events
inconsistent with any paragraph of Section 5.1 has had or is
expected to have a Material Adverse Effect with respect to the
Company and its subsidiaries.
(b) Company Shareholder Approval. This Agreement
shall have been duly approved by the holders of a majority of the
votes entitled to be cast by the holders of Shares at the
Shareholder meeting, in accordance with applicable law and the
Articles of Incorporation and By-Laws of the Company.
(c) No Litigation. There shall not be pending or
threatened by any governmental authority or regulatory agency,
any suit, action or proceeding, (A) challenging or seeking to
restrain or prohibit the Merger or any of the other transactions
contemplated by this Agreement or seeking to obtain from Acquiror
or the Company or any of their respective subsidiaries in
connection with the Merger any material damages, (B) seeking to
prohibit or limit the ownership or operation by Acquiror or the
Company or any of their respective subsidiaries of any material
48<PAGE>
portion of the business or assets of Acquiror or the Company or
any of their respective subsidiaries, or to compel Acquiror, the
Company or any of their respective subsidiaries to dispose of or
hold separate any material portion of the business or assets of
Acquiror, the Company or any of their respective subsidiaries in
each case as a result of the Merger or any of the other
transactions contemplated by this Agreement, (C) seeking to
impose limitations on the ability of Acquiror to acquire or hold,
or exercise full rights of ownership of, the Shares, including
the right to vote the Shares on all matters properly presented to
the stockholders of the Company, (D) seeking to prohibit Acquiror
or any of its subsidiaries from effectively controlling in any
material respect the business or operations of the Company or any
of its subsidiaries or (E) which otherwise is reasonably likely
to have a Material Adverse Effect with respect to the Company and
its subsidiaries or Acquiror and its subsidiaries. There shall
be in effect no preliminary or permanent injunction or other
order of a court or governmental or regulatory agency of
competent jurisdiction directing that the transactions
contemplated herein not be consummated.
(d) S-4 Registration Statement. The S-4 Registration
Statement shall have become effective and no stop order
suspending the effectiveness of the S-4 Registration Statement
shall have been issued and no proceedings for such purpose shall
have been initiated and be continuing or threatened by the SEC.
(e) Listing of Acquiror Common Shares. The Acquiror
Common Shares to be issued pursuant to the Merger and the Share
Exchange and the other such shares required to be reserved for
issuance in connection with the Merger shall have been authorized
for listing on the NYSE, subject to notice of official issuance.
(f) Governmental Filings and Consents; HSR Act.
Subject in each case to the provisions of Section 7.1(c), (i) all
governmental filings required to be made prior to the Effective
Time by the Company with, and all governmental consents required
to be obtained prior to the Effective Time from, governmental and
regulatory authorities in connection with the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been made or
obtained, except where the failure to make such filing or obtain
such consent would not reasonably be expected to have a Material
Adverse Effect with respect to Acquiror (assuming the Merger had
taken place) and (ii) the waiting periods under the HSR Act shall
have expired or been terminated.
(g) Third-Party Consents. All required
authorizations, consents and approvals of any Person (other than
a governmental authority), the failure to obtain which would have
49<PAGE>
a Material Adverse Effect with respect to Acquiror (assuming the
Merger had taken place), shall have been obtained.
(h) Delivery of Comfort Letter. Deloitte & Touche LLP
shall have delivered to the Company, for delivery by it to
Acquiror, one or more letters with respect to the financial
information contained in the Proxy Statement as contemplated by
Section 6.17.
(i) Affiliate Letters. Acquiror shall have used its
reasonable best efforts to obtain from each Company Affiliate an
executed copy of an agreement substantially in the form of
Exhibit C.
(j) Delivery of Tax Opinion. Acquiror shall have
received from Weil, Gotshal & Manges LLP, counsel to Acquiror, an
opinion addressed to Acquiror, substantially to the effect that
(i) the Merger will be treated for federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the
Code; (ii) each of Acquiror and the Company will be a party to
the reorganization within the meaning of Section 368(b) of the
Code; and (iii) no gain or loss will be recognized by Acquiror or
the Company as a result of the Merger, dated the Closing Date,
and such opinion shall not have been withdrawn or modified in any
material respect. In rendering such opinion, Weil, Gotshal &
Manges LLP may receive and rely upon representations contained in
certificates and agreements of the Company, Acquiror and certain
shareholders of the Company.
7.2. Conditions to the Obligations of the Company.
The obligation of the Company to consummate the Merger is subject
to the fulfillment at or prior to the Effective Time of the
following conditions, any or all of which may be waived in whole
or in part by the Company to the extent permitted by applicable
law.
(a) Certificate. The representations and warranties
of Acquiror set forth in this Agreement shall be true and correct
in all material respects on and as of the Effective Time with the
same force and effect as though the same had been made on and as
of the Effective Time (except to the extent they relate to a
particular date), Acquiror shall have performed in all material
respects all of its obligations under this Agreement theretofore
to be performed, and the Company shall have received at the
Effective Time a certificate to that effect dated the Effective
Time and executed by the Chief Executive Officer or President of
Acquiror, provided, however, that no representation or warranty
of Acquiror contained in Section 5.2 hereof shall be deemed
untrue or incorrect as a consequence of the existence of any
fact, circumstance or event unless such fact, circumstance or
50<PAGE>
event, individually or taken together with all other facts
circumstances or events inconsistent with any paragraph of
Section 5.2 has had or is expected to have a Material Adverse
Effect with respect to Acquiror and its subsidiaries.
(b) Company Shareholder Approval. This Agreement
shall have been duly approved by the holders of a majority of the
votes entitled to be cast by the holders of Shares at the
Shareholder Meeting, in accordance with applicable law and the
Articles of Incorporation and By-Laws of the Company.
(c) Injunction. There shall be in effect no
preliminary or permanent injunction or other order of a court or
governmental or regulatory agency of competent jurisdiction
directing that the transactions contemplated herein not be
consummated; provided, however, that prior to invoking this
condition the Company shall use its best efforts to have such
injunction or order vacated.
(d) S-4 Registration Statement. The S-4 Registration
Statement shall have become effective and no stop order
suspending the effectiveness of the S-4 Registration Statement
shall have been issued and no proceedings for such purpose shall
have been initiated and be continuing or threatened by the SEC.
(e) Listing of Acquiror Common Shares. The Acquiror
Common Shares to be issued pursuant to the Merger and such other
shares required to be reserved for issuance in connection with
the Merger shall have been authorized for listing on the NYSE,
subject to official notice of issuance.
(f) HSR Act. The waiting periods under the HSR Act
shall have expired or been terminated.
(g) Delivery of Tax Opinion. The Company shall have
received from Wachtell, Lipton, Rosen & Katz, counsel to the
Company, an opinion addressed to the Company substantially to the
effect that (i) the Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a)
of the Code; (ii) each of Acquiror and the Company will be a
party to the reorganization within the meaning of Section 368(b)
of the Code; and (iii) no gain or loss will be recognized by a
shareholder of the Company as a result of the Merger except (x)
with respect to cash received by such shareholder in lieu of
fractional shares or pursuant to the exercise of appraisal rights
and (y) except to the extent a shareholder receives consideration
different in amount from other shareholders, dated the Closing
Date, and such opinion shall not have been withdrawn or modified
in any material respect. In rendering such opinion, Wachtell,
Lipton, Rosen & Katz may receive and rely upon representations
51<PAGE>
contained in certificates of Acquiror, the Company and certain
shareholders of the Company.
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent. This Agreement
may be terminated and the Merger may be abandoned at any time
prior to the Effective Time, before or after the approval by
holders of Shares, either by the mutual written consent of
Acquiror and the Company, or by mutual action of their respective
Boards of Directors.
8.2. Termination by Either Acquiror or the Company.
This Agreement may be terminated and the Merger may be abandoned
by action of the Board of Directors of either Acquiror or the
Company if (i) the Merger shall not have been consummated by May
31, 1997 (provided that the right to terminate this Agreement
under this Section 8.2(i) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has
been the cause of or resulted in the failure of the Merger to
occur on or before such date); (ii) any court of competent
jurisdiction in the United States or some other governmental body
or regulatory authority shall have issued an order, decree or
ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and
nonappealable; or (iii) the Merger shall have been voted on by
shareholders of the Company at a meeting duly convened therefor
and the vote shall not have been sufficient to satisfy the
conditions set forth in Sections 7.1(b) and 7.2(b).
8.3. Termination by Acquiror. This Agreement may be
terminated and the Merger may be abandoned at any time prior to
the Effective Time, before or after the approval by holders of
Shares, by action of the Board of Directors of Acquiror, if (i)
the Company shall have failed to comply in any material respect
with any of the covenants or agreements contained in this
Agreement to be complied with or performed or fulfilled by the
Company at or prior to such date of termination, which failure to
comply has not been cured within fifteen business days following
receipt by the Company of notice of such failure to comply,
(ii) any representation or warranty of the Company contained in
the Agreement shall not be true in all material respects when
made (provided such breach has not been cured within fifteen
business days following receipt by the Company of notice of the
breach) or (except to the extent they relate to a particular
date) on and as of the Effective Time as if made on and as of the
52<PAGE>
Effective Time (in each case subject to the standard set forth in
the proviso of Section 7.1(a)) , or (iii) (A) the Board of
Directors of the Company shall withdraw, modify or change its
recommendation of this Agreement or the Merger in a manner
adverse to Acquiror, or shall have approved or recommended to the
stockholders of the Company any Competing Transaction or (B) the
Company shall have entered into any agreement with respect to any
Competing Transaction or (C) the Board of Directors of the
Company shall resolve to do any of the foregoing.
8.4. Termination by the Company. This Agreement may
be terminated and the Merger may be abandoned at any time prior
to the Effective Time, before or after the approval by holders of
Shares, by action of the Board of Directors of the Company, if
(i) Acquiror shall have failed to comply in any material respect
with any of the covenants or agreements contained in this
Agreement to be complied with or performed or fulfilled by,
Acquiror at or prior to such date of termination, which failure
to comply has not been cured within fifteen business days
following receipt by the breaching party of notice of such
failure to comply, (ii) any representation or warranty of
Acquiror contained in this Agreement shall not be true in all
material respects when made (provided such breach has not been
cured within fifteen business days following receipt by the
breaching party of notice of the breach) or (except to the extent
they relate to a particular date) on and as of the Effective Time
as if made on and as of the Effective Time (in each case subject
to the standard set forth in the proviso of Section 7.2(a)) or
(iii) the Company enters into a definitive agreement relating to
a Superior Proposal in accordance with Section 6.2(b), provided
it has complied with all of the provisions thereof and has made
payment of the fees required by Section 8.5 hereof.
8.5. Effect of Termination and Abandonment. (a) In
the event of termination of this Agreement by either the Company
or Acquiror as provided in this Article VIII, this Agreement
shall forthwith become void and there shall be no liability or
obligation on the part of Acquiror or the Company or their
respective affiliates, officers, directors or stockholders except
(x) with respect to this Section 8.5 and Section 9.1 and (y) to
the extent that such termination results from the breach of a
party hereto or any of its representations or warranties, or any
of its covenants or agreements, in each case, as set forth in
this Agreement; provided, however, that the Company agrees that
if this Agreement shall be terminated pursuant to (i) Section
8.2(iii), if at or prior to the time of the Shareholder Meeting
(x) a Competing Transaction shall have been commenced, publicly
proposed or publicly disclosed and (y) the Company has not
rejected such Competing Transaction, (ii) Section 8.3 (iii) , or
(iii) Section 8.4(iii), then the Company shall pay to Acquiror an
53<PAGE>
amount equal to $12 million; and provided, further, that Acquiror
agrees that if this Agreement shall be terminated pursuant to
Section 8.4(i) or 8.4(ii), then Acquiror shall pay to the Company
an amount equal to $20 million.
(b) Any payment required to be made pursuant to
Section 8.5(a) shall be made as promptly as practicable but not
later than two business days after the occurrence of the event
giving rise to such payment and shall be made by wire transfer of
immediately available funds to an account designated by Acquiror
or the Company, as the case may be, except that any payment to be
made pursuant to clause (iii) of the first proviso of Section
8.5(a) shall be made not later than the termination of this
Agreement by the Company pursuant to Section 8.4(iii).
ARTICLE IX
Miscellaneous and General
9.1. Payment of Expenses. Whether or not the Merger
shall be consummated, except as otherwise provided in Section
8.5, each party hereto and the shareholders of the Company shall
pay their own expenses incident to preparing for, entering into
and carrying out this Agreement and the consummation of the
transactions contemplated hereby, provided that the Surviving
Corporation shall pay, with funds of the Company and not with
funds provided by any of Acquiror Companies, any and all property
or transfer taxes imposed on the Surviving Corporation. The cost
of printing the S-4 Registration Statement and the Proxy
Statement shall be borne equally by the Company and the Acquiror.
9.2. Survival of Representations and Warranties. The
representations and warranties made herein shall not survive
beyond the Effective Time or a termination of this Agreement.
This Section 9.2 shall not limit any covenant or agreement of the
parties hereto which by its terms contemplates performance after
the Effective Time.
9.3. Modification or Amendment. Subject to the
applicable provisions of the BCA, at any time prior to the
Effective Time, Acquiror and the Company may modify or amend this
Agreement, by written agreement executed and delivered by duly
authorized officers of Acquiror and the Company; provided,
however, that after approval of this Agreement by the
shareholders of the Company, no amendment shall be made which
changes the consideration payable in the Merger or adversely
affects the rights of the Company's shareholders hereunder
without the approval of such shareholders.
54<PAGE>
9.4. Waiver of Conditions. The conditions to each of
the parties' obligations to consummate the Merger are for the
sole benefit of such party and may be waived by such party in
whole or in part to the extent permitted by applicable law.
9.5. Counterparts. For the convenience of the parties
hereto, this Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an
original instrument, and all such counterparts shall together
constitute the same agreement.
9.6. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York, without regard to any applicable conflicts of law, except
that matters relating to the Merger shall be governed by and
construed in accordance with the laws of Delaware and South
Carolina to the extent applicable.
9.7. Notices. Any notice, request, instruction or
other document to be given hereunder by any party to the other
parties shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, or by facsimile
transmission (with a confirming copy sent by overnight courier),
as follows:
(a) if to the Company or Tate, to
Baby Superstore, Inc.
1201 Woods Chapel Road
Duncan, South Carolina 29334
Attention: Jodi Taylor
Telephone: (800) 324-1340
Facsimile: Call to arrange facsimile.
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Edward Herlihy, Esq.
Telephone: (212) 403-1000
Facsimile: (212) 403-2000
55<PAGE>
(b) if to Acquiror, to
TOYS "R" US, Inc.
462 From Road
Paramus, New Jersey 07652
Attention: Michael Goldstein
Telephone: (201) 262-7800
Facsimile: (201) 262-8919
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Dennis J. Block, Esq.
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
or to such other persons or addresses as may be designated in
writing by the party to receive such notice.
9.8. Entire Agreement; Assignment. This Agreement,
including the Disclosure Schedules and Exhibits, and the
Confidentiality Agreement, (i) constitutes the entire agreement
among the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both
written and oral, among the parties or any of them with respect
to the subject matter hereof, and (ii) shall not be assigned by
operation of law or otherwise.
9.9. Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto
and their respective successors and assigns; provided, however,
that Tate shall only have the right to receive Acquiror Common
Shares pursuant to Article IV and shall not have the right to
enforce any other provision of this Agreement. Nothing in this
Agreement, express or implied, other than the right to receive
the consideration payable in the Merger pursuant to Article IV
hereof, 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; provided, however, that the provisions
of Section 6.7 shall inure to the benefit of and be enforceable
by the Indemnified Parties.
9.10. Certain Definitions. As used herein:
(a) "Affiliate" shall mean, with respect to any
Person, any other Person directly or indirectly controlling,
controlled by or under common control with such other Person.
56<PAGE>
(b) "subsidiary" shall mean, when used with reference
to any entity, any entity fifty percent (50%) or more of the
outstanding voting securities or interests of which are owned
directly or indirectly by such former entity.
(c) "Material Adverse Effect" shall mean, with respect
to any person, any change or effect (or any development that,
insofar as can reasonably be foreseen, is likely to result in any
change or effect) that is materially adverse to the business,
properties, assets, condition (financial or otherwise), results
of operations or prospects of such party and its subsidiaries
taken as a whole, other than changes or effects which result from
the execution and delivery of this Agreement or the consummation
of any transactions contemplated hereby.
(d) "Person" shall mean an individual, corporation,
partnership, trust or unincorporated organization or a government
or any agency or political subdivision thereof.
9.11. Severability. If any term or other provision of
this Agreement is invalid, illegal or unenforceable, all other
provisions of this Agreement shall remain in full force and
effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner
materially adverse to any party.
9.12. Specific Performance. The parties hereto
acknowledge that irreparable damage would result if this
Agreement were not specifically enforced, and they therefore
consent that the rights and obligations of the parties under this
Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall,
however, not be exclusive and shall be in addition to any other
remedies, including arbitration, which any party may have under
this Agreement or otherwise.
9.13. Captions. The Article, Section and paragraph
captions herein are for convenience of reference only, do not
constitute part of this Agreement and shall not be deemed to
limit or otherwise affect any of the provisions hereof.
57<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly
executed and delivered by the duly authorized officers of the
parties hereto and shall be effective as of the date first
hereinabove written.
TOYS "R" US, INC.
By: /s/ Michael Goldstein
Name:
Title:
BABY SUPERSTORE, INC.
By: /s/ Jack P. Tate
Name: Jack P. Tate
Title: CEO
/s/ Jack P. Tate
Jack P. Tate
58
EXHIBIT 2
[EXECUTION COPY]
SHAREHOLDERS AGREEMENT
AGREEMENT, dated October 1, 1996 (this "Agreement"),
by and among TOYS "R" US, Inc., a Delaware corporation ("Ac-
quiror"), and Jack P. Tate ("Tate") and Linda M. Robertson
("Robertson") (each, a "Shareholder", and collectively, the
"Shareholders").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Acquiror and Diaper,
Inc., a South Carolina corporation (the "Company"), and Tate
are entering into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the
"Merger Agreement"; capitalized terms used and not defined
herein have the respective meanings ascribed to them in the
Merger Agreement) pursuant to which the Company will be merged
with and into Acquiror (the "Merger");
WHEREAS, Tate owns 9 million shares (the "Shares"),
no par value, of common stock of the Company ("Common Stock");
and
WHEREAS, as an inducement and a condition to entering
into the Merger Agreement, Acquiror has required that the
Shareholders agree, and the Shareholders have agreed, to enter
into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and
the mutual premises, representations, warranties, covenants and
agreements contained herein, the parties hereto hereby agree as
follows:
1. Provisions Concerning Shares. (a) Tate hereby
agrees that during the period commencing on the date hereof and
continuing until this provision terminates pursuant to Section
5 hereof, at any meeting of the holders of shares of Common
Stock, however called, or in connection with any written con-
sent of the holders of shares of Common Stock, he shall vote
(or cause to be voted) the Shares held of record or Benefi-
cially Owned (as defined below) by him, whether heretofore
owned or hereafter acquired, (i) in favor of the adoption of
the Merger Agreement and any actions required in furtherance
thereof and hereof; (ii) against any action or agreement that
would result in a breach in any respect of any covenant, repre-
sentation or warranty or any other obligation or agreement of
the Company under the Merger Agreement (after giving effect to
any materiality or similar qualifications contained therein);
and (iii) except as otherwise agreed to in writing in advance
by Acquiror, against the following actions (other than the
Merger and the transactions contemplated by the Merger Agree-
ment): (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving
the Company; (B) a sale, lease or transfer of a material amount<PAGE>
of assets of the Company, or a reorganization, recapitaliza-
tion, dissolution or liquidation of the Company; (C) (1) any
change in a majority of the persons who constitute the board of
directors of the Company; (2) any change in the present capi-
talization of the Company or any amendment of the Company's
Articles of Incorporation or By-Laws; (3) any other material
change in the Company's corporate structure or business; or (4)
any other action which, in the case of each of the matters re-
ferred to in clauses C (1), (2), (3) or (4), is intended, or
could reasonably be expected, to impede, interfere with, delay,
postpone, or materially adversely affect the Merger and the
transactions contemplated by this Agreement and the Merger
Agreement. Tate shall not enter into any agreement or under-
standing with any Person (as defined below) the effect of which
would be inconsistent or violative of the provisions and agree-
ments contained in Section 1 or 2 hereof. For purposes of this
Agreement, "Beneficially Own" or "Beneficial Ownership" with
respect to any securities shall mean having "beneficial owner-
ship" of such securities (as determined pursuant to Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Ex-
change Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplica-
tive counting of the same securities by the same holder, secu-
rities Beneficially Owned by a Person shall include securities
Beneficially Owned by all other Persons with whom such Person
would constitute a "group" as within the meanings of Section
13(d)(3) of the Exchange Act. For purposes of this Agreement,
"Person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization
or other entity.
(b) In furtherance of the foregoing, (i) Tate hereby
appoints Acquiror and the proper officers of Acquiror, and each
of them, with full power of substitution in the premises, its
proxies to vote all Shares at any meeting, general or special,
of the shareholders of the Company, and to execute one or more
written consents or other instruments from time to time in or-
der to take such action without the necessity of a meeting of
the shareholders of the Company, in accordance with the provi-
sions of the preceding paragraph and (ii) Acquiror hereby
agrees to vote such Shares or execute written consents or other
instruments in accordance with the provisions of the preceding
paragraph. The proxy and power of attorney granted herein
shall be irrevocable during the term specified in Section 5
hereof, shall be deemed to be coupled with an interest and
shall revoke all prior proxies granted by Tate. Tate shall not
grant any proxy to any person which conflicts with the proxy
granted herein, and any attempt to do so shall be void. The
power of attorney granted herein is a durable power of attorney
and shall survive the disability or incompetence of such Share-
holder.
(c) Notwithstanding anything to the contrary in this
Agreement, in no event shall the number of Shares subject to
-2-<PAGE>
the agreement to vote provided for in Section 1(a) or the proxy
provided for in Section 1(b) be greater than 49% of the total
voting power of all shares of capital stock of the Company en-
titled to vote in ordinary circumstances in an election of di-
rectors.
(d) Tate hereby waives his dissenter's rights under
Chapter 13 of the BCA with respect to the Shares in connection
with the transactions contemplated by the Merger Agreement.
2. Other Covenants, Representations and Warranties.
Each Shareholder hereby agrees, represents and warrants as to
itself to Acquiror as follows:
(a) Ownership of Shares. Tate is the Beneficial
Owner of 9 million Shares. On the date hereof, such Shares
constitute all of the shares of Common Stock owned of record or
Beneficially Owned by him. Tate has sole voting power and sole
power to issue instructions with respect to the matters set
forth in Section 1 hereof, sole power of disposition, sole
power of conversion, sole power to demand appraisal rights and
sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all such Shares, with
no limitations, qualifications or restrictions on such rights.
(b) Power; Binding Agreement. Such Shareholder has
the legal capacity, power and authority to enter into and per-
form all of such Shareholder's obligations under this Agree-
ment. The execution, delivery and performance of this Agree-
ment by such Shareholder will not violate any other agreement
to which such Shareholder is a party including, without limita-
tion, any voting agreement, shareholders agreement or voting
trust. This Agreement has been duly and validly executed and
delivered by such Shareholder and constitutes a valid and bind-
ing agreement of such Shareholder, enforceable against such
Shareholder in accordance with its terms. In the case of Tate,
there is no beneficiary or holder of a voting trust certificate
or other interest of any trust of which such Shareholder is
trustee whose consent is required for the execution and deliv-
ery of this Agreement or the consummation by such shareholder
of the transactions contemplated hereby. If Tate is married
and the Shares constitute community property, this Agreement
has been duly authorized, executed and delivered by, and con-
stitutes a valid and binding agreement of, Tate's spouse, en-
forceable against such person in accordance with its terms.
c) No Conflicts. (A) No filing with, and no
permit, authorization, consent or approval of, any state or
federal public body or authority is necessary for the execution
of this Agreement by Tate and the consummation by him of the
transactions contemplated hereby and (B) none of the execution
and delivery of this Agreement by Tate, the consummation by him
of the transactions contemplated hereby or compliance by him
with any of the provisions hereof shall (1) result in a
-3-<PAGE>
violation or breach of, or constitute (with or without notice
or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification
or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or
other instrument or obligation of any kind to which Tate is a
party or by which he or any of his properties or assets may be
bound, or (2) violate any order, writ, injunction, decree,
judgment, order, statute, rule or regulation applicable to him
or any of his properties or assets.
(d) No Finder's Fees. Other than existing financial
advisory and investment banking arrangements and agreements be-
tween the Company and CS First Boston Corporation and Invemed
Associates, Inc., no broker, investment banker, financial ad-
viser or other person is entitled to any broker's, finder's,
financial adviser's or other similar fee or commission in con-
nection with the transactions contemplated by the Merger Agree-
ment based upon arrangements made by or on behalf of such
Shareholder.
(e) No Solicitation. Notwithstanding the provisions
of Section 6.2 of the Merger Agreement, from and after the date
hereof and continuing until this provision terminates pursuant
to Section 5 hereof, Tate shall not, in his capacity as such,
directly or indirectly, initiate, solicit or encourage (includ-
ing by way of furnishing non-public information or assistance),
or take any other action to facilitate, any inquiries or the
making of any proposal that constitutes, or may reasonably be
expected to lead to, any Competing Transaction, or enter into
or maintain or continue discussions or negotiate with any per-
son or entity in furtherance of such inquiries or to obtain a
Competing Transaction or agree to or endorse any Competing
Transaction, or authorize or permit any of his agents, and Tate
shall promptly notify Acquiror orally (in all events within two
business days) and in writing (as promptly thereafter as prac-
ticable) of the material terms and status of all inquiries and
proposals which he or any such agent may receive after the date
hereof relating to any of such matters and, if such inquiry or
proposal is in writing, Tate shall deliver to Acquiror a copy
of such inquiry or proposal promptly; provided, however, that,
notwithstanding any other provision of this Agreement, Tate, as
a member of the Board of Directors of the Company, may take any
action in his capacity as a director that the Board of Direc-
tors of the Company would be permitted to take in accordance
with Section 6.2 of the Merger Agreement. Tate will immedi-
ately cease and cause to be terminated any existing activities,
discussions or negotiations, with any parties conducted hereto-
fore with respect to any of the foregoing.
(f) Restriction on Transfer, Proxies and Non-
Interference. Tate shall not, directly or indirectly, during
the period commencing on the date hereof and continuing until
-4-<PAGE>
this provision terminates pursuant to Section 5 hereof: (i)
except as contemplated by the Merger Agreement, offer for sale,
sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other ar-
rangement or understanding with respect to or consent to the
offer for sale, sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of, any or all of his Shares or
any interest therein; (ii) except as contemplated by this
Agreement, grant any proxies or powers of attorney, deposit any
Shares into a voting trust or enter into a voting agreement
with respect to any Shares; or (iii) take any action that would
make any of his representation or warranty contained herein un-
true or incorrect or have the effect of preventing or disabling
him from performing his obligations under this Agreement.
(g) Disposition of Acquiror Common Shares. Tate has
no plan or intention to sell, exchange, or otherwise dispose
of, reduce the risk of loss by short sale or other use, enter
into any contract or arrangement with respect to, or consent to
the sale, exchange or other disposition of any interest in any
Acquiror Common Shares received in the Merger by such Share-
holder.
(h) Reliance by Acquiror. Such Shareholder under-
stands and acknowledges that Acquiror is entering into the
Merger Agreement in reliance upon such Shareholder's execution
and delivery of this Agreement.
(i) Certain Acknowledgments by Tate. Tate acknowl-
edges that he is an informed and sophisticated investor and,
together with his advisor, has undertaken such investigation as
he has deemed necessary, including the review of the Merger
Agreement and this Agreement, to enable him to make an informed
and intelligent decision with respect to the Merger Agreement
and this Agreement and the transactions contemplated thereby
and hereby. Tate acknowledges that pursuant to the Merger he
will receive less consideration per Share than will other hold-
ers of shares of Common Stock.
3. Further Assurances. From time to time, at the
other party's request and without further consideration, Tate
and Acquiror shall execute and deliver such additional docu-
ments and take all such further lawful action as may be neces-
sary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated
by this Agreement.
4. Stop Transfer. Tate agrees with, and covenants
to, Acquiror that he shall not request that the Company regis-
ter the transfer (book-entry or otherwise) of any certificate
or uncertificated interest representing the Shares, unless such
transfer is made in compliance with this Agreement. In the
event of a stock dividend or distribution, or any change in the
Company Common Stock by reason of any stock dividend, split-up,
-5-<PAGE>
recapitalization, combination, exchange of shares or the like,
the term "Shares" shall be deemed to refer to and include the
Shares as well as all such stock dividends and distributions
and any shares into which or for which any or all of the Shares
may be changed or exchanged.
5. Termination. Except as otherwise provided here-
in, the covenants and agreements contained in Sections 1, 2(e),
2(f) and 4 hereof with respect to the Shares shall terminate
(a) in the event the Merger Agreement is terminated, upon such
termination, and (b) in the event the Merger is consummated,
upon the Effective Time.
6. Shareholder Capacity. No person executing this
Agreement who is or becomes during the term hereof a director
of the Company makes any agreement or understanding herein in
his or her capacity as such director. Tate is executing this
Agreement solely in his capacity as the record and beneficial
owner of all of his Shares.
7. Confidentiality. The Shareholders recognize
that successful consummation of the transactions contemplated
by this Agreement may be dependent upon confidentiality with
respect to the matters referred to herein. In this connection,
pending public disclosure thereof, each Shareholder hereby
agrees not to disclose or discuss such matters with anyone not
a party to this Agreement (other than such Shareholder's coun-
sel and advisors, if any) without the prior written consent of
Acquiror, except for disclosures such Shareholder's counsel
advises are necessary in order to fulfill such Shareholder's
obligations imposed by law, in which event such Shareholder
shall give notice of such disclosure to Acquiror as promptly as
practicable so as to enable Acquiror to seek a protective order
from a court of competent jurisdiction with respect thereto.
8. Release. Each of the Shareholders, solely in
such person's capacity as a shareholder of the Company, hereby
releases and discharges the Company and the Surviving Corpora-
tion and their respective officers, directors, shareholders,
employees, agents, attorneys, representatives, successors and
assigns (and the respective heirs, executors, administrators,
representatives, successors and assigns of such officers, di-
rectors, shareholders, employees, agents, attorneys and repre-
sentatives) from any and all claims, actions, causes of action,
suits, debts, sums of money, controversies, agreements, prom-
ises, damages, judgments, claims and demands whatsoever, at law
or in equity, which any of the Shareholders, as a result of
such person's status as a shareholder of the Company, had, now
have or hereafter can, shall or may have for, upon, or by rea-
son of any matter, cause or thing whatsoever relating, directly
or indirectly, to the Company or the Surviving Corporation and
any of their respective subsidiaries, as the case may be; pro-
vided, however, that nothing contained in this Section 8 shall
be construed as a release of the Acquiror for any such claims
-6-<PAGE>
such Shareholder may have, as a shareholder of Acquiror, for
obligations Acquiror may have to such Shareholder following the
Merger.
9. Non-Competition. (a) Except as otherwise pro-
vided in Section 9(b), each Shareholder shall not, until the
third anniversary of the Effective Date (the "Termination
Date"):
(i) engage in any activity in the juvenile retail
business, directly or indirectly (whether as an employee, of-
ficer, director, agent, consultant, proprietor, partner, prin-
cipal shareholder or otherwise), anywhere in the United States
of America and in foreign countries where the Company currently
has operations; or
(ii) engage in any action, activity or course of con-
duct which is detrimental to the business or business reputa-
tion of the Company or any of its Subsidiaries, including (A)
recruiting any employees of the Company (or the Surviving Cor-
poration) or any of its subsidiaries and (B) soliciting or en-
couraging any employee of the Company (or the Surviving Corpo-
ration) or any of its subsidiaries to leave the employment of
the Company or any of its subsidiaries and (C) disclosing or
furnishing to anyone any confidential information relating to
the Company or any of its subsidiaries or otherwise using such
confidential information for its own benefit or the benefit of
any other person.
(b) Nothing contained in Section 9(a) shall prohibit
or otherwise restrict any Shareholder from acquiring or owning,
directly or indirectly, for investment or other legitimate bus-
iness purposes not intended to circumvent this Agreement, secu-
rities of any entity engaged, directly or indirectly, in the
juvenile retail business if either (i) such entity is a public
entity and (A) is not a Controlling Person of, or a member of a
group which Controls, such entity and (B) owns, directly or
indirectly, no more than 5% of any class of equity securities
of such entity or (ii) such entity is not a public entity and
such Shareholder (X) is not a Controlling Person of, or a mem-
ber of a group that Controls, such entity and (Y) owns, direct-
ly or indirectly, no more than 10% of any class of equity secu-
rities of such entity.
(c) Each Shareholder acknowledges and agrees that
the covenants and restrictions contained in this Section 9 are
reasonable and that they shall not in any way challenge the
reasonableness or the enforceability of this Section 9 or any
covenant or restriction contained herein.
-7-<PAGE>
(d) As used herein, "Control" shall mean, as to any
Person, the power to direct or cause the direction of the man-
agement and policies of such Person, whether through the owner-
ship of voting securities, by contract or otherwise. The term
"Controlling Person" shall have a correlative meaning.
10. Miscellaneous.
(a) Entire Agreement. This Agreement and in the
case of Tate, the Merger Agreement, constitute the entire
agreement between the parties with respect to the subject mat-
ter hereof and supersede all other prior agreements and under-
standings, both written and oral, between the parties with re-
spect to the subject matter hereof.
(b) Certain Events. Tate agrees that this Agreement
and the obligations hereunder shall attach to the Shares and
shall be binding upon any person or entity to which legal or
beneficial ownership of such Shares shall pass, whether by op-
eration of law or otherwise, including, without limitation,
Tate's heirs, guardians, administrators or successors. Not-
withstanding any transfer of Shares, the transferor shall re-
main liable for the performance of all obligations under this
Agreement of the transferor.
(c) Assignment. This Agreement shall not be as-
signed by operation of law or otherwise without the prior writ-
ten consent of the other party, provided that Acquiror may
assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned subsidiary of
Acquiror, but no such assignment shall relieve Acquiror of its
obligations hereunder if such assignee does not perform such
obligations.
(d) Amendments, Waivers, Etc. This Agreement may
not be amended, changed, supplemented, waived or otherwise
modified or terminated, with respect to any one or more Share-
holders, except upon the execution and delivery of a written
agreement executed by the relevant parties hereto.
(e) 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 received
if so given) by hand delivery, telegram, telex or telecopy, or
by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal
Express, providing proof of delivery. All communications here-
under shall be delivered to the respective parties at the fol-
lowing addresses:
-8-<PAGE>
If to any Shareholder: c/o Baby Superstore, Inc.
1201 Woods Chapel Road
Duncan, South Carolina 29334
Telephone: (800) 324-1340
Facsimile: Call to arrange
facsmile.
Attention: Linda M. Robertson
If to Acquiror: Toys "R" Us, Inc.
461 From Road
Paramus, New Jersey 07652
Telephone: 201-262-7800
Facsimile: 201-262-8919
Attention: Michael Goldstein
or to such other address as the person to whom notice is given
may have previously furnished to the others in writing in the
manner set forth above.
(f) Severability. Whenever possible, each provision
or portion of any provision of this Agreement will be inter-
preted in such manner as to be effective and valid under ap-
plicable law but if any provision or portion of any provision
of this Agreement is held to be invalid, illegal or unenforce-
able in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability
will not affect any other provision or portion of any provision
in such jurisdiction, and this Agreement will be reformed, con-
strued and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision
had never been contained herein.
(g) Specific Performance. Each of the parties
hereto recognizes and acknowledges that a breach by it of any
covenants or agreements contained in this Agreement will cause
the other party to sustain damages for which it would not have
an adequate remedy at law for money damages, and therefore each
of the parties hereto agrees that in the event of any such
breach the aggrieved party shall be entitled to the remedy of
specific performance of such covenants and agreements and in-
junctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(h) Remedies Cumulative. All rights, powers and
remedies provided under this Agreement or otherwise available
in respect hereof at law or in equity shall be cumulative and
not alternative, and the exercise of any thereof by any party
shall not preclude the simultaneous or later exercise of any
other such right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to
exercise any right, power or remedy provided under this Agree-
ment or otherwise available in respect hereof at law or in eq-
uity, or to insist upon compliance by any other party hereto
with its obligations hereunder, and any custom or practice of
-9-<PAGE>
the parties at variance with the terms hereof, shall not con-
stitute a waiver by such party of its right to exercise any
such or other right, power or remedy or to demand such compli-
ance.
(j) No Third Party Beneficiaries. This Agreement is
not intended to be for the benefit of, and shall not be en-
forceable by, any person or entity who or which is not a party
hereto.
(k) Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of New
York, without giving effect to the principles of conflicts of
law thereof.
(l) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY SUCH
ACTION, SUIT OR PROCEEDING.
(m) Descriptive Headings. The descriptive headings
used herein are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or in-
terpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original,
but all of which, taken together, shall constitute one and the
same Agreement.
-10-<PAGE>
IN WITNESS WHEREOF, Acquiror and each Shareholder
have caused this Agreement to be duly executed as of the day
and year first above written.
TOYS "R" US, INC.
By: /s/ Michael Goldstein
Name:
Title:
By: /s/ Jack P. Tate
Jack P. Tate
By: /s/ Linda M. Robertson
Linda M. Robertson
AGREED TO AND ACKNOWLEDGED
(with respect to Sections 2, 4 and 8):
BABY SUPERSTORE, INC.
By: /s/ Jack P. Tate
Name: Jack P. Tate
Title: CEO
-11-
Exhibit 3
CONTACT:
Lawrence A. Rand Louis Lipschitz Jodi Taylor Naomi Rosenfeld
Kekst and Company Toys "R" Us, Inc. Baby Superstore, Inc. Morgan Walke
437 Madison Ave. 461 From Road 1201 Wood Chapel Rd. 380 Lexington Ave.
New York, NY Paramus, NJ Duncan, SC New York, NY
(212) 593-2855 (201) 388-5548 (864) 968-9292 (212) 850-6600
FOR: Toys "R" Us, Inc. Baby Superstore, Inc.
FOR IMMEDIATE RELEASE
TOYS "R" US TO ACCELERATE EXPANSION OF ITS NEW BABIES "R" US
DIVISION THROUGH STRATEGIC ACQUISITION OF BABY SUPERSTORE
PARAMUS, NEW JERSEY AND DUNCAN, SOUTH CAROLINA, OCTO-
BER 2, 1996 -- Toys "R" Us, Inc. (NYSE: TOY) and Baby Super-
store, Inc. (NASDAQ: BSST) today announced the execution of a
definitive Merger Agreement pursuant to which Toys "R" Us will
acquire Baby Superstore, Inc. in a tax-free exchange of shares
valued at approximately $376 million, based upon the closing
price of Toys "R" Us stock as of October 1, 1996. Under the
terms of the Agreement, Baby Superstore shareholders will re-
ceive .8121 of a share of Toys "R" Us stock for each Baby Su-
perstore share, valued at $23.45 as of the close of business on
October 1, 1996. Jack Tate, founder, Chairman and Chief Execu-
tive Officer of Baby Superstore, will receive .5150 of a share
for each Baby Superstore share, valued at $14.87 as of close of
business on October 1, 1996. The Merger, which has been ap-
proved by both Boards of Directors, is subject to customary
regulatory approvals and approval by Baby Superstore sharehold-
ers.
Michael Goldstein, Chief Executive Officer of Toys
"R" Us, said that "this transaction is another important step
in our long range strategic business plan to become the leading
retailer in the infant-through-toddler marketplace. Through
the excellent strategic fit of this acquisition, we will be
able to accelerate our planned growth in sales and profitabil-
ity of Babies "R" Us, our new format that is already exhibiting
exciting growth potential."
Through its acquisition of Baby Superstore, which is
the leading operator of infant and toddler superstores, Babies
"R" Us emerges as the sector's leading specialty store operator
with 73 stores in 23 states generating sales in excess of $450
million in 1996. "The Company expects the combination of these
two businesses will provide significant synergies to both busi-
nesses, including lower costs and economies of scale," Mr.
Goldstein said.<PAGE>
Commenting on the announcement, Mr. Tate said, "This
transaction will combine the well-established Baby Superstore
concept with the tremendous financial, operational and market-
ing resources of Toys "R" Us, to create retailing leadership in
the baby and toddlers' products segments.
"As an indication of my confidence in the potential
of the combined company, of which I will be the single largest
individual shareholder, I have agreed to accept a reduced ex-
change ratio for my stock, as compared to that paid to all
other shareholders. Not only will this help to facilitate a
transaction of which I have been a strong proponent, but it
will also enhance the returns for the remaining shareholders,
as well as for those associate option-holders who have helped
grow Baby Superstore over the years."
Mr. Goldstein further stated that "we are excited
about the opportunity to apply our vast operational experience
and our strong financial and management expertise to the Baby
Superstore business. We are also pleased to welcome the Baby
Superstore associates into the Toys "R" Us family. Their
knowledge and experience in the juvenile market will enhance
our prospects to build this business in the future. In addi-
tion, by immediately increasing our presence in the infant/
toddler market, we will be best positioned to capitalize on the
natural synergies inherent among our Babies "R" Us, Toys "R" Us
and Kids "R" Us businesses. As a result, we expect this acqui-
sition to provide incremental sales and earnings growth to Toys
"R" Us, immediately following consummation of the transaction."
The transaction is anticipated to close around the
end of the companies' fiscal year at the end of January. Mr.
Tate, holder of approximately 46.8% of Baby Superstore common
stock, has entered into an agreement to vote his shares in fa-
vor of the merger.
Goldman, Sachs & Co. served as financial advisors to
Toys "R" Us for purposes of this transaction. CS First Boston
and Invemed Associates, Inc. served as financial advisors to
Baby Superstore for purposes of this transaction.
Baby Superstore, Inc. is a leading large format re-
tailer of baby and young children's products in the United
States. The Company currently operates 70 stores in 21 states.
Toys "R" Us is the world's largest retailer of chil-
dren's products currently operating 651 toy stores in the Unit-
ed States, 366 international toy stores, including franchise
stores, 211 Kids "R" Us children's clothing stores and three
Babies "R" Us stores.
# # #
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