EXHIBIT 2
SHAREHOLDERS AGREEMENT
AGREEMENT, dated October 1, 1996 (this "Agreement"), by
and among TOYS "R" US, Inc., a Delaware corporation ("Acquiror"),
and Xxxx X. Xxxx ("Xxxx") and Xxxxx X. Xxxxxxxxx ("Xxxxxxxxx")
(each, a "Shareholder", and collectively, the "Shareholders").
W I T N E S S E T H:
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WHEREAS, concurrently herewith, Acquiror and Diaper,
Inc., a South Carolina corporation (the "Company"), and Xxxx 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, Xxxx 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) Xxxx hereby
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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 consent of the
holders of shares of Common Stock, he shall vote (or cause to be
voted) the Shares held of record or Beneficially 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, representation 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 Agreement): (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 of assets of the Company, or a
reorganization, recapitalization, 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 capitalization 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
referred 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. Xxxx shall not enter into any agreement or
understanding with any Person (as defined below) the effect of
which would be inconsistent or violative of the provisions and
agreements 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
ownership" of such securities (as determined pursuant to Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder,
securities 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) Xxxx 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 order
to take such action without the necessity of a meeting of the
shareholders of the Company, in accordance with the provisions 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 Xxxx. Xxxx 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 Shareholder.
(c) Notwithstanding anything to the contrary in this
Agreement, in no event shall the number of Shares subject to 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
entitled to vote in ordinary circumstances in an election of
directors.
(d) Xxxx 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.
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Each Shareholder hereby agrees, represents and warrants as to
itself to Acquiror as follows:
(a) Ownership of Shares. Xxxx is the Beneficial Owner
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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. Xxxx 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
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the legal capacity, power and authority to enter into and perform
all of such Shareholder's obligations under this Agreement. The
execution, delivery and performance of this Agreement by such
Shareholder will not violate any other agreement to which such
Shareholder is a party including, without limitation, 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 binding agreement of
such Shareholder, enforceable against such Shareholder in
accordance with its terms. In the case of Xxxx, 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 delivery of this
Agreement or the consummation by such shareholder of the
transactions contemplated hereby. If Xxxx is married and the
Shares constitute community property, this Agreement has been
duly authorized, executed and delivered by, and constitutes a
valid and binding agreement of, Xxxx'x spouse, enforceable
against such person in accordance with its terms.
(c) No Conflicts. (A) No filing with, and no permit,
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authorization, consent or approval of, any state or federal
public body or authority is necessary for the execution of this
Agreement by Xxxx and the consummation by him of the transactions
contemplated hereby and (B) none of the execution and delivery of
this Agreement by Xxxx, the consummation by him of the
transactions contemplated hereby or compliance by him with any of
the provisions hereof shall (1) 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 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 Xxxx 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
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advisory and investment banking arrangements and agreements
between the Company and CS First Boston Corporation and Invemed
Associates, Inc., no broker, investment banker, financial adviser
or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with
the transactions contemplated by the Merger Agreement based upon
arrangements made by or on behalf of such Shareholder.
(e) No Solicitation. Notwithstanding the provisions
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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, Xxxx shall not, in his capacity as such,
directly or indirectly, initiate, solicit or encourage (including
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 person 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 Xxxx shall promptly
notify Acquiror orally (in all events within two business days)
and in writing (as promptly thereafter as practicable) 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, Xxxx shall deliver to Acquiror a copy of such inquiry or
proposal promptly; provided, however, that, notwithstanding any
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other provision of this Agreement, Xxxx, 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 Directors of the Company would be
permitted to take in accordance with Section 6.2 of the Merger
Agreement. Xxxx will immediately cease and cause to be
terminated any existing activities, discussions or negotiations,
with any parties conducted heretofore with respect to any of the
foregoing.
(f) Restriction on Transfer, Proxies and Non-
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Interference. Xxxx shall not, directly or indirectly, during the
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period commencing on the date hereof and continuing until 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 arrangement 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 untrue or incorrect or have the
effect of preventing or disabling him from performing his
obligations under this Agreement.
(g) Disposition of Acquiror Common Shares. Xxxx has
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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
Shareholder.
(h) Reliance by Acquiror. Such Shareholder
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understands and acknowledges that Acquiror is entering into the
Merger Agreement in reliance upon such Shareholder's execution
and delivery of this Agreement.
(i) Certain Acknowledgements by Xxxx. Xxxx
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acknowledges 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. Xxxx acknowledges that pursuant to the Merger he will
receive less consideration per Share than will other holders of
shares of Common Stock.
3. Further Assurances. From time to time, at the
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other party's request and without further consideration, Xxxx and
Acquiror shall execute and deliver such additional documents and
take all such further lawful action as may be necessary or
desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by
this Agreement.
4. Stop Transfer. Xxxx agrees with, and covenants
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to, Acquiror that he shall not request that the Company register
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,
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 herein,
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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 pursuant to any
other provision, upon such termination, and (b) in the event the
Merger is consummated, upon the Effective Time.
6. Shareholder Capacity. No person executing this
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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. Xxxx 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
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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 counsel 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
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person's capacity as a shareholder of the Company, hereby
releases and discharges the Company and the Surviving Corporation
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,
directors, shareholders, employees, agents, attorneys and
representatives) from any and all claims, actions, causes of
action, suits, debts, sums of money, controversies, agreements,
promises, 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 reason
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; provided,
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however, that nothing contained in this Section 8 shall be
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construed as a release of the Acquiror for any such claims 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
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provided 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,
officer, director, agent, consultant, proprietor, partner,
principal shareholder of 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
conduct which is detrimental to the business or business
reputation of the Company or any of its Subsidiaries, including
(A) recruiting any employees of the Company (or the Surviving
Corporation) or any of its subsidiaries and (B) soliciting or
encouraging any employee of the Company (or the Surviving
Corporation) 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
business purposes not intended to circumvent this Agreement,
securities 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 member of a
group that Controls, such entity and (Y) owns, directly or
indirectly, no more than 10% of any class of equity securities 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.
(d) As used herein, "Control" shall mean, as to any
Person, the power to direct or cause the direction of the
management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise. The
term "Controlling Person" shall have a correlative meaning.
10. Miscellaneous.
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(a) Entire Agreement. This Agreement and in the case
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of Xxxx, the Merger Agreement, constitute the entire agreement
between the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject
matter hereof.
(b) Certain Events. Xxxx agrees that this Agreement
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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
operation of law or otherwise, including, without limitation,
Xxxx'x heirs, guardians, administrators or successors.
Notwithstanding any transfer of Shares, the transferor shall
remain liable for the performance of all obligations under this
Agreement of the transferor.
(c) Assignment. This Agreement shall not be assigned
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by operation of law or otherwise without the prior written
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
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be amended, changed, supplemented, waived or otherwise modified
or terminated, with respect to any one or more Shareholders,
except upon the execution and delivery of a written agreement
executed by the relevant parties hereto.
(e) Notices. All notices, requests, claims, demands
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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 hereunder shall
be delivered to the respective parties at the following
addresses:
If to any Shareholder: c/o Baby Superstore, Inc.
0000 Xxxxx Xxxxxx Xxxx
Xxxxxx, Xxxxx Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: Call to arrange
facsimile.
Attention: Xxxxx X. Xxxxxxxxx
If to Acquiror: Toys "R" Us, Inc.
000 Xxxx Xxxx
Xxxxxxx, Xxx Xxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxxx Xxxxxxxxx
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
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or portion of any provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law
but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable 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, construed 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
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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 injunctive 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
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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
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exercise any right, power or remedy provided under this Agreement
or otherwise available in respect hereof at law or in equity, or
to insist upon compliance by any other party hereto with its
obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver
by such party of its right to exercise any such or other right,
power or remedy or to demand such compliance.
(j) No Third Party Beneficiaries. This Agreement is
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not intended to be for the benefit of, and shall not be
enforceable by, any person or entity who or which is not a party
hereto.
(k) Governing Law. This Agreement shall be governed
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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
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WAIVES ANY RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY SUCH
ACTION, SUIT OR PROCEEDING.
(m) Descriptive Headings. The descriptive headings
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used herein are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in
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counterparts, each of which shall be deemed to be an original,
but all of which, taken together, shall constitute one and the
same Agreement.
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/ Xxxxxxx Xxxxxxxxx
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Name: Xxxxxxx Xxxxxxxxx
Title: Vice Chairman and
Chief Executive Officer
By: /S/ Xxxx X. Xxxx
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Xxxx X. Xxxx
By: /S/ Xxxxx X. Xxxxxxxxx
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Xxxxx X. Xxxxxxxxx
AGREED TO AND ACKNOWLEDGED
(with respect to Sections 2, 4 and 8):
BABY SUPERSTORE, INC.
By: /S/ Xxxx X. Xxxx
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Name: Xxxx X. Xxxx
Title: Chief Executive Officer
NYFS11...:\93\77893\0010\1664\AGR9236L.39G
