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 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:
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
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
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. Xxxx 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) 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 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 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 Share-
holder.
(c) Notwithstanding anything to the contrary in this
Agreement, in no event shall the number of Shares subject to
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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) 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.
Each Shareholder hereby agrees, represents and warrants as to
itself to Acquiror as follows:
(a) Ownership of Shares. Xxxx 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. 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
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 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 deliv-
ery 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 con-
stitutes a valid and binding agreement of, Xxxx'x 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 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
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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
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, Xxxx 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 Xxxx
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, Xxxx shall deliver to Acquiror a copy
of such inquiry or proposal promptly; provided, however, that,
notwithstanding any 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 Direc-
tors of the Company would be permitted to take in accordance
with Section 6.2 of the Merger Agreement. Xxxx 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. Xxxx shall not, directly or indirectly, during
the period commencing on the date hereof and continuing until
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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. Xxxx 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 Xxxx. Xxxx 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. Xxxx 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, Xxxx
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. Xxxx 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,
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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. 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 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
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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.
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(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 Xxxx, 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. Xxxx 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,
Xxxx'x 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:
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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
facsmile.
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
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
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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.
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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
Name:
Title:
By: /s/ Xxxx X. Xxxx
Xxxx X. Xxxx
By: /s/ Xxxxx X. Xxxxxxxxx
Xxxxx X. Xxxxxxxxx
AGREED TO AND ACKNOWLEDGED
(with respect to Sections 2, 4 and 8):
BABY SUPERSTORE, INC.
By: /s/ Xxxx X. Xxxx
Name: Xxxx X. Xxxx
Title: CEO
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