SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "AGREEMENT"), dated as of May 4, 2000, by
and between Xxxxxx & Xxxxx, Inc., a Delaware corporation ("PARENT"), and Xxxxx
X. Xxxxxx (the "SHAREHOLDER").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, B&N Acquisition Corporation, a Minnesota corporation and
wholly-owned indirect subsidiary of Parent ("PURCHASER"), and Funco, Inc., a
Minnesota corporation (the "COMPANY"), are entering into an Agreement and Plan
of Merger (as the same may be amended from time to time, the "MERGER
AGREEMENT"), pursuant to which (i) Purchaser will commence a cash tender offer
to purchase all of the issued and outstanding Company Common Stock (as
hereinafter defined), and (ii) subject to certain conditions, the Purchaser will
be merged with and into the Company (the "MERGER"), with Company being the
surviving corporation in the Merger; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Shareholder agree, and the Shareholder
has agreed, to enter into this Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, agree as follows:
Section 1. DEFINITIONS. For purposes of this Agreement:
(a) "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" with respect
to any securities shall have the meaning set forth in Section 302A.011,
Subdivision 41 of the Minnesota Business Corporation Act (the "MBCA").
(b) "COMPANY COMMON STOCK" shall mean at any time the common
stock, $.01 par value per share, of the Company.
(c) "PERSON" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated organization or
other entity.
(d) Capitalized terms used and not defined herein and which
are defined in the Merger Agreement have the respective meanings ascribed to
such terms in the Merger Agreement.
Section 2. DISCLOSURE. The Shareholder hereby permits Parent and
Purchaser to publish and disclose in the Offer Documents and the Proxy Statement
(including all documents and schedules filed with the SEC) and other filings and
communications his identity and ownership of Company Common Stock and Stock
Options and the nature of his commitments, arrangements and understandings under
this Agreement.
Section 3. AGREEMENT TO TENDER; VOTING AGREEMENT.
(a) The Shareholder shall tender, pursuant to the Offer, all
shares of Company Common Stock then held of record by the Shareholder, or with
respect to which the Shareholder is the Beneficial Owner, as of the date of the
commencement of the Offer, and any shares of Company Common Stock thereafter
acquired by the Shareholder prior to the expiration of the Offer; PROVIDED,
HOWEVER, such shares of Company Common Stock shall be limited to those shares
representing, in the aggregate, from time to time, no more than 19.9% of the
issued and outstanding Company Common Stock.
(b) If, as of the record date for determination of
shareholders entitled to vote at the Shareholders Meeting (or, if no record date
is established, at the date such vote is taken or any written consent of
shareholders is first solicited) (the "RECORD DATE"), the shares of Company
Common Stock tendered pursuant to Section 3(a) above represent less than 19.9%
of the issued and outstanding Company Common Stock, then the Shareholder shall,
at the Shareholders Meeting, vote (or cause to be voted) the shares of Company
Common Stock held of record by Shareholder or with respect to which the
Shareholder is the Beneficial Owner as of the Record Date: (i) in favor of the
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval of the terms thereof, the performance by the Company of each of the
actions contemplated by the Merger Agreement and this Agreement and all actions
required in furtherance thereof and hereof; (ii) against any Acquisition
Proposal or Alternative Transaction; and (iii) against any action or agreement
that would impede, frustrate, prevent or nullify this Agreement, or 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 or which would
result in any of the conditions set forth in Article VII of the Merger Agreement
not being fulfilled (the matters referred to in clauses (i), (ii) and (iii)
being referred to collectively, as the "Voting Objectives"). Notwithstanding
anything to the contrary contained herein, the shares of Company Common Stock
referred to in Section 3(a) above, together with such additional shares of
Company Common Stock required to be voted in favor of the Voting Objectives
pursuant to this Section 3(b) (collectively, the "SUBJECT SHARES"), shall be
limited to those shares representing, in the aggregate, from time to time, no
more than 19.9% of the issued and outstanding Company Common Stock. This Section
3(b) shall in no event affect the obligation of Shareholder to comply with
Section 3(a) above.
Section 4. NO INCONSISTENT ARRANGEMENTS. The Shareholder hereby
covenants and agrees that, except as contemplated by this Agreement and the
Merger Agreement, he shall not (i) transfer (which term shall include, without
limitation, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Subject Shares, Stock Options or any
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interest therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Subject Shares,
Stock Options or any interest therein, (iii) grant any proxy, power-of-attorney
or other authorization in or with respect to the Subject Shares or Stock
Options, (iv) deposit the Subject Shares or Stock Options into a voting trust or
enter into a voting agreement or arrangement with respect to the Subject Shares
or Stock Options, or (v) take any other action that would in any way restrict,
limit or interfere with the performance of his obligations hereunder or the
transactions contemplated hereby or by the Merger Agreement.
Section 5. GRANT OF IRREVOCABLE PROXY; APPOINTMENT OF PROXY.
(a) Subject to the termination provision in Section 10 hereof,
the Shareholder hereby irrevocably grants to, and appoints, Xxxxxxx Xxxxxx and
Xxxxxxx Xxxxxxxx, and each or any of them, in his capacity as an officer of
Parent, and any individual who shall hereafter succeed to such office of Parent,
the Shareholder's proxy and attorney-in-fact (with full power of substitution),
for and in the name, place and stead of the Shareholder, to vote the Subject
Shares, or grant a consent or approval in respect of the Subject Shares in
accordance with the Voting Objectives, including, without limitation, the
transactions contemplated by the Merger Agreement.
(b) The Shareholder represents that any outstanding proxies
heretofore given in respect of the Subject Shares are not irrevocable, and that
any such proxies are hereby revoked.
(c) The Shareholder understands and acknowledges that Parent
is entering into the Merger Agreement in reliance upon the Shareholder's
execution and delivery of this Agreement. The Shareholder hereby affirms that
the irrevocable proxy set forth in this Section 5 is given in connection with
the execution of the Merger Agreement, and that such irrevocable proxy is given
to secure the performance of the duties of the Shareholder under this Agreement.
The Shareholder hereby further affirms that the irrevocable proxy is coupled
with an interest and may under no circumstances be revoked except as provided in
Section 10 hereof. The Shareholder hereby ratifies and confirms all that such
irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such
irrevocable proxy is executed and intended to be irrevocable in accordance with
the provisions of Section 302A.449 of the MBCA.
Section 6. WAIVER OF APPRAISAL RIGHTS. The Shareholder hereby
waives any rights of appraisal or rights to dissent from the Merger that he may
have.
Section 7. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER.
The Shareholder hereby represents and warrants to Parent as follows:
(a) OWNERSHIP OF SHARES. The Shareholder is the record and
Beneficial Owner of shares of Company Common Stock (the "EXISTING SHARES") which
represent more than 19.9% of the issued and outstanding Company Common Stock.
The Shareholder has sole voting power and sole power to issue instructions with
respect to any and all of the matters set forth in this Agreement, sole power of
disposition, sole power of conversion, sole power to demand appraisal
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rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to any and all of the Existing Shares with
no limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(b) POWER; BINDING AGREEMENT. The Shareholder has the legal
capacity, power and authority to enter into and perform all of the Shareholder's
obligations under this Agreement. The execution, delivery and performance of
this Agreement by the Shareholder will not violate any other agreement,
arrangement or understanding (in each case, oral or written) to which the
Shareholder is a party including, without limitation, any voting agreement,
proxy arrangement, pledge agreement, shareholders agreement or voting trust.
This Agreement has been duly and validly executed and delivered by the
Shareholder and, assuming that this Agreement has been duly executed and
delivered by Parent, constitutes a valid and binding agreement of the
Shareholder, enforceable against the Shareholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or other
interest of any trust of which the Shareholder is a trustee whose consent is
required for the execution and delivery of this Agreement or the consummation by
the Shareholder of the transactions contemplated hereby.
(c) NO CONFLICTS. Except for filings under the HSR Act, the
Exchange Act and Chapter 80B of the MBCA, (i) no filing with, and no permit,
authorization, consent or approval of, any Governmental Entity for the execution
of this Agreement by the Shareholder and the consummation by the Shareholder of
the transactions contemplated hereby and (ii) none of the execution and delivery
of this Agreement by the Shareholder, the consummation by the Shareholder of the
transactions contemplated hereby or compliance by the Shareholder with any of
the provisions hereof shall (A) 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, loan agreement, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which the Shareholder is a party or by which the
Shareholder or any of his properties or assets may be bound, or (B) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to the Shareholder or any of his properties or assets.
(d) NO ENCUMBRANCES. Except (i) as permitted by this Agreement
and (ii) for any proxies arising under this Agreement, the Existing Shares and
the certificates representing such Existing Shares are now, and the Subject
Shares at all times during the term hereof will be, held by the Shareholder, or
by a nominee or custodian for the benefit of the Shareholder, free and clear of
all encumbrances, liens, restrictions, proxies, voting trusts or agreements,
understandings or arrangements or any other rights whatsoever.
(e) NO FINDER'S FEES. Except as disclosed in the Company
Disclosure Schedule, no broker, investment banker, financial advisor 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
hereby based upon arrangements made by or on behalf of the Shareholder.
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(f) RELIANCE BY PARENT. The Shareholder understands and
acknowledges that Parent is entering into, and causing Purchaser to enter into,
the Merger Agreement in reliance upon the Shareholder's execution and delivery
of this Agreement.
Section 8. FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto 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 a reasonably
prompt manner, the transactions contemplated by this Agreement.
Section 9. STOP TRANSFER. The Shareholder shall not request
that the Company register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Existing Shares
if such transfer will reduce the percentage ownership represented by the Subject
Shares to less than 19.9% of the issued and outstanding Company Common Stock,
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, stock- split, recapitalization, combination,
exchange of shares or the like, the term "Subject Shares" shall refer to and
include the Subject Shares as well as all such stock dividends and distributions
and any shares into which or for which any or all of the Subject Shares may be
changed or exchanged, so long as including such shares in the Subject Shares
does not result in the Subject Shares representing more than 19.9% of the issued
and outstanding Company Common Stock.
Section 10. TERMINATION. The covenants, agreements and proxy
contained in this Agreement shall terminate upon (i) the consummation of the
Merger, or (ii) the termination of the Merger Agreement in accordance with its
terms.
Section 11. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
(b) BINDING AGREEMENT. This Agreement and the obligations
hereunder shall attach to the Existing Shares and shall be binding upon any
person or entity to which legal or beneficial ownership of the Existing Shares
shall pass, whether by operation of law or otherwise, including, without
limitation, the Shareholder's heirs, guardians, administrators or
representatives; provided that in no event shall more than 19.9% of the issued
and outstanding Company Common Stock in the aggregate be deemed to be Subject
Shares under this Agreement. Notwithstanding any transfer of the Existing
Shares, the Shareholder shall remain liable for the performance of all
obligations of the Shareholder under this Agreement.
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(c) ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the other
party, provided that Parent may assign, in its sole discretion, its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of
Parent, but no such assignment shall relieve Parent 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, except upon the
execution and delivery of a written agreement executed by the 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 given) by hand delivery or telecopy (with a
confirmation copy sent for next day delivery via courier service, such as
Federal Express), 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 the Shareholder:
Xxxxx X. Xxxxxx
00000 Xxxx 00xx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Telecopy No.: (000) 000-0000
Copy to:
Faegre & Xxxxxx LLP
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
If to Parent:
Xxxxxx & Noble, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxx
Telecopy No.: (000) 000-0000
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Copy to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
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 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
recognizes and acknowledges that a breach by such party 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 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 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 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 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.
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(k) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (except to the
extent such matter is the proper subject of the MBCA in which event the laws of
the State of Minnesota shall control) without regard to any applicable conflicts
of law.
(l) 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 interpretation of this Agreement.
(m) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
(SIGNATURE PAGE FOLLOWS)
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IN WITNESS WHEREOF, the parties hereto have caused this
Shareholder Agreement to be duly executed as of the day and year first above
written.
XXXXXX & XXXXX, INC.
By: /s/ Xxxxxxx X'Xxxxxxx
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Name: Xxxxxxx X'Xxxxxxx
Title: Chief Executive Officer
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
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