EXECUTION COPY
SUPPORT AGREEMENT
This SUPPORT AGREEMENT (this "AGREEMENT") is entered into as of October
__, 2005, by and among GF Goods Inc., a Delaware corporation ("PARENT"), GF
Acquisition Corp., a Tennessee corporation ("ACQUISITION CORP."), and each of
the persons listed on SCHEDULE A hereto (each a "PRINCIPAL SHAREHOLDER" and,
collectively, the "PRINCIPAL SHAREHOLDERS"). Each capitalized term used but not
otherwise defined herein shall have the meaning ascribed to such term in the
Acquisition Agreement and Plan of Merger, dated as of the date hereof (as
amended, supplemented and otherwise modified from time to time, the "ACQUISITION
AGREEMENT"), by and among Parent, Acquisition Corp. and Goody's Family Clothing,
Inc., a Tennessee corporation (the "COMPANY").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company, Parent and Acquisition Corp. are entering into the
Acquisition Agreement which provides, subject to the terms and conditions set
forth in the Acquisition Agreement, for (i) the making of a tender offer (the
"OFFER") to purchase all of the Company's shares of common stock, no par value
per share ("COMPANY COMMON STOCK"), which are issued and outstanding (the
"OUTSTANDING COMMON SHARES") and tendered pursuant to the terms thereof, at a
price per Outstanding Common Share equal to the Offer Price, and (ii) the merger
of Acquisition Corp. and the Company (the "MERGER"), whereby each Outstanding
Common Share not purchased pursuant to the Offer (other than any Outstanding
Common Shares owned by Parent, Acquisition Corp. or any other wholly owned
Subsidiary of Parent) will be converted into the right to receive the Merger
Consideration in cash;
WHEREAS, the Board of Directors of the Company (the "BOARD") has, at a
meeting duly called and held, unanimously (i) approved the Acquisition
Agreement, each of the other Transaction Agreements, as well as the Offer, the
Merger and the other Transactions, and (ii) recommended that the holders of
Common Shares accept the Offer, tender their Common Shares pursuant to the Offer
and approve and adopt this Agreement and the Merger;
WHEREAS, each Principal Shareholder is the record and beneficial owner
of the number of Outstanding Common Shares and the Stock Rights (as defined
below) in each case set forth opposite such Principal Shareholder's name on
SCHEDULE A hereto (collectively, the "EXISTING EQUITY RIGHTS" of such Principal
Shareholder; and, together with all shares of Company Common Stock and Stock
Rights acquired after the date hereof by such Principal Shareholder, whether
upon the exercise, conversion or exchange of any Existing Equity Rights, upon
the exercise, conversion or exchange of any Stock Rights obtained hereafter by
such Principal Shareholder or otherwise hereafter acquired by such Principal
Shareholder, in each case as such shares, rights and other securities may be
adjusted from time to time for any stock dividend, stock split,
recapitalization, combination, exchange, merger, consolidation, reorganization
or other change or transaction involving the Company, are referred to herein
collectively as the "PRINCIPAL SHAREHOLDER SHARES" of such Principal
Shareholder). For purposes hereof, "STOCK RIGHTS" means options and other rights
to acquire shares of Company Common Stock or rights exercisable for or
convertible into shares of Company Common Stock; and
WHEREAS, as a condition to the willingness of Parent and Acquisition
Corp. to enter into the Acquisition Agreement, Parent and Acquisition Corp. have
requested that the Principal Shareholders enter into this Agreement.
NOW, THEREFORE, to induce Parent and Acquisition Corp. to enter into,
and in consideration of them entering into, the Acquisition Agreement, and in
consideration of the foregoing premises and the representations, warranties,
covenants and agreements contained herein, Parent, Acquisition Corp. and each of
the Principal Shareholders hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF EACH PRINCIPAL SHAREHOLDER. Each
Principal Shareholder, acting solely in its capacity as a holder of Principal
Shareholder Shares and not as a director of the Company or in any other
capacity, hereby, severally and not jointly with any other Principal
Shareholder, represents and warrants to Parent and Acquisition Corp. as follows:
(a) AUTHORITY. Such Principal Shareholder has all requisite power
and authority to execute and deliver this Agreement, to perform all of its
obligations hereunder and otherwise to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, have been duly authorized
by such Principal Shareholder. This Agreement has been duly executed and
delivered by such Principal Shareholder and, assuming this Agreement constitutes
a valid and binding obligation of the Parent and Acquisition Corp., constitutes
a valid and binding obligation of such Principal Shareholder enforceable against
such Principal Shareholder in accordance with its terms. Other than in
connection with or in compliance with the provisions of the Exchange Act or the
HSR Act, neither the execution, delivery or performance of this Agreement by
such Principal Shareholder nor the consummation by such Principal Shareholder of
the transactions contemplated hereby will (i) require any filing with, or
permit, authorization, consent or approval of, any Governmental Authority
(except for filing an amendment to Xxxxxx X. Xxxxxxxxxx'x Schedule 13D to
reflect the transactions contemplated by this Agreement), (ii) result in a
material violation or breach of, or constitute (with or without due notice or
lapse of time or both) a material default under, or give rise to any right of
termination, amendment, cancellation or acceleration under, result in the
creation of any material Lien upon a material portion of the properties or
assets of each Principal Shareholder, or result in the creation of any Lien upon
any Company Common Stock, under, any of the terms, conditions or provisions of
any Contract to which such Principal Shareholder is a party or by which such
Principal Shareholder or any of such Principal Shareholder's properties or
assets, including the Principal Shareholder Shares owned by such Principal
Shareholder, may be bound or (iii) violate, in any material respect, any Order
or any Law applicable to such Principal Shareholder or any of such Principal
Shareholder's properties or assets, including the Principal Shareholder Shares
owned by such Principal Shareholder.
(b) OWNERSHIP OF PRINCIPAL SHAREHOLDER SHARES. The Existing Equity
Rights of such Principal Shareholder and all certificates representing such
Existing Equity Rights are now, and at all times while this Agreement is in
effect will be, held by such Principal Shareholder, or by a nominee or custodian
for the benefit of such Principal
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Shareholder, and such Principal Shareholder has good and marketable title to
such Existing Equity Rights, free and clear of any Liens, proxies, voting trusts
or agreements, understandings or arrangements, except for any such Liens or
proxies arising hereunder, other than, with respect to any Principal
Shareholder, those agreements set forth on Schedule A opposite such Principal
Shareholder's name, all of which agreements (including the Support Agreement,
dated as of October 7, 2005, among GFC Holding Corp., GFC Enterprises, Inc. and
the principal Shareholders (the "SUN SUPPORT AGREEMENT")) have been terminated
prior to the date hereof. All Principal Shareholder Shares acquired hereafter by
such Principal Shareholder shall at all times while this Agreement is in effect
be held by such Principal Shareholder, or by a nominee or custodian for the
benefit of such Principal Shareholder, and such Principal Shareholder shall at
all time while this Agreement is in effect have good and marketable title to all
such Principal Shareholder Shares, free and clear of any Liens, proxies, voting
trusts or agreements, understandings or arrangements, except for any such Liens
or proxies arising hereunder. Such Principal Shareholder does not own of record
or beneficially any Outstanding Common Shares, any options or other rights to
purchase shares of Company Common Stock or any rights exercisable for or
convertible into shares of Company Common Stock, other than the Outstanding
Common Shares and shares of Company Common Stock issuable upon the exercise of
Company Stock Options, in each case set forth opposite such Principal
Shareholder's name on SCHEDULE A hereto. The Principal Shareholders own, in the
aggregate, 41.5% of ---------- the Outstanding Common Shares and, assuming the
options are exercised pursuant to Section 3(b)(1), over 39.6% of the shares of
Company Common Stock on a Fully-Diluted Basis.
(c) ACQUISITION AGREEMENT. Such Principal Shareholder understands
and acknowledges that Parent and Acquisition Corp. are entering into the
Acquisition Agreement in reliance upon execution and delivery of this Agreement
by such Principal Shareholder.
(d) ADEQUACY OF INFORMATION. Such Principal Shareholder is a
sophisticated investor with respect to the Principal Shareholder Shares of such
Principal Shareholder and has adequate information concerning the business and
financial condition of the Company to make an informed decision regarding the
transactions contemplated hereby and by the Acquisition Agreement and has
independently and without reliance upon either Parent or Acquisition Corp. and
based on such information as the Shareholder has deemed appropriate made its own
analysis and decision to enter into this Agreement. Such Principal Shareholder
has received and reviewed the Acquisition Agreement and acknowledges that
neither Parent nor Acquisition Corp. has made or makes any representation or
warranty, whether express or implied, of any kind or character except as
expressly set forth herein or in the Acquisition Agreement. Such Principal
Shareholder acknowledges that the agreements contained herein with respect to
the Principal Shareholder Shares of such Principal Shareholder are irrevocable
(subject to termination in accordance with SECTION 14 of this Agreement), and
that such Principal Shareholder has no recourse to such Principal Shareholder
Shares or to Parent or Acquisition Corp., except with respect to breaches by
Parent or Acquisition Corp. of their respective representations, warranties,
covenants and agreements expressly set forth in this Agreement.
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(e) EXCLUDED INFORMATION. Such Principal Shareholder acknowledges
and confirms that (i) Parent and Acquisition Corp. may possess or hereafter come
into possession of certain non-public information concerning the Principal
Shareholder Shares and/or the Company which is not known to such Principal
Shareholder and which may be material to such Principal Shareholder's decision
to enter into this Agreement or to consummate the transactions contemplated
hereby (the "EXCLUDED INFORMATION"), (ii) such Principal Shareholder has
requested not to receive the Excluded Information and has determined to enter
into this Agreement and to consummate the transactions contemplated hereby
(including, without limitation, to exercise, convert or cancel all Existing
Equity Rights into shares of Company Common Stock at or prior to the Effective
Time and to sell the Principal Shareholder Shares of such Principal Shareholder
pursuant to the Offer) notwithstanding its lack of knowledge of the Excluded
Information, and (iii) neither Parent nor Acquisition Corp., nor any of their
respective officers, directors, shareholders or representatives, shall have any
liability or obligation to such Principal Shareholder in connection with, and
such Principal Shareholder hereby waives and releases each of Parent,
Acquisition Corp. and their respective officers, directors, shareholders and
representatives from, any claims which such Principal Shareholder or its
successors or assigns may have against Parent, Acquisition Corp. or any their
respective officers, directors, shareholders or representatives (whether
pursuant to applicable securities, laws or otherwise) with respect to the
non-disclosure of the Excluded Information.
2. REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION CORP. Each
of Parent and Acquisition Corp. hereby represents and warrants to the Principal
Shareholders that each of Parent and Acquisition Corp. has the requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and otherwise to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Parent and Acquisition Corp. and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and Acquisition Corp. This Agreement has been duly
executed and delivered by Parent and Acquisition Corp. and, assuming this
Agreement constitutes a valid and binding obligation of each Principal
Shareholder, constitutes a valid and binding obligation of Parent and
Acquisition Corp. enforceable in accordance with its terms.
3. COVENANTS. Each Principal Shareholder, acting solely in its capacity
as a holder of Principal Shareholder Shares and not as a director or officer of
the Company or in any other capacity, hereby, severally and not jointly with any
other Principal Shareholder, agrees as follows:
(a) such Principal Shareholder shall not, except as expressly
contemplated by the terms of this Agreement or the Acquisition Agreement, (A)
sell, transfer, pledge, assign or otherwise dispose of (including, without
limitation, by merger or otherwise by operation of law), or enter into any
Contract, option or other arrangement (including, without limitation, any profit
sharing arrangement) or understanding with respect to the sale, transfer,
pledge, assignment or other disposition of (including, without limitation, by
merger or otherwise by operation of law), all or any portion, or any interest in
any, of the Principal Shareholder Shares of such Principal Shareholder to any
person
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other than Acquisition Corp. or any Person(s) designated in writing by
Acquisition Corp., (B) enter into any voting arrangement, whether by proxy,
voting agreement, voting trust, power-of-attorney or otherwise, with respect to
all or any portion of the Principal Shareholder Shares of such Principal
Shareholder or (C) take any other action that would in any way restrict, limit
or interfere with the performance of such Principal Shareholder's obligations
hereunder or the transactions contemplated hereby or in the Acquisition
Agreement;
(b) such Principal Shareholder (i), no later than one business day
prior to the then applicable expiration date of the Offer as set forth in the
Acquisition Agreement shall take all actions necessary or desirable to exercise
or convert all options to acquire Company Common Stock which have an exercise
price equal to or less than the Offer Price into shares of Common Stock and
shall validly tender such shares of Company Common Stock as set forth in SECTION
3(C) below and (ii) prior to the commencement of the Offer, such Principal
Shareholder shall execute a written acknowledgement to Parent, Acquisition Corp.
and the Company confirming that as of the Effective Date, (x) the payment of the
Option Consideration, if any, for all of such Principal Shareholder's Stock
Rights with an exercise price equal to or less than Offer Price per share will
satisfy in full the Company's obligation to such person pursuant to any and all
Stock Rights then outstanding (other than with respect to any Options which have
been exercised prior to the Effective Time) and (y) subject to the payment of
the Option Consideration, if any, all Stock Rights (including Stock Rights with
an exercise price or conversion price in excess of the Option Consideration with
respect to such Stock Rights) by such Principal Shareholder shall, without any
action on the part of the Company or the Principal Shareholder, be deemed
terminated, canceled, void and of no further force and effect as between the
Company and such Principal Shareholder and neither party shall have any further
rights or obligations with respect thereto. Such written acknowledgement shall
be in substantially the form of EXHIBIT D to the Acquisition Agreement;
(c) such Principal Shareholder shall (A) as promptly as practicable
(but in any event within 5 business days after the commencement of the Offer),
validly tender all of the Principal Shareholder Shares of such Principal
Shareholder pursuant to and in accordance with the terms of the Offer, and (B)
not withdraw, or cause to be withdrawn, all or any portion of such Principal
Shareholder Shares from the Offer, unless this Agreement is terminated;
(d) at any meeting of shareholders of the Company or at any
adjournment thereof or in any other circumstances upon which such Principal
Shareholder's vote, consent or other approval is sought, such Principal
Shareholder shall as requested by Acquisition Corp. vote (or cause to be voted)
all of the Principal Shareholder Shares of such Principal Shareholder in favor
of the approval and adoption of the Acquisition Agreement and the Transactions
and against (A) any Acquisition Proposal (as defined in the Acquisition
Agreement), (B) any action which would result in a change in a majority of the
individuals who constitute the Board and (C) any amendment of the Company's
Charter or by-laws or any other proposal or
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transaction involving the Company or any of its Subsidiaries, which amendment or
other proposal or transaction would in any manner impede, frustrate, prevent or
nullify, the Acquisition Agreement, the Merger or any of the other Transactions
(collectively, "FRUSTRATING TRANSACTIONS");
(e) notwithstanding any provision herein or in the Acquisition
Agreement to the contrary, such Principal Shareholder hereby waives any rights
of appraisal that such Principal Shareholder may have under the Tenn. Acts in
connection with the Merger or any of the other Transactions; and
(f) such Principal Shareholder shall not, and shall cause each of
its immediate family members and affiliates not to, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with,
provide any information to, or enter into any agreement with, any Person or
group of Persons (other than Parent, Acquisition Corp. or any of their
respective affiliates) concerning all or any portion, or interest in any, of the
Principal Shareholder Shares of such Principal Shareholder or any Acquisition
Proposal; PROVIDED, HOWEVER, that this provision shall in no way be construed as
limiting the ability to act in the capacity of an officer or director of the
Company (other than as set forth in the Acquisition Agreement) if such Principal
Shareholder is an officer or director of the Company.
4. NOTICE OF ACQUISITION OF ADDITIONAL PRINCIPAL SHAREHOLDER SHARES.
Each Principal Shareholder hereby, severally and not jointly with any other
Principal Shareholder, agrees, while this Agreement is in effect, to promptly
notify Parent and Acquisition Corp. of each acquisition by such Principal
Shareholder of any shares of Company Common Stock or Stock Rights after
execution hereof, which notice shall specify in each case the number of acquired
shares (and, in the case of any such Stock Rights, the number of shares of
Company Common Stock issuable upon the exercise, exchange or conversion thereof
and the other material terms thereof). All such shares of Company Common Stock
and Stock Rights shall be subject to the terms of this Agreement as though owned
by such Principal Shareholder on the date hereof.
5. IRREVOCABLE PROXY.
(a) Solely for the purpose of facilitating the enforcement of each
Principal Shareholder's obligations under SECTION 3(D) of this Agreement, each
Principal Shareholder hereby irrevocably grants to, and appoints, Xxxxx Xxxxx,
Xxxxxxx Xxxxxxxxx, and any other individual who shall hereafter be designated by
Acquisition Corp., such Principal Shareholder's proxy and attorney-in-fact (with
full power of substitution), for and in the name, place and stead of such
Principal Shareholder, to vote all of the Principal Shareholder Shares of such
Principal Shareholder, or grant a consent or approval in respect of such
Principal Shareholder Shares, at any meeting of shareholders of the Company or
at any adjournment thereof or in any other circumstances upon which their vote,
consent or other approval is sought in favor of the approval and adoption of the
Acquisition Agreement and the Transactions or against any Acquisition Proposal
(including, without limitation, any Superior Proposal) and any Frustrating
Transaction.
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(b) Each Principal Shareholder represents that, except for the
proxies pursuant to the Sun Support Agreement, none of the proxies (if any)
heretofore given in respect of any of the Principal Shareholder Shares of such
Principal Shareholder are irrevocable, and each such Principal Shareholder
agrees that all such proxies (including the proxies pursuant to the Sun Support
Agreement) are hereby revoked.
(c) Each Principal Shareholder hereby affirms that the proxy granted
by such Principal Shareholder in this SECTION 5 is coupled with an interest and
is irrevocable until the earlier of (i) such time as this Agreement terminates
in accordance with its terms and (ii) consummation of the Merger in accordance
with the terms of the Acquisition Agreement. Each Principal Shareholder hereby
further affirms that the proxy granted by such Principal Shareholder in this
SECTION 5 is granted in connection with the execution of the Acquisition
Agreement, is given to secure the performance of the duties of such Principal
Shareholder under this Agreement, and therefore is coupled with an interest.
6. GRANT OF STOCK OPTION.
(a) Each Principal Shareholder hereby grants to Acquisition Corp. an
irrevocable option (the "OPTION") to purchase all such Principal Shareholder
Shares, in the manner set forth below, at an exercise price of $8.85 per share,
subject to adjustment as provided below (the "OPTION PRICE").
(b) EXERCISE OF OPTION. Acquisition Corp.'s designee may exercise
the Option, in whole or in part, at any time, or from time to time following the
occurrence of a Triggering Event (as defined below). In the event Acquisition
Corp. wishes to exercise the Option, Acquisition Corp. shall deliver written
notice (the "EXERCISE NOTICE") to the Principal Shareholder specifying its
intention to exercise the Option, the total number of Principal Shareholder
Shares it wishes to purchase and a date and time for the closing of such
purchase (an "OPTION CLOSING") not less than three nor more than 30 Business
Days after the date such Exercise Notice is given; PROVIDED, HOWEVER, that if
any waiting period under the HSR Act applicable to the Transaction or the
purchase of the Principal Shareholder Shares pursuant to the Option shall not
have expired or terminated by the date specified in the Exercise Notice for the
Option Closing, then the Option Closing shall occur within one Business Day
following such expiration or termination. The term "TRIGGERING EVENT" means the
termination of the Acquisition Agreement either (i) by Parent or Acquisition
Corp. in accordance with Section 8.03(c) of the Acquisition Agreement or (ii) by
the Company for any reason (other than in accordance with Section 8.04(a) or
Section 8.04(b) of the Acquisition Agreement). In the event that Acquisition
Corp. exercises the Option following a termination of the Acquisition Agreement
by the Company (other than a termination in accordance with Section 8.04(c) of
the Acquisition Agreement), then Acquisition Corp. shall use its reasonable best
efforts to acquire the remaining shares of Company Common Stock not held by it
or its affiliates at a price equal to $8.85 per share at the earliest
practicable date following the Option Closing.
(c) PAYMENT OF OPTION PRICE AND DELIVERY OF CERTIFICATE. Any Option
Closing under Section 6(b) shall be held at the offices of Skadden, Arps, Slate,
Xxxxxxx
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& Xxxx LLP, Four Times Square, Xxx Xxxx, XX 00000. At any Option Closing
hereunder, (i) Acquisition Corp. or its designee will make payment to the
Principal Shareholder of the aggregate price for the Principal Shareholder
Shares being so purchased by delivery of a certified check, official bank check
or wire transfer of funds pursuant to the Principal Shareholder's instructions
payable to the Principal Shareholder in an amount equal to the product obtained
by multiplying the Option Price by the number of Principal Shareholder Shares to
be purchased, and (ii) upon receipt of such payment, the Principal Shareholder
will deliver to Acquisition Corp. or its designee a certificate or certificates
representing the number of validly issued, fully paid and non-assessable
Principal Shareholder Shares so purchased, in the denominations and registered
in such names designated to the Principal Shareholder in writing by Acquisition
Corp., along with all appropriate and effective instruments of transfer.
(d) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of any
change in the number of Outstanding Common Shares by reason of any stock
dividend, stock split, recapitalization, merger, rights offering, share exchange
or other change in the corporate or capital structure of the Company,
Acquisition Corp. shall receive, upon exercise of the Option, the stock or other
securities, cash or property to which Acquisition Corp. would have been entitled
if it had exercised the Option and had been a holder of record of Company Common
Stock on the record date fixed for determination of holders of Company Common
Stock entitled to receive such stock or other securities, cash or property and
the Option Price shall be adjusted appropriately.
7. FURTHER ASSURANCES. Solely for the purpose of facilitating the
enforcement of each Principal Shareholder's obligations hereunder, each
Principal Shareholder will, from time to time, execute and deliver, or cause to
be executed and delivered, such additional or further transfers, assignments,
endorsements, consents and other instruments as Parent or Acquisition Corp. may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement and to vest the power to vote the Principal
Shareholder Shares of such Principal Shareholder as contemplated by SECTION 3.
Each of Parent and Acquisition Corp. hereby agrees to use reasonable efforts to
take, or cause to be taken, all actions necessary to comply promptly with all
legal requirements that may be imposed with respect to the transactions
contemplated by this Agreement (including, without limitation, any legal
requirements of the HSR Act).
8. NAME AND LIKENESS. Xxxxxx X. Xxxxxxxxxx hereby grants to the Company
and its Subsidiaries the exclusive right to use his name and likeness, including
without limitation any and all trademark rights thereof, in connection with the
Company's and its Subsidiaries' advertising, marketing and sales programs in any
and all media formats (now existing or hereafter developed) for a period of six
months after the Offer Payment Date; PROVIDED HOWEVER that the Company and its
Subsidiaries shall not use such name and likeness in a manner substantially
inconsistent with the current and currently proposed use of such person's name
and likeness, including without limitation the current use and currently
proposed use set forth in existing plans of the Company and its Subsidiaries
relating to such programs.
9. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by
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operation of law or otherwise) without the prior written consent of the holders
of a majority of Company Common Stock owned by the Principal Shareholders.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of, and be enforceable by, the parties hereto and their
respective successors and assigns. Notwithstanding anything in this SECTION 9 to
the contrary, each of Parent and Acquisition Corp. shall have the right to
assign all or any portion of its respective rights, interests and obligations
hereunder (a) to any of its respective affiliates and/or (b) as collateral
security to any Person who may provide financing to Parent for the Transactions,
in each case without the prior written consent of any of the other parties
hereto; PROVIDED that no such assignment shall relieve Parent or Acquisition
Corp. of any of its respective obligations hereunder to the extent such assignee
does not perform such obligations; PROVIDED, FURTHER, the rights of the assignee
will be subject to all defenses, excuses, claims and counterclaims assertable
against Parent or Acquisition Corp., as applicable. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective heirs, successors, executors, administrators and
permitted assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
10. NON-COMPETITION AND NON-SOLICITATION. In consideration of Parent's
and Acquisition Corp.'s agreement to enter into this Agreement and the
Acquisition Agreement, and as a condition thereto, each Principal Shareholder
covenants and agrees as follows:
(a) Each Principal Shareholder hereby acknowledges that it is or
may be familiar with the Companies' trade secrets and with other confidential
information and such Principal Shareholder acknowledges and agrees that Parent,
Acquisition Corp., the Company and their respective Subsidiaries would be
irreparably damaged if it were to provide services to or otherwise participate
in the business of any person competing with the Company or any of its
Subsidiaries in a similar business and that any such competition by such
Principal Shareholder would result in a significant loss of goodwill by Parent,
Acquisition Corp., the Company and their Subsidiaries.
(b) From the date hereof through and including the date eighteen
months after the Offer Payment Date, no Principal Shareholder or any of its
affiliates shall, directly or indirectly, own any interest in, manage, control,
participate in (whether as an officer, director, employee, partner, agent,
representative or otherwise), consult with, render services for, or in any other
manner engage, anywhere in the Restricted Territories in any business engaged
directly or indirectly the ownership or operation of retail clothing stores or
other sales outlets providing similar clothing goods and services as those
provided by the Company and its Subsidiaries; PROVIDED THAT nothing herein shall
prohibit (x) such Principal Shareholder or any of its affiliates from being a
passive owner of not more than 2% of the outstanding stock of any class of a
corporation which is publicly traded so long as none of such Persons has any
active participation in the business of such corporation or (y) Xxxxxxx X.
Xxxxxxxxxx from owning any interest in, managing, or controlling, participating
in, consulting with, rendering services for, or engaging in any business;
PROVIDED THAT during such eighteen-month period Xxxxxxx X. Xxxxxxxxxx shall not,
directly or indirectly, own or have voting control over any retail clothing
stores or other sales outlets providing similar clothing goods and services as
those provided by the Company and its Subsidiaries with more than 20 stores.
From the
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date hereof through and including the third anniversary of the Offer Payment
Date, no Principal Shareholder or any of its affiliates shall, directly or
indirectly, use the name "Xxxxxxxxxx," "Goody's," or any derivative thereof or
Xxxxxx X. Xxxxxxxxxx'x or his immediate family members' names or likenesses in
any business. From and after the date hereof, no Principal Shareholder shall,
directly or indirectly, use the name "Goody's" in any business in the clothing
industry so long as the Company or any of its affiliates, successors or assigns
is then using such name. For purposes of this Agreement, "Restricted
Territories" shall mean the States of Alabama, Arizona, Delaware, Florida,
Georgia, Iowa, Illinois, Indiana, Kentucky, Kansas, Louisiana, Missouri,
Mississippi, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas,
Virginia, West Virginia and any other state the Company or any of its
Subsidiaries currently proposes to conduct business. Each Principal Shareholder
acknowledges that the Company's and its Subsidiaries' businesses has been
conducted or is presently proposed to be conducted throughout the Restricted
Territories and that the geographic restrictions set forth above are reasonable
and necessary to protect the goodwill of the Company's and its Subsidiaries'
businesses.
(c) From the date hereof through and including the date eighteen
months after the Offer Payment Date, no Principal Shareholder or any of their
affiliates shall, directly, or indirectly through another Person, (A) induce or
attempt to induce any employee of the any Company or its Subsidiaries or
affiliates to leave the employ of such Company or any of its Subsidiaries or
affiliates, or in any way interfere with the relationship between the Company or
any of its Subsidiaries or affiliates and any employee thereof, (B) hire any
person who was an employee of the Company or any of its Subsidiaries or
affiliates at any time during the one-year period immediately prior to the Offer
Payment Date (it being conclusively presumed by the parties so as to avoid any
disputes under this SECTION 10(C) that any such hiring within such one-year
period is in violation of clause (A) above) unless such employee was identified
on Schedule B hereto and was terminated by the Company or voluntarily terminated
employment; PROVIDED, HOWEVER, that, nothing in this SECTION 10(C) shall be
construed to prohibit any Principal Shareholder or any of their affiliates from
hiring any other Principal Shareholder whose employment has been terminated
whether voluntarily or not, so long as such hiring does not violate any other
provisions of this Agreement, including without limitation SECTION 10(B), or (C)
for so long as such Principal Shareholder has continuing obligations under
SECTION 10(C) above, call on, solicit or service any supplier, licensee,
licensor or other business relation of the Company or any of its Subsidiaries or
affiliates (including any Person that was a supplier or other potential business
relation of the Company or any of its Subsidiaries or affiliates at any time
during the one-year period immediately prior to such call, solicit or service),
induce or attempt to induce such Person to cease doing business with the Company
or any of its Subsidiaries or affiliates, or in any way interfere with the
relationship between any such customer, supplier, licensee or business relation
and the Company or any of its Subsidiaries or affiliates (including making any
negative statements or communications about the Company or any of its
Subsidiaries or affiliates).
(d) Each Principal Shareholder agrees that it shall not (and shall
cause its affiliates not to) (i) make any negative statement or communication
regarding Parent, Acquisition Corp. the Company or any of their respective
Subsidiaries, affiliates or
10
employees with the intent to harm the Parent, Acquisition Corp., the Company or
any of their respective Subsidiaries or (ii) make any derogatory or disparaging
statement or communication regarding Parent, Acquisition Corp., the Company or
any of their respective Subsidiaries, affiliates or employees; PROVIDED,
HOWEVER, that the covenants contained in this Section 10(d) shall not be
construed so as to prohibit any Principal Shareholder from giving truthful,
sworn testimony pursuant any legal or judicial proceeding.
(e) If, at the time of enforcement of the covenants contained in
this SECTION 10 (the "RESTRICTIVE COVENANTS"), a court shall hold that the
duration, scope or area restrictions stated herein are unreasonable under
circumstances then existing, the parties agree that the maximum duration, scope
or area reasonable under such circumstances shall be substituted for the stated
duration, scope or area and that the court shall be allowed and directed to
revise the restrictions contained herein to cover the maximum period, scope and
area permitted by law. Each Principal Shareholder has consulted with legal
counsel regarding the Restrictive Covenants and based on such consultation has
determined and hereby acknowledges that the Restrictive Covenants are reasonable
in terms of duration, scope and area restrictions and are necessary to protect
the goodwill of the Company's and its Subsidiaries' businesses and the
substantial investment in the Company made by Parent and Acquisition Corp.
hereunder. Each Principal Shareholder further acknowledges and agrees that the
Restrictive Covenants are being entered into by it in connection with the
proposed sale of Common Shares pursuant to the Acquisition Agreement and not
directly or indirectly in connection with such Principal Shareholders'
employment or other relationship with the Company or any of its Subsidiaries.
(f) If any Principal Shareholder or an affiliate of a Principal
Shareholder breaches, or threatens to commit a breach of, any of the Restrictive
Covenants, the Company shall have the following rights and remedies, each of
which rights and remedies shall be independent of the others and severally
enforceable, and each of which is in addition to, and not in lieu of, any other
rights and remedies available to Parent, Acquisition Corp., the Company or any
of its affiliates at law or in equity:
(i) the right and remedy to have the Restrictive Covenants
specifically enforced by any court of competent jurisdiction, it being agreed
that any breach or threatened breach of the Restrictive Covenants would cause
irreparable injury to Parent, Acquisition Corp. and the Company and that money
damages would not provide an adequate remedy to the Parent, Acquisition Corp.
and the Company; and
(ii) the right and remedy to require any Principal Shareholder
to account for and pay over to the Company any profits, monies, accruals,
increments or other benefits derived or received by such person as the result of
any transactions constituting a breach of the Restrictive Covenants.
(g) In the event of any breach or violation by a Principal
Shareholder of any of the Restrictive Covenants, the time period of such
covenant with respect to such
11
breaching Principal Shareholder shall be extended for one day for each day of
such breach or violation.
11. GENERAL PROVISIONS.
(a) EXPENSES. Subject to the terms of the Acquisition Agreement, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense.
(b) AMENDMENTS. This Agreement may not be amended except by an
instrument in writing signed by Parent, Acquisition Corp. and the holders of a
majority of Company Common Stock owned by the Principal Shareholders.
(c) NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in Person, by facsimile or by
registered or certified mail (postage prepaid, return receipt requested) or by a
nationally recognized overnight courier service to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this SECTION 11(C)):
(i) if to Parent or to Acquisition Corp., to:
GF Goods Inc.
GF Acquisition Corp.
c/o GMM Capital LLC
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxx
Telecopy: (000) 000-0000
c/o Prentice Capital Management, LP
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Telecopy: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx
Facsimile No.: (000) 000-0000
Telecopy: (000) 000-0000
12
and
(ii) if to a Principal Shareholder, to the address set forth
under the name of such Principal Shareholder on Schedule A
hereto.
(d) INTERPRETATION; CONSTRUCTION. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." This Agreement and any documents or instruments
delivered pursuant hereto or in connection herewith shall be construed without
regard to the identity of the Person who drafted the various provisions of the
same. Each and every provision of this Agreement and such other documents and
instruments shall be construed as though all of the parties participated equally
in the drafting of the same. Consequently, the parties acknowledge and agree
that any rule of construction that a document is to be construed against the
drafting party shall not be applicable to this Agreement or such other documents
and instruments.
(e) COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
(f) ENTIRE AGREEMENT. This Agreement and the documents and
instruments referred to herein constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, among such parties with
respect to the subject matter hereof.
(g) GOVERNING LAW; WAIVER OF JURY TRIAL. The provisions of this
agreement and the documents delivered pursuant hereto shall be governed by and
construed in accordance with the Laws of the State of Tennessee (excluding any
conflict of Law, rule or principle that would refer to the Laws of another
jurisdiction). EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY
SUIT, ACTION OR PROCEEDING ARISING HEREUNDER.
(h) PUBLIC ANNOUNCEMENTS. The Principal Shareholders shall consult
Parent, Acquisition Corp. and the Company before issuing any press release or
otherwise making any public statement with respect to this Agreement, any of the
other Transaction Agreements or any of the Transactions. Prior to the Closing,
no Principal Shareholder shall issue any press release or otherwise make any
public statement without the prior written consent of Parent and Acquisition
Corp., except as may be required by Law or
13
any listing agreement with the Nasdaq or any national securities exchange to
which the Company is a party and, in such case, shall consult with Parent and
Acquisition Corp. prior to such release or statement being issued.
(i) THIRD-PARTY BENEFICIARY. The Company is an intended third party
beneficiary of this Agreement and may enforce all rights and remedies of the
Company hereunder.
12. SHAREHOLDER CAPACITY. No Person executing this Agreement who,
during the term hereof, is or becomes a director or officer of the Company makes
any agreement or understanding herein in his or her capacity as a director or
officer of the Company. Each Principal Shareholder signs solely in his, her or
its capacity as the record holder and beneficial owner of, or the trustee of a
trust whose beneficiaries are the beneficial owners of, Principal Shareholder
Shares.
13. ENFORCEMENT. Each of the parties hereto agree that irreparable
damage will occur in the event that any of the provisions of this Agreement are
not performed in accordance with their specific terms or are otherwise breached.
It is accordingly agreed that each of the parties to this Agreement shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in a
court of the United States in addition to any other remedy to which they are
entitled at law or in equity.
14. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
15. TERMINATION. Subject to the two last sentences of this Section 15,
the provisions of SECTIONS 3, 4, 5, 6, 7, 8 and 10 shall terminate automatically
and be of no further force or effect upon a valid termination of the Acquisition
Agreement; PROVIDED, however, nothing herein shall relieve any party hereto from
liability for fraud or a material and intentional breach of any such provision
prior to such termination. Notwithstanding anything to the contrary in this
Agreement, Section 3(a) and Section 6 shall survive a termination of the
Acquisition Agreement that constitutes a Triggering Event for a period of 30
Business Days following the occurrence of the Triggering Event. In the event
Acquisition Corp. has provided any Principal Shareholder with an Exercise Notice
prior to the termination of Section 3(a) and Section 6 pursuant to this Section
15, then notwithstanding anything to the contrary in this Agreement, Section
3(a) and Section 6 shall survive the time at which they would otherwise
terminate pursuant to this Section 15 with respect to any Principal Shareholder
Shares subject to such Exercise Notice until the Option Closing.
* * * * *
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first written above.
GF Goods Inc.
By: /s/ Xxxxx Xxxxx
-----------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Executive Officer
GF Acquisition Corp.
By: /s/ Xxxxx Xxxxx
-----------------------------------------
Name: Xxxxx Xxxxx
Title: Chief Executive Officer
PRINCIPAL SHAREHOLDERS:
------------------------------------------------
Xxxxxx X. Xxxxxxxxxx
------------------------------------------------
Xxxxx X. Xxxxxxxxxx
------------------------------------------------
Xxxxxxx X. Xxxxxxxxxx
THE XXXXXX XXXXXX XXXXXXXXXX SUBCHAPTER S
TRUST, DATED JANUARY 23, 1991
By:
----------------------------------------
Xxx Xxxxx
Its Trustee
THE XXXXXXX XXXX XXXXXXXXXX SUBCHAPTER S
TRUST, DATED JANUARY 23, 1991
By:
----------------------------------------
Xxx Xxxxx
Its Trustee
THE XXXXXXXXXX FOUNDATION
By:
----------------------------------------
Xxxxxx X. Xxxxxxxxxx
Its President
16
SCHEDULE A
-------------------------- ------------------------ ------------------------ ------------------------
Name and Address of Number of Shares of Number of Options Number of Other Options
Principal Shareholder Outstanding Common Described in Section
Shares Owned by 3(b)(1)
Principal Shareholder
-------------------------- ------------------------ ------------------------ ------------------------
Xxxxxx X. Xxxxxxxxxx 12,098,330 750,000 75,000
000 Xxxx Xxx Xxx Xxxxx
Xxxxxxxxx, XX 00000
-------------------------- ------------------------ ------------------------ ------------------------
Xxxxxx X. Xxxxxxxxxx & 22,500 0 0
Xxxxx X. Xxxxxxxxxx
000 Xxxx Xxx Xxx Xxxxx
Xxxxxxxxx, XX 00000
-------------------------- ------------------------ ------------------------ ------------------------
Xxxxxxx X. Xxxxxxxxxx 0 15,000 9,000
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
-------------------------- ------------------------ ------------------------ ------------------------
The Xxxxxx Xxxxxx 317,270 0
Xxxxxxxxxx Subchapter S
Trust, dated January 23,
1991
000 Xxxx Xxx Xxx Xxxxx
Xxxxxxxxx, XX 00000
-------------------------- ------------------------ ------------------------ ------------------------
The Xxxxxxx Xxxx 317,270 0 0
Xxxxxxxxxx Subchapter S
Trust, dated January 23,
1991
000 Xxxx Xxx Xxx Xxxxx
Xxxxxxxxx, XX 00000
-------------------------- ------------------------ ------------------------ ------------------------
The Xxxxxxxxxx Foundation 1,000,000 0 0
000 Xxxx Xxx Xxx Xxxxx
Xxxxxxxxx, XX 00000
-------------------------- ------------------------ ------------------------ ------------------------
17
SCHEDULE B
Xxxxxxx Xxxx Xxxxxxxxxx
Xxxxx Xxxxxxx
Xxxxx Xxxxxxxx
Xx Xxxxxx
Xxxx Xxxxxxx
Xxxx Xxxxxxxxx
Xxx Xxxxxx
Xxxx Xxxxxx
Xxxxxx Xxxxxxxx
Xxxxxx X. Xxxxxxxxxx
18
