Exhibit 99.2
AGREEMENT WITH SHAREHOLDER
--------------------------
AGREEMENT WITH SHAREHOLDER (the "Agreement"), dated November 30, 1996,
between Woolworth Corporation, a New York corporation (the "Purchaser"), and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Shareholder").
WHEREAS, the Purchaser, Eastbay, Inc., a Wisconsin corporation (the
"Company"), and East Acquisition Corporation, a Wisconsin corporation and an
indirect wholly owned subsidiary of the Purchaser ("Acquisition"), are entering
into an Agreement and Plan of Merger (the "Merger Agreement"), which would
provide, among other things, that Acquisition, upon the terms and subject to the
conditions thereof, would be merged with the Company (the "Merger"); and
WHEREAS, as a condition to its willingness to execute the Merger
Agreement, and as a material inducement with respect thereto the Purchaser 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
covenants and agreements set forth herein, the parties hereto agree as follows:
▇. ▇▇▇▇▇ OF APPRECIATION RIGHT
1.1 If, at any time prior to the first anniversary of the date the
Merger Agreement is terminated by the Company, (i) any third party shall have
made a bona fide "takeover proposal" (as defined in the Merger Agreement) and
subsequently (ii) the Shareholder shall, by sale, transfer, assignment or any
other means whatsoever, receive cash or property (including the retained value
of any security and the present value of any right to receive a payment in the
future (whether or not after the first anniversary)) for any share of common
stock, par value $.01 per share, of the Company ("Shares") held by such
Shareholder as of the date hereof (which the Shareholder represents is 1,522,000
Shares) in excess of $23.75 per Share, the Shareholder shall promptly pay
(including, in the case of deferred consideration, when such consideration is
received) the amount of such excess to the Purchaser, provided that if a
"takeover proposal" (as
defined in the Merger Agreement) which provides for the payment of a higher
price per share to the public than that set forth in the Merger Agreement is
received by the Company within 37 days of the date of the Merger Agreement, such
payment shall be subject to a maximum of $1.139284 per share. This provision
shall apply to the extent set forth herein to any sale, transfer, assignment or
other action with respect to any interest in or right with respect to, such
Shares, whether the sale, transfer, assignment or other action occurs in a
single transaction or a series of transactions, and shall be generally broadly
construed in order to protect the interests of the Purchaser. The provisions of
this Article I shall be of no further force and effect in the event that (i) the
Purchaser shall be or shall have been in material breach of its obligations
under the Merger Agreement or (ii) the Merger shall fail to be consummated as a
result of the failure to obtain clearance under the HSR Act (as defined in the
Merger Agreement) or (iii) the conditions set forth in Section 7.1(b) or 7.2 of
the Merger Agreement shall not have been satisfied at the time of termination of
the Merger Agreement.
II. CONTINGENT CONSIDERATION
2.1 In the event that the Merger is consummated, the Shareholder
(whether or not employed by the Company, and including his heirs, beneficiaries,
representatives and assigns) shall be entitled to receive from the Purchaser a
payment pursuant to this Article II to the extent the conditions hereof are
satisfied. Any payment so made shall be deemed to be, and shall be treated for
all purposes by the parties hereto as, contingent payment in consideration of
the Shares sold by the Shareholder and the parties agree to treat the payment as
such on all tax returns filed by the parties.
(i) If the earnings before interest and taxes ("EBIT") of the
Company in the twelve-month period ended June 30, 1998 ("1998 EBIT") exceeds
$20,271,000, then the Shareholder shall be entitled to receive from the
Purchaser (in cash paid promptly after the amount is finally calculated) $X per
Share (the "1998 Payment"), where X is calculated as follows:
(a) If the 1998 EBIT is less than $24,473,000, then X shall be equal to
2
[1998 EBIT - $20,271,000)] / $4,202,000 x $0.777737 and the 1998
Unpaid Amount shall be equal to [$0.777737 - X].
(b) If the 1998 EBIT is greater than or equal to $24,473,000, then X
shall be equal to $0.777737 and the 1998 Unpaid Amount shall be equal
to $0.
In no event shall the 1998 Payment exceed $0.777737 per Share.
(ii) If the EBIT of the Company for the twelve-month period
ended June 30, 1999 ("1999 EBIT") exceeds $25,316,000, then the Shareholder
shall be entitled to receive from the Purchaser (in cash promptly after the
amount is finally calculated), $Y per Share (the "1999 Payment"), where Y is
calculated as follows:
(a) If the 1999 EBIT is less than or equal to $30,569,000, then Y shall
be equal to [1999 EBIT - $25,316,000] / $5,253,000 x $0.972263.
(b) If the 1999 EBIT is greater than $30,569,000 and the 1998 Unpaid
Amount is greater than $0, then Y shall be equal to $0.972263 plus
[1999 EBIT - $30,569,000] / [$24,473,000 - 1998 EBIT] x 1998 Unpaid
Amount, provided however, that in no event shall Y exceed $0.972263
plus the 1998 Unpaid Amount.
(c) If the 1999 EBIT is greater than $30,569,000 and the 1998 Unpaid
Amount equals $0, then Y shall be equal to $0.972263.
(iii) Notwithstanding the foregoing, in no event shall the sum
of the 1998 Payment and the 1999 Payment exceed $1.75 per share.
(iv) The Purchaser intends to maintain the business and
financial affairs of the Company as a discrete entity in accordance with their
conditions as of
3
the Effective Time of the Merger. If any material change is made to the
Company as currently operated prior to the payment (if earned) of the 1999
Payment, the parties will cooperate in good faith to determine the necessary
amendments (if any) to this Article II so as to fairly and equitably treat both
parties to this Agreement.
(v) Any calculation of EBIT made pursuant to this Article II
shall be prepared based upon the books and records of the Company in accordance
with generally accepted accounting principles, consistently applied. By way of
illustration and not limitation, EBIT shall not include any intercompany charges
which do not replace other charges which would be paid by the Company or any
expenses related to costs of the Merger.
III. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder represents and warrants to the Purchaser that:
3.1 The Shareholder has all necessary power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby and this Agreement constitutes a valid and binding agreement of the
Shareholder.
3.2 The Shareholder beneficially owns 1,522,000 Shares free and clear
of all claims, liens, encumbrances, security interests and charges of any kind,
including rights of first refusal and restrictions or other impediments on the
Shareholder's voting rights or rights of disposition pertaining thereto.
3.3 Neither the execution, delivery and performance of this Agreement
nor the consummation by the Shareholder of the transactions contemplated hereby
will require the consent, waiver, approval, license or authorization of or
filing with any person or public authority and will not conflict with,
constitute a violation of or default under or result in a breach of any
contract, commitment, agreement, arrangement, certificate of incorporation or
bylaw, judgment, order, ordinance, regulation, decree or restriction of any kind
to which the Shareholder is a party or by which the Shareholder is bound.
4
IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Shareholder that:
4.1 This Agreement has been duly authorized by all necessary
corporate action on the part of the Purchaser and has been duly executed by a
duly authorized officer of the Purchaser and constitutes a valid and binding
obligation of the Purchaser.
V. COVENANTS OF THE SHAREHOLDER
5.1 The Shareholder hereby covenants and agrees that prior to the
date of termination of the Merger Agreement the Shareholder will not, directly
or indirectly, sell, transfer, assign, pledge, hypothecate, create a security
interest in or lien on, place in trust (voting or otherwise) or otherwise
encumber or dispose of or limit its right to vote in any manner any of the
Shares which are the subject matter of this Agreement except pursuant to the
terms hereof. The Shareholder will not take any action in his individual
capacity which would have the effect of preventing or disabling the Shareholder
from performing its obligations under this Agreement.
5.2 (a) The Shareholder agrees to vote all voting securities of the
Company held by such holder in favor of adoption of the Merger Agreement;
provided, however, that the Shareholder shall not be required to vote his voting
securities in favor of adoption of the Merger Agreement if the Board of
Directors of the Company determines, after consultation with counsel, that
recommending the Merger and adoption of the Merger Agreement to the Company's
shareholders is inconsistent with the Board of Directors' fiduciary duties to
the Company's shareholders.
(b) The Shareholder agrees that, prior to the date of
termination of the Merger Agreement (the "Termination Date") such holder will
not vote or execute any written consent in favor of any amendment to the
Articles of Incorporation or By-laws of the Company or any Business Combination
Transaction without the prior written consent of the Purchaser. As used herein,
"Business Combination Transaction" shall mean any transaction,
5
including, without limitation, a merger, consolidation, reclassification,
liquidation, dissolution or sale of substantially all of the assets of the
Company, other than a transaction to which the Purchaser is a party, which
requires a vote of stockholders of the Company pursuant to the Wisconsin
Business Corporation Law or the rules and regulations of the NASDAQ Stock
Market.
5.3 For a period of five years from the Effective Date (as defined in
the Merger Agreement), the Shareholder shall not (a)(i) compete with the Company
or the Purchaser, in the Territory in the conduct of the Business, or (ii)
engage or participate, directly or indirectly, in any business or businesses
substantially similar to the Business, (b) solicit or cause to be solicited
within or without the Territory any customers of the Business for services or
products that compete with these of the Company or the Business, or (c) recruit,
solicit, or induce any employee of the Business, the Purchaser, or any
subsidiary of the Purchaser to terminate their employment with, or otherwise
cease their relationship with, the Business, the Purchaser, or any such
subsidiary, as the case may be. For purposes of this provision, "Territory"
shall mean the United States, Canada, Japan, the United Kingdom, Germany,
France, Spain and Italy, and "Business" shall mean the business of selling and
marketing by mail order footwear and apparel and selling and marketing athletic
footwear and apparel through retail stores. The parties agree that the
Purchaser is not making any separate payment for the Shareholder's agreement
contained in this Section 5.3 and the parties agree not to allocate or report
any part of the contingent payment in Article II of this Agreement or any part
of the consideration received under the Merger Agreement for tax or any other
purposes to the Shareholder's agreement in this Section 5.3.
VI. NEGOTIATIONS
Following the execution of this Agreement and prior to the Termination
Date, the Shareholder shall not in his individual capacity, directly or
indirectly, solicit, encourage, or initiate or participate in any discussions or
negotiations with, or provide any information to, any corporation, partnership,
person, or other entity or group (other than the Purchaser or an affiliate or an
associate of the Purchaser or an officer, employee
6
or other authorized representative of the Purchaser or such affiliate or
associate) concerning any merger, sale of substantial assets, sale of
substantial amounts of securities, or similar transaction involving the Company
or any sale of the Shares. The foregoing prohibition shall not prohibit the
Shareholder from taking any action, including but not limited to, those
enumerated above, in connection with his exercise of any fiduciary duty owed to
the Company or its shareholders in his capacity as an officer or director.
VII. MISCELLANEOUS
7.1 This Agreement will be governed by and construed in accordance
with the laws of the State of New York (regardless of the laws that might be
applicable under principles of conflicts of laws). This Agreement may be
executed simultaneously in counterparts, each of which will be deemed to be an
original but all of which together will constitute one and the same instrument.
7.2 The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
7.3 All representations, warranties and agreements made by the
Shareholder and the Purchaser in this Agreement shall survive the Closing
hereunder and any investigation at any time made by or on behalf of any party
hereto.
7.4 This Agreement will be binding upon, inure to the benefit of and
be enforceable by (i) the Shareholder and his respective heirs, beneficiaries,
representatives and assigns, and (ii) the Purchaser and its successors and
assigns. This Agreement may not be assigned by the parties hereto, except that
the Purchaser may assign its rights hereunder to any wholly owned subsidiary of
Purchaser.
7.5 The Shareholder agrees that damages would be an inadequate remedy
for breach of this Agreement and that the Purchaser may obtain specific
performance of this Agreement and injunctive relief against any breach hereof.
7
7.6 This Agreement, and the documents referred to herein or delivered
pursuant hereby which form a part hereof, contain the entire understanding of
the parties hereto with respect to its subject matter. There are no
restrictions, agreements, promises, warranties, covenants or undertakings with
respect to the subject matter hereof other than those expressly set forth
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to its subject matter. This Agreement may be
amended only by a written instrument duly executed by both the parties hereto.
Any condition to a party's obligations hereunder may be waived in writing by
such party .
7.7 The article and section headings contained herein are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement.
7.8 All notices, claims, certificates, requests, demands and other
communications hereunder ("notices) will be given in writing and will be deemed
to have been duly given if delivered or mailed (registered or certified mail,
postage prepaid, return receipt requested) as follows:
(a) If to the Purchaser, to:
Woolworth Corporation
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(b) If to the Shareholder, to the address set forth below the
Shareholder's signature at the end of this Agreement,
8
with a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Reinhart, Boerner, Van Deuren,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, s.c.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or, in either case, such other address as the person to whom notice is to be
given may have previously furnished to the others in the manner set forth above.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date hereof.
WOOLWORTH CORPORATION
By: _________________________________
Name:
Title:
--------------------------------------
Name of Shareholder: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
9