EXHIBIT 10.112
EXECUTION COPY
SUPPORT AGREEMENT
This SUPPORT AGREEMENT (this "Agreement") is entered into as of
October 27, 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 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇'▇ 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
2
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.
3
(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
4
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
transaction involving the Company or any of its Subsidiaries, which
amendment or other proposal or
5
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, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, 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.
6
(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
$9.60 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 $9.60 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, ▇▇▇▇▇▇▇
7
& ▇▇▇▇ LLP, Four Times Square, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇. 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. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 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
8
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) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 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
9
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 "▇▇▇▇▇▇▇▇▇▇," "Goody's," or any
derivative thereof or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇'▇ 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
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
c/o Prentice Capital Management, LP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and
12
(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 any listing agreement with the Nasdaq or any national securities
exchange to which the
13
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:
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
GF Acquisition Corp.
By:
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
PRINCIPAL SHAREHOLDERS:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
THE ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ SUBCHAPTER
S TRUST, DATED JANUARY 23, 1991
By:
------------------------------------
▇▇▇ ▇▇▇▇▇
Its Trustee
THE ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ SUBCHAPTER S
TRUST, DATED JANUARY 23, 1991
By:
------------------------------------
▇▇▇ ▇▇▇▇▇
Its Trustee
THE ▇▇▇▇▇▇▇▇▇▇ FOUNDATION
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Its President
16
SCHEDULE A
Number of Shares of
Outstanding Common Number of Options
Name and Address of Shares Owned by Described in Section
Principal Shareholder Principal Shareholder 3(b)(1) Number of Other Options
--------------------- --------------------- -------------------- -----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 12,098,330 750,000 75,000
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ & 22,500 0 0
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ 0 15,000 9,000
The ▇▇▇▇▇▇ ▇▇▇▇▇▇ 317,270 0
▇▇▇▇▇▇▇▇▇▇ Subchapter
S Trust,
dated January 23, 1991
The ▇▇▇▇▇▇▇ ▇▇▇▇ 317,270 0 0
▇▇▇▇▇▇▇▇▇▇ Subchapter
S Trust,
dated January 23, 1991
The ▇▇▇▇▇▇▇▇▇▇ Foundation 1,000,000 0 0
17
SCHEDULE B
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
18