ACQUISITION AGREEMENT AND AGREEMENT AND PLAN OF MERGER

Asset Purchase Agreement

You are currently viewing:

This Asset Purchase Agreement involves

GOODY'S FAMILY CLOTHING, INC., | GF GOODS INC. | GF ACQUISITION CORP.

. RealDealDocs™ contains millions of easily searchable legal documents and clauses from top law firms. Search for free - click here.

Title: ACQUISITION AGREEMENT AND AGREEMENT AND PLAN OF MERGER
Governing Law: Tennessee Date: 10/28/2005
Industry: Retail (Apparel) Law Firm: Skadden, Arps, Slate, Meagher & Flom LLP; Dechert LLP Sector: Services

ACQUISITION AGREEMENT AND

AGREEMENT AND PLAN OF MERGER

, Parties: goody's family clothing inc. , gf goods inc. , gf acquisition corp.

<PAGE>

EXHIBIT 2.2

EXECUTION COPY

ACQUISITION AGREEMENT AND

AGREEMENT AND PLAN OF MERGER

DATED AS OF OCTOBER 27, 2005

BY AND AMONG

GOODY'S FAMILY CLOTHING, INC.,

GF GOODS INC.

AND

GF ACQUISITION CORP.

<PAGE>

TABLE OF CONTENTS

<TABLE>

PAGE

----

<S> <C>

EXHIBITS 1

INDEX OF DEFINED TERMS................................................... 1

LIST OF SCHEDULES........................................................ 1

ACQUISITION AGREEMENT AND AGREEMENT AND PLAN OF MERGER................... 1

RECITALS ................................................................ 1

ARTICLE 1 THE OFFER...................................................... 2

1.01 The Offer........................................................ 2

1.02 Company Actions.................................................. 4

1.03 Directors........................................................ 5

ARTICLE 2 THE MERGER..................................................... 7

2.01 The Merger....................................................... 7

2.02 Effective Time................................................... 7

2.03 Effects of the Merger............................................ 8

2.04 Charter and Bylaws of the Surviving Corporation.................. 8

2.05 Directors of the Surviving Corporation........................... 8

2.06 Officers of the Surviving Corporation............................ 8

2.07 Closing.......................................................... 8

2.08 Additional Actions............................................... 8

ARTICLE 3 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE COMPANY AND

ACQUISITION CORP...................................................... 9

3.01 Effect on Shares of Capital Stock................................ 9

3.02 Options; Stock Plans............................................. 10

3.03 Payment for Common Shares and Options in the Merger.............. 11

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 13

4.01 Organization and Qualification................................... 14

4.02 Charter Documents and Bylaws..................................... 14

4.03 Capitalization................................................... 14

4.04 Authority Relative to this Agreement............................. 15

4.05 Company Subsidiaries............................................. 16

4.06 No Violation; Required Filings and Consents...................... 16

4.07 SEC Reports and Financial Statements............................. 17

4.08 Compliance with Applicable Laws.................................. 19

4.09 Absence of Certain Changes or Events............................. 20

4.10 Change of Control................................................ 21

</TABLE>

<PAGE>

<TABLE>

<S> <C>

4.11 Litigation....................................................... 21

4.12 Information in Offer Documents and Proxy Statement............... 22

4.13 Benefit Plans.................................................... 22

4.14 Taxes............................................................ 25

4.15 Intellectual Property............................................ 27

4.16 Licenses and Permits............................................. 28

4.17 Material Contracts............................................... 29

4.18 Environmental Laws............................................... 30

4.19 Opinion of Financial Advisor..................................... 31

4.20 Brokers.......................................................... 31

4.21 Special Committee and Company Board Recommendations.............. 31

4.22 Required Shareholder Vote........................................ 32

4.23 Related Party Transactions....................................... 32

4.24 Assets and Properties............................................ 32

4.25 Labor and Employment Matters..................................... 33

4.26 Insurance........................................................ 35

4.27 Company Expenses................................................. 35

4.28 State Takeover Statutes.......................................... 35

4.29 Suppliers........................................................ 35

4.30 Termination of Existing Agreements............................... 36

4.31 No Other Representations or Warranties........................... 36

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT....................... 36

AND ACQUISITION CORP..................................................... 36

5.01 Organization and Qualification................................... 37

5.02 Charter Documents and Bylaws..................................... 37

5.03 Authority Relative to this Agreement............................. 37

5.04 No Violation; Required Filings and Consents...................... 38

5.05 Litigation....................................................... 38

5.06 Brokers.......................................................... 38

5.07 Information to be Supplied....................................... 38

5.08 Financing........................................................ 39

5.09 Holding Corp. and Acquisition Corp............................... 39

ARTICLE 6 COVENANTS...................................................... 39

6.01 Interim Operations............................................... 39

6.02 Shareholders Meeting............................................. 44

6.03 Filings and Consents............................................. 45

6.04 Access to Information............................................ 46

6.05 Notification of Certain Matters.................................. 46

6.06 Public Announcements............................................. 47

6.07 Further Assurances; Reasonable Best Efforts...................... 47

6.08 No Solicitation.................................................. 47

6.09 SEC Reports...................................................... 50

6.10 Delisting........................................................ 50

6.11 Financing........................................................ 50

</TABLE>

<PAGE>

<TABLE>

<S> <C>

6.12 Shareholder Litigation........................................... 51

6.13 Conveyance Taxes................................................. 51

6.14 Special Meeting.................................................. 52

6.15 State Takeover Laws.............................................. 52

6.16 Stock Purchase Plans............................................. 52

6.17 Certain Deliveries Prior to Offer Payment Date................... 52

6.18 Employee Benefits................................................ 53

6.19 Directors' and Officers' Indemnification and Insurance........... 54

ARTICLE 7 CONDITIONS TO CONSUMMATION OF THE MERGER....................... 56

7.01 Conditions to the Obligations of Each Party...................... 56

ARTICLE 8 TERMINATION.................................................... 56

8.01 Termination by Mutual Consent.................................... 56

8.02 Termination by Acquisition Corp., Parent or the Company.......... 56

8.03 Termination by Acquisition Corp. and Parent...................... 57

8.04 Termination by the Company....................................... 58

8.05 Effect of Termination............................................ 59

ARTICLE 9 MISCELLANEOUS.................................................. 59

9.01 Payment of Fees and Expenses..................................... 59

9.02 No Survival of Representations, Warranties, Covenants and

Agreements....................................................... 61

9.03 Modification or Amendment........................................ 62

9.04 Entire Agreement; Assignment; Termination of Confidentiality

Agreement........................................................ 62

9.05 Validity......................................................... 62

9.06 Notices.......................................................... 62

9.07 Governing Law.................................................... 63

9.08 Descriptive Headings............................................. 63

9.09 Counterparts..................................................... 63

9.10 Certain Definitions.............................................. 63

9.11 Specific Performance............................................. 65

9.12 Extension; Waiver................................................ 65

9.13 Third-Party Beneficiaries........................................ 65

9.14 Company Disclosure Schedule...................................... 65

9.15 Severability..................................................... 65

9.16 Submission to Jurisdiction; Waiver of Jury Trial................. 66

ANNEX A.................................................................. 68

CONDITIONS TO THE TENDER OFFER........................................... 68

</TABLE>

iii

<PAGE>

EXHIBITS

Exhibit A Articles of Merger

Exhibit B Charter of Surviving Corporation

Exhibit C Bylaws of Surviving Corporation

Exhibit D Form of Acknowledgement of Certain Optionholders

Exhibit E Press Release

<PAGE>

INDEX OF DEFINED TERMS

<TABLE>

TERM LOCATION OF DEFINITION

---- ----------------------

<S> <C>

1991 Plan 3.02(a)

Accountants 6.11(a)

Acquisition Corp Introduction

Acquisition Corp. Common Stock 3.01(c)

Acquisition Corp. Disclosure Schedule 5.04(a)

Acquisition Corp. Material Adverse Effect 5.01

Acquisition Corp. Representatives 6.04

Acquisition Corp. Stock Option Agreement Recitals

Acquisition Proposal 6.08(f)

affiliate 9.10(a)

Agent 3.03(a)

Agreement Introduction

Articles of Merger 2.02

Benefit Plans 4.13(b)

Business Day 9.10(b)

Certain Principal Shareholders Recitals

Certificates 3.03(b)

Charter 9.10(c)

Class B Common Stock 4.03(a)

Closing 2.07

Closing Date 2.07

COBRA 4.13(a)

Code 3.03(h)

Commencement Delay Election 8.03

Commitment Letter 5.08

Common Shares Recitals

Company Introduction

Company Board Recitals

Company Break Up Fee 9.01(b)

Company Disclosure Documents 4.12(a)

Company Disclosure Schedule 4.01

Company Extension Election 1.01

Company Material Adverse Effect 4.01

Company Permits 4.16

Company Representatives 6.04

Company Tender Recommendation 1.02(b)

Confidentiality Agreement 6.04

Contract 9.10

Costs 6.19(a)

Director Plan 3.02(a)

Effective Time 2.02

Employees 4.13(a)

</TABLE>

<PAGE>

<TABLE>

TERM LOCATION OF DEFINITION

---- ----------------------

<S> <C>

Environmental Laws 4.18(e)

ERISA 4.13(b)

Exchange Act 1.01(a)

Expenses 9.01(a)

Financial Advisor 4.19

Financing 6.11(a)

Force Majeure Event 8.03

Force Majeure Period 8.03

Four Day Period 6.08(c)

Fully-Diluted Basis 9.10(e)

Future SEC Reports 4.07(a)

GAAP 4.07(b)

Governmental Authority 4.06(b)

GUST 4.13(c)

Hazardous Substances 4.18(e)

HSR Act 4.06(b)

Indebtedness 4.07(b)

Indemnified Directors and Officers 6.19(a)

Independent Directors 1.03(c)

Intellectual Property 4.15(b)

Interim Financial Statements 4.07(b)

knowledge 9.10(f)

Law 4.06(a))

Laws 4.06(a)

Leased Real Property 9.10(g)

Leases 9.10(h)

Liabilities 4.07(d)

Lien 4.06(a)

Liens 4.06(a)

Material Contracts 4.17(a)

Maximum Amount 6.19(c)

Merger 2.01

Merger Consideration 3.01(a)

Minimum Condition 1.01(a)

-------

Multiemployer Pension Plans 4.13(b)

Nasdaq 1.03(c)

Offer 1.01(a)

-------

Offer Documents 1.01(b)

Offer Payment Date 1.01(a)

-------

Offer Price 1.01(a)

-------

Offer to Purchase 1.01(a)

-------

Option 3.02(a)

Option Consideration 3.02(b)

Order 7.01(b)

Other Offer Closing Conditions Annex A

</TABLE>

<PAGE>

<TABLE>

TERM LOCATION OF DEFINITION

---- ----------------------

<S> <C>

Owned Real Property 9.10(i)

Parent Introduction

Parent Disclosure Documents 5.07(b)

Payment Fund 3.03(a)

Pension Plans 4.13(b)

Permits 4.16

Permitted Liens 4.24(d)

Person 9.10(j)

Preferred Stock 4.03(a)

Press Release 6.06

Proxy Statement 4.12(a)

Release 4.18(e)

Schedule TO 1.01(b))

SEC 1.01(b)

SEC Reports 4.07(a)

Securities Act 4.06(b)

Shareholder Approval 4.22

Shareholders Meeting 6.02

Special Committee Recitals

Stock Plan 3.02(a)

Sub Board 1.03(a)

Subsidiaries 9.10(k)

Subsidiary 9.10(k)

Summary of Material Terms 4.24(c)

Sun Merger Agreement 4.30

Superior Proposal 6.08(g)

Support Agreement Recitals

Surviving Corporation 2.01

Surviving Corporation Common Stock 3.01(c)

Tax 4.14(i))

Tax Return 4.14(i)

Taxes 4.14(i)

TBCA Recitals

Tenn. Acts Recitals

Terminating Acquisition Corp. Breach 8.04(a)

Terminating Company Breach 8.03(a)

Termination Date 8.02(b)

Transaction Agreements Recitals

Transactions 4.01

WARN Act 4.25(c)

</TABLE>

<PAGE>

LIST OF SCHEDULES

<TABLE>

SCHEDULE CONTENT

-------- -------

<S> <C>

4.01 Organization and Qualification

4.03 Capitalization

4.05 Company Subsidiaries / Investments in Marketable

Securities

4.06 No Violation; Filings and Consents

4.07 SEC Reports and Financial Statements

4.08 Compliance with Applicable Law

4.09 Absence of Certain Changes or Events

4.10 Change of Control

4.11 Litigation

4.12 Information in Offer Documents and Proxy Statement

4.13 Benefit Plans

4.14 Tax

4.15 Intellectual Property

4.16 Licenses and Permits

4.17 Material Contracts

4.18 Environmental Laws

4.23 Related Party Transactions

4.24 Assets and Properties

4.24(b) Owned Real Property

4.24(c) Leased Real Property

4.25 Labor and Employment Matters

4.26 Insurance

4.27 Company Expenses

4.29 Suppliers

5.04 Filings and Consents for Acquisition Corp. and Parent

6.01 Interim Operations

6.19 Employee Benefits

6.19 Directors' and Officers' Indemnification and Insurance

</TABLE>

<PAGE>

ACQUISITION AGREEMENT AND

AGREEMENT AND PLAN OF MERGER

THIS ACQUISITION AGREEMENT AND AGREEMENT AND PLAN OF MERGER (this

"Agreement"), dated as of October 27, 2005, is entered into by and among Goody's

Family Clothing, Inc., a Tennessee corporation (the "Company"), GF Acquisition

Corp., a Tennessee corporation ("Acquisition Corp."), and GF Goods Inc., a

Delaware corporation ("Parent").

RECITALS

WHEREAS, a special committee consisting solely of disinterested

directors (the "Special Committee") of the board of directors of the Company

(the "Company Board") has recommended to the Company Board that it approve of

the transactions contemplated by this Agreement;

WHEREAS, the Company Board, and the board of directors of each of

Parent and Acquisition Corp. have approved, and deem it advisable and in the

best interests of their respective shareholders to consummate, the acquisition

of the Company by Parent upon the terms and subject to the conditions set forth

herein;

WHEREAS, in furtherance thereof, it is proposed that Acquisition Corp.

make the Offer (as defined in Section 1.01(a)) to acquire all of the shares of

the Company's common stock, no par value per share (the "Common Shares"), issued

and outstanding for $9.60 per Common Share in cash, on the terms and subject to

the conditions set forth herein;

WHEREAS, subject to any additional conditions set forth herein, also

in furtherance thereof, if Acquisition Corp. purchases pursuant to the Offer at

least fifty-one percent (51%) of the Common Shares determined on a Fully-Diluted

Basis, it is proposed that the parties hereto consummate the merger of

Acquisition Corp. into the Company on the terms set forth herein;

WHEREAS, also in furtherance of such acquisition, the Special

Committee, the Company Board and the board of directors of each of Parent and

Acquisition Corp. have approved this Agreement, the Offer and the Merger

following the Offer in accordance with the Tennessee Business Corporation Act

(the "TBCA") and the Tennessee Investor Protection Act (together with the TBCA,

the "Tenn. Acts") upon the terms and subject to the conditions set forth herein;

WHEREAS, the Special Committee and the Company Board have each

determined that the consideration to be paid for each Common Share in the Offer

and the Merger is fair to the holders of the Common Shares and has resolved to

recommend that the holders of the Common Shares accept the Offer and approve

this Agreement, the Merger and the other transactions contemplated hereby, in

each case upon the terms and subject to the conditions set forth herein;

<PAGE>

WHEREAS, Parent, Acquisition Corp. and the Company desire to make

certain representations, warranties, covenants and agreements in connection with

the Offer and the Merger;

WHEREAS, as a condition and inducement to Parent and Acquisition Corp.

entering into this Agreement and incurring the obligations set forth herein, the

Company, concurrently herewith, is entering into a Stock Option Agreement (the

"Acquisition Corp. Stock Option Agreement"), dated as of the date hereof, with

Parent and Acquisition Corp. pursuant to which the Company is granting to

Acquisition Corp. an option to purchase Common Shares upon the terms and subject

to the conditions as set forth in the Acquisition Corp. Stock Option Agreement;

and

WHEREAS, as a condition and inducement to Parent and Acquisition Corp.

entering into this Agreement and incurring the obligations set forth herein,

certain shareholders of the Company ("Certain Principal Shareholders") have

entered into an agreement with Parent and Acquisition Corp. (the "Support

Agreement" and, together with this Agreement and the Acquisition Corp. Stock

Option Agreement, the "Transaction Agreements") pursuant to which Certain

Principal Shareholders have agreed to take specified actions in furtherance of

the Offer and the Merger.

NOW, THEREFORE, in consideration of the foregoing and the respective

representations, warranties, covenants and agreements set forth herein, the

parties hereto agree as follows:

ARTICLE 1

THE OFFER

1.01 The Offer.

(a) Subject only to any Laws or Orders preventing commencement of the

Offer, provided that this Agreement shall not have been terminated in accordance

with Article 8 hereof and that the Company complies with its covenants set forth

in this Agreement, then Acquisition Corp. shall, as promptly as practicable, but

not later than the tenth (10th) Business Day after the date hereof (unless due

to a Force Majeure Event), commence (within the meaning of Rule 14d-2 under the

Securities Exchange Act of 1934, as amended (the "Exchange Act")) an offer (the

"Offer") to purchase all of the Common Shares at a price of $9.60 per share in

cash (such price, or such higher price per Common Share as may be paid in the

Offer, the "Offer Price"), subject to the condition that the holders of Common

Shares have validly tendered and not withdrawn prior to the expiration of the

Offer a number of Common Shares which, together with the Common Shares

beneficially owned by Parent or Acquisition Corp., represents at least 51% of

the Common Shares determined on a Fully-Diluted Basis (the "Minimum Condition")

and subject to the other conditions set forth in Annex A hereto. Subject to the

prior satisfaction of the Minimum Condition and the prior satisfaction (or

waiver in writing by Acquisition Corp.) of the other conditions of the Offer set

forth in Annex A, Acquisition Corp. shall use reasonable best efforts to

consummate the Offer in accordance with its terms and to accept for payment and

<PAGE>

pay for all of the Common Shares that are tendered pursuant to the Offer as soon

as it is legally permitted to do so under applicable Law. The date on which all

of the Common Shares validly tendered pursuant to the Offer and not withdrawn

have been accepted for payment and paid for is referred to herein as the "Offer

Payment Date" The obligations of Acquisition Corp. to commence the Offer and to

accept for payment and pay for the Common Shares validly tendered on or prior to

the expiration of the Offer and not withdrawn shall be subject only to the

Minimum Condition and the other conditions set forth in Annex A hereto. The

Offer shall be made by means of an offer to purchase (the "Offer to Purchase")

containing the terms set forth in this Agreement, the Minimum Condition and the

other conditions set forth in Annex A hereto. The Offer shall remain open until

5:00 p.m., New York City time, on the day immediately following the twentieth

Business Day of the Offer (as such term is defined in Rule 14d-1(g)(3) under the

Exchange Act), unless Acquisition Corp. shall have extended the time for which

the Offer is open pursuant to this Section 1.01 or as may be required by Law.

Parent and Acquisition Corp. expressly reserve the right to modify the terms of

the Offer, except that, without the prior written consent of the Company,

neither Parent nor Acquisition Corp. shall decrease the Offer Price, decrease

the number of Common Shares sought, increase or decrease the required percentage

of, or waive, the Minimum Condition, change the form of or reduce the

consideration in the Offer or add to or amend any of the conditions of the Offer

set forth in Annex A hereto in any manner which would be adverse to the holders

of the Common Shares (other than with respect to insignificant changes or

amendments); provided, however, (i) if on the initially scheduled expiration

date of the Offer (as it may be extended) any of the conditions to the Offer

have not been satisfied or waived, Acquisition Corp. may, from time to time, in

its sole discretion, extend the Offer (provided that no such extension pursuant

to this sentence shall extend the Offer beyond the date of the termination of

this Agreement pursuant to Article 8), (ii) if on or before the initially

scheduled expiration date of the Offer (as it may be extended) any of the

conditions to the Offer have not been satisfied or waived, the Company shall

have the option to require Acquisition Corp. to extend the Offer for a period of

up to the number of Business Days equal to (X) ten minus (Y) the number of

Business Days of any Force Majeure Period and minus (Z) the number of Business

Days of any Commencement Delay Election, if the Company is not in material

breach of its covenants under this Agreement, the Company provides notice to

Parent and Acquisition Corp. of its election to extend the expiration date of

the Offer pursuant to clause (ii) of this Section 1.01 and the Company pays

certain Expenses of Parent and Acquisition Corp. pursuant to Section 9.01 (the

"Company Extension Election") and (iii) Acquisition Corp. may, in its sole

discretion, provide a subsequent offering period in accordance with Rule 14d-11

under the Exchange Act. In addition, the Offer Price may be increased, and, in

connection therewith, the Offer may be extended, to the extent required by

applicable federal securities laws, in each case without the consent of the

Company. Notwithstanding the foregoing, (A) Acquisition Corp. may, from time to

time in its sole discretion, extend the Offer for a period not to exceed ten

Business Days for any reason and (B) without limiting Acquisition Corp.'s rights

under clause (A), if, as of immediately prior to the expiration date of the

Offer (as it may be extended), the Common Shares tendered and not withdrawn

pursuant to the Offer constitute less than 90% of the Common Shares determined

on a Fully-Diluted Basis, Acquisition Corp. may, from time to time in its sole

discretion, extend the Offer for a period not to exceed ten Business Days in the

aggregate, notwithstanding that all conditions to the Offer are satisfied as of

such expiration date of the Offer; provided, however, that such extensions

pursuant to clauses (A) and (B) shall not be more than twenty Business Days in

the aggregate.

<PAGE>

(b) On the date the Offer is commenced, Parent and Acquisition Corp.

shall file with the United States Securities and Exchange Commission (the "SEC")

a Tender Offer Statement on Schedule TO with respect to the Offer (together with

all amendments and supplements thereto and including the exhibits thereto, the

"Schedule TO"). The Schedule TO will include, as exhibits, the Offer to Purchase

and a form of letter of transmittal and summary advertisement (collectively,

together with any amendments and supplements thereto, the "Offer Documents").

Parent and Acquisition Corp. further agree to take all steps necessary to cause

the Offer Documents to be filed with the SEC and to be disseminated to holders

of Common Shares, in each case as and to the extent required by applicable

federal securities laws. Each of Parent and Acquisition Corp., on the one hand,

and the Company, on the other hand, agrees promptly to correct any information

provided by it for use in the Offer Documents if and to the extent that it shall

have become false or misleading in any material respect and Acquisition Corp.

further agrees to take all steps necessary to cause the Offer Documents as so

corrected to be filed with the SEC and to be disseminated to holders of Common

Shares, in each case as and to the extent required by applicable federal

securities laws; provided that the costs and expenses of filing and

disseminating the corrected Offer Documents shall be borne by the Company if any

such corrections are required as a result of information provided by the Company

becoming false and misleading in any material respect. The Company and its

counsel shall be given a reasonable opportunity to review and comment on the

Schedule TO before it is filed with the SEC. In addition, Parent and Acquisition

Corp. agree to provide the Company and its counsel in writing with any written

comments Parent, Acquisition Corp. or their counsel may receive from time to

time from the SEC or its staff with respect to the Offer Documents promptly

after the receipt of such comments, and shall provide the Company and its

counsel with a reasonable opportunity to comment on the proposed responses

thereto.

the Company to act as information agent in connection with, and through the

consummation of, the Offer.

1.02 Company Actions.

(a) The Company hereby approves and consents to the Offer, the Merger

and the other Transactions and represents that (i) the Company Board has, at a

meeting duly called and held, unanimously (A) approved each of the Transaction

Agreements and the Transactions, including the Offer and the Merger, (B)

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, (C) determined that each of the Transaction Agreements and the

Transactions, including the Offer and the Merger, are fair to and in the best

interests of the shareholders of the Company, (D) determined that the

consideration to be paid for each Common Share in the Offer and the Merger is

fair to the shareholders of the Company, and (E) declared that each of the

Transaction Agreements is advisable, and (ii) Rothschild Inc. has delivered to

the Company Board its written opinion that the consideration to be received by

the Company's shareholders other than Robert M. Goodfriend and his immediate

family and family trusts in respect of each Common Share pursuant to the Offer

and the Merger is fair to such shareholders from a financial point of view.

<PAGE>

(b) Concurrently with the commencement of the Offer, the Company shall

file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9

(together with all amendments and supplements thereto and including the exhibits

thereto, the "Schedule 14D-9") which shall, subject to the fiduciary duties of

the Company's directors under applicable Law and to the provisions of this

Agreement, contain the recommendation referenced in clause (v) of Section 4.21

hereof (the "Company Tender Recommendation"). The Company hereby consents to the

inclusion of the Company Tender Recommendation in the Offer Documents. The

Company further agrees to take all steps necessary to cause the Schedule 14D-9

to be filed with the SEC and to be disseminated to all holders of Common Shares,

in each case as and to the extent required by applicable federal securities

laws. Each of the Company, on the one hand, and Parent and Acquisition Corp., on

the other hand, agrees promptly to correct any information provided by it for

use in the Schedule 14D-9 if and to the extent that it shall have become false

and misleading in any material respect and the Company further agrees to take

all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with

the SEC and to be disseminated to all holders of the Common Shares, in each case

as required by applicable federal securities laws. Parent, Acquisition Corp. and

their counsel shall be given a reasonable opportunity to review and comment on

the Schedule 14D-9 and any amendment thereto before it is filed with the SEC. In

addition, the Company agrees to provide Parent, Acquisition Corp. and their

counsel in writing with any comments the Company or its counsel may receive from

time to time from the SEC or its staff with respect to the Schedule 14D-9

promptly after the receipt of such comments, and shall provide Parent and

Acquisition Corp. with a reasonable opportunity to comment on the proposed

responses thereto.

any event within five Business Days) after the date hereof, furnish or cause to

be furnished to Acquisition Corp. mailing labels, security position listings and

any available listing or computer file containing the names and addresses of the

record holders of the Common Shares as of the most recent practicable date prior

to delivery of such information and all updates to such information, and shall

furnish Acquisition Corp. with such information and assistance as Acquisition

Corp. or any of its agents may reasonably request in communicating the Offer to

the record and beneficial holders of the Common Shares. Subject to applicable

law or legal process and except for such steps as are necessary to disseminate

the Offer Documents, Parent and Acquisition Corp. shall hold in confidence the

information contained in any of such labels and lists and the additional

information referred to in the preceding sentence, shall use such information

only in connection with the Offer, the Merger and the other Transactions, and,

if this Agreement is terminated, shall upon the request of the Company deliver

or cause to be delivered to the Company, or cause to be destroyed, all copies of

such information then in its possession or the possession of its agents or

representatives.

1.03 Directors.

(a) Promptly upon the purchase of and payment for any Common Shares by

Parent, Acquisition Corp. and/or any of their affiliates pursuant to the Offer

and at all times thereafter, Parent shall be entitled to elect or designate such

number of directors, rounded up to the next whole number, on the Company Board

as is equal to the product of the total number of directors on such Company

Board (giving effect to the directors designated or elected by Parent pursuant

to this sentence) multiplied by the percentage that the aggregate number of

Common

<PAGE>

Shares beneficially owned by Parent, Acquisition Corp. and/or any of their

respective affiliates bears to the total number of Common Shares then issued and

outstanding. The Company shall, upon the request of Parent, use its best efforts

to promptly (but in any event within two Business Days after receipt of such

request) take such actions, including filling vacancies or newly created

directorships on the Company Board, increasing the size of the Company Board,

including by amending the bylaws of the Company if necessary to so increase the

size of the Company Board, and/or securing the resignations of such number of

its incumbent directors, as is necessary to enable Parent's designees to be so

elected or designated to the Company Board, and shall cause Parent's designees

to be so elected or appointed at such time. The Company shall, upon the request

of Parent, also cause Persons elected or designated by Parent to constitute the

same percentage (rounded up to the next whole number) as is on the Company Board

of (i) each committee of the Company Board, (ii) each board of directors (or

similar body) of each Subsidiary (as defined in Section 3.01 hereof) of the

Company (each a "Sub Board") and (iii) each committee (or similar body) of each

Sub Board, in each case only to the extent permitted by applicable Law and the

rules of any stock exchange or quotation system on which the Common Shares are

listed. Notwithstanding the foregoing, until the Effective Time (as defined in

Section 2.02 hereof), neither Parent nor Acquisition Corp. shall remove (other

than for cause) any of the Designated Company Directors (as defined in Section

1.03(b) below) or request that any of the Designated Company Directors resign

from the Company Board; provided that, subsequent to the purchase of and payment

for Common Shares pursuant to the Offer, Parent shall always be entitled to have

its designees represent a majority of the entire Company Board. The Company's

obligations under this Section 1.03(a) shall be subject to Section 14(f) of the

Exchange Act and Rule 14f-1 promulgated thereunder. The Company shall promptly

take all actions required pursuant to such Section 14(f) and Rule 14f-1 in order

to fulfill its obligations under this Section 1.03(a), including mailing to

shareholders the information required by such Section 14(f) and Rule 14f-1 as is

necessary to enable Parent's designees to be elected or appointed to the Company

Board. Parent or Acquisition Corp. will supply the Company any information with

respect to either of them and their nominees, officers, directors and affiliates

required by such Section 14(f) and Rule 14f-1. The provisions of this Section

1.03(a) are in addition to and shall not limit any rights which Acquisition

Corp., Parent or any of their affiliates may have as a holder or Beneficial

Owner of Common Shares as a matter of Law with respect to the election of

directors or otherwise.

(b) Prior to the purchase of and payment for any Common Shares by

Parent, Acquisition Corp. and/or any of their affiliates pursuant to the Offer,

(i) to effect the transactions contemplated by Section 1.03(a) hereof, the

Company Board shall approve, and shall not have withdrawn or amended,

resolutions (x) to increase the number of members of the Company Board from five

to up to ten directors (as determined by Parent in its sole discretion), to be

effective at such time as Parent, Acquisition Corp. and/or any of their

affiliates purchases any Common Shares, and (y) to elect Persons designated by

Parent prior to consummation of the transactions contemplated by Section 1.03(a)

to fill the vacancies created by such increase in the number of directors,

effective upon such increase and (ii) each of the directors of the Company prior

to the consummation of the transactions contemplated by Section 1.03(a) hereof,

other than three directors of the Company determined by Acquisition Corp. in its

sole and absolute discretion (the "Designated Company Directors"), shall deliver

to the Company a letter stating that such director has irrevocably resigned from

the Company Board, and from each committee thereof, effective at such time as

Parent, Acquisition Corp. and/or any of their affiliates

<PAGE>

purchases Common Shares to the extent such resignations are necessary to permit

all of Parent's designees to which Parent is entitled pursuant to Section

1.03(a) hereof to be elected or designated to the Company Board.

the Company Board, until the Effective Time, the Company Board shall have at

least such number of directors as may be required by the rules of the Nasdaq

National Market, Inc. ("Nasdaq") or the federal securities laws and the SEC

rules and regulations thereunder who are considered independent directors within

the meaning of the rules of Nasdaq ("Independent Directors"), provided that, in

such event, if the number of Independent Directors shall be reduced below the

number of directors as may be required by such rules and regulations and the

federal securities laws and the SEC rules and regulation thereunder for any

reason whatsoever, the remaining Independent Director(s) shall be entitled to

designate persons to fill such vacancies who shall be deemed to be Independent

Directors for purposes of this Agreement or, if no other Independent Director

then remains, the other directors shall designate such number of directors as

may be required by the rules of Nasdaq and the federal securities laws and the

SEC rules and regulation thereunder, to fill such vacancies who shall not be

shareholders or affiliates of Parent or Acquisition Corp., and such Persons

shall be deemed to be Independent Directors for purposes of this Agreement.

(d) From and after the time, if any, that Parent's designees

constitute a majority of the Company Board, any amendment of this Agreement, any

termination of this Agreement by the Company, any extension of time for

performance of any of the obligations of Parent or Acquisition Corp. hereunder,

any waiver of any condition or any of the Company's rights hereunder or other

action by the Company hereunder that adversely affects the holders of Common

Shares may be effected only by the action of a majority of the Independent

Directors, including, for these purposes, the vote of a majority of the

Designated Company Directors, which action shall be deemed to constitute the

action of the full Company Board; provided that, if there shall be no Designated

Company Directors, such actions may be effected by majority vote of the entire

Company Board.

ARTICLE 2

THE MERGER

2.01 The Merger. At the Effective Time (as defined in Section 2.02),

subject to the terms and conditions of this Agreement and in accordance with the

provisions of the Tenn. Acts, Acquisition Corp. shall be merged with and into

the Company (the "Merger"). Following the Merger, the separate corporate

existence of Acquisition Corp. shall cease, and the Company shall continue as

the surviving corporation (sometimes hereinafter referred to as the "Surviving

Corporation") and shall continue to be governed by the laws of the State of

Tennessee.

2.02 Effective Time. As soon as practicable following the Closing (as

defined in Section 2.07), and provided that this Agreement has not been

terminated or abandoned pursuant to Article 8 hereof, the Company and

Acquisition Corp. will cause articles of Acquisition Corp. substantially in the

form attached hereto as Exhibit A (the "Articles of Merger") to be duly

executed, acknowledged and filed, in the manner required by the Tenn. Acts, with

the Secretary

<PAGE>

of State of the State of Tennessee, and the parties shall take such other and

further actions as may be required by law to make the Merger effective. The date

and time the Merger becomes effective in accordance with applicable law is

referred to herein as the "Effective Time."

2.03 Effects of the Merger. The Merger shall have the effects set forth

herein, in the Articles of Merger and in the Tenn. Acts. Without limiting the

generality of the foregoing, and subject thereto, at the Effective Time, all the

properties, rights, privileges, powers and franchises of the Company and

Acquisition Corp. shall vest in the Surviving Corporation, and all debts,

liabilities and duties of the Company and Acquisition Corp. shall become the

debts, liabilities and duties of the Surviving Corporation.

2.04 Charter and Bylaws of the Surviving Corporation.

(a) The Charter of the Company as in effect immediately prior to the

Effective Time shall be amended in its entirety substantially as provided in

Exhibit B attached hereto, and, as so amended, shall be the Charter of the

Surviving Corporation until duly amended.

(b) The Bylaws of the Company as in effect immediately prior to the

Effective Time shall be amended in its entirety substantially as provided in

Exhibit C attached hereto, and, as so amended, shall be the Bylaws of the

Surviving Corporation until duly amended.

2.05 Directors of the Surviving Corporation. The directors of Acquisition

Corp. immediately prior to the Effective Time shall be the initial directors of

the Surviving Corporation and shall hold office until their respective

successors are duly elected and qualified, or their earlier death, resignation

or removal in accordance with applicable law and the Surviving Corporation's

Charter and Bylaws.

2.06 Officers of the Surviving Corporation. The officers designated by

Acquisition Corp. immediately prior to the Effective Time shall be the initial

officers of the Surviving Corporation and shall hold office until their

respective successors are duly elected and qualified, or their earlier death,

resignation or removal.

2.07 Closing. Subject to the conditions contained in this Agreement, the

closing of the Merger (the "Closing") shall take place (i) at the offices of

Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, NY 10036,

as promptly as practicable but in no event later than the third Business Day

following the satisfaction (or waiver if permissible) of the conditions set

forth in Article 7 that by their terms are not to be satisfied at the Closing or

(ii) at such other place and time and/or on such other date as the Company and

Acquisition Corp. may agree in writing. The date on which the Closing occurs is

hereinafter referred to as the "Closing Date."

2.08 Additional Actions. If, at any time after the Effective Time, the

Surviving Corporation shall consider or be advised that any deeds, bills of

sale, assignments or assurances in law or any other acts are necessary or

desirable to vest, perfect or confirm, of record or otherwise, in the Surviving

Corporation its right, title or interest in, to or under any of the rights,

properties or assets of the Company or Acquisition Corp., the Company and its

officers and directors shall be deemed to have granted to the Surviving

Corporation an irrevocable power of attorney to execute and deliver all such

deeds, assignments and assurances in law and to take all

<PAGE>

acts necessary, proper or desirable to vest, perfect or confirm title to and

possession of such rights, properties or assets in the Surviving Corporation,

and the officers and directors of the Surviving Corporation are authorized in

the name of the Company to take any and all such action.

ARTICLE 3

EFFECT OF THE MERGER ON THE CAPITAL STOCK

OF THE COMPANY AND ACQUISITION CORP.

3.01 Effect on Shares of Capital Stock.

(a) Common Shares of the Company. As of the Effective Time, by virtue

of the Merger and without any action on the part of the holder of any Common

Shares, the Company or Acquisition Corp., each Common Share that is issued and

outstanding immediately prior to the Effective Time (other than those Common

Shares to be canceled pursuant to Section 3.01(b) shall be canceled and

extinguished and converted into the right to receive the Offer Price (the

"Merger Consideration"), payable to the holder thereof, without interest or

dividends thereon, less any applicable withholding of taxes, in the manner

provided in Section 3.03. All such Common Shares, when so converted, shall no

longer be outstanding and shall automatically be canceled and each holder of a

certificate or certificates representing any such Common Shares shall cease to

have any rights with respect thereto, except the right to receive the

consideration specified in the preceding sentence.

(b) Cancellation of Certain Common Shares. As of the Effective Time,

by virtue of the Merger and without any action on the part of the holder of any

Common Shares, the Company or Acquisition Corp., each Common Share that is owned

by the Company or any wholly owned Subsidiary as treasury stock or otherwise or

owned by Acquisition Corp. or Parent or any of their respective Subsidiaries

immediately prior to the Effective Time shall automatically be canceled and

shall cease to exist, and no cash or other consideration shall be delivered or

deliverable in exchange therefor.

share of common stock, no par value per share, of Acquisition Corp.

("Acquisition Corp. Common Stock") issued and outstanding immediately prior to

the Effective Time shall, by virtue of the Merger and without any action on the

part of the holders of Acquisition Corp. Common Stock, the Company or

Acquisition Corp., be converted into three hundred thirty thousand (330,000)

validly issued, fully paid and non-assessable shares of common stock, no par

value per share, of the Surviving Corporation ("Surviving Corporation Common

Stock"). Each certificate that, immediately prior to the Effective Time,

represented issued and outstanding shares of Acquisition Corp. Common Stock

shall, from and after the Effective Time, automatically and without the

necessity of presenting the same for exchange, represent the shares of the

Surviving Corporation capital stock into which such shares have been converted

pursuant to the terms hereof; provided, however, that the record holder thereof

shall receive, upon surrender of any such certificate, a certificate

representing the shares of Surviving Corporation Common Stock into which the

shares of Acquisition Corp. Common Stock formerly represented thereby shall have

been converted pursuant to the terms hereof.

<PAGE>

3.02 Options; Stock Plans.

(a) For purposes of this Agreement, the term "Option" means each

outstanding unexercised option to purchase Common Shares, whether or not then

vested or fully exercisable, granted on or prior to the date hereof to any

current or former employee or director of the Company or any Subsidiary of the

Company or any other person, whether under any stock option plan or otherwise

(including, without limitation, under the 1991 Stock Incentive Plan (the "1991

Plan"), the 1993 Stock Option Plan, the Discounted Stock Option Plan for

Directors (the "Director Plan"), the 1997 Stock Option Plan and the 2005 Stock

Incentive Plan) (collectively, the "Stock Plans").

(b) Prior to the Offer Payment Date, (i) the Company shall clarify its

interpretations of the 1991 Plan and the Director Plan and take such other

actions reasonably requested by Parent or Acquisition Corp. to clarify that at

the Effective Time, all Options issued under the 1991 Plan and the Director Plan

shall be converted into the right to receive Option Consideration (as defined

below) and (ii) the Company shall take all actions necessary so that (A)

immediately prior to the Effective Time, each outstanding Option granted under

the Stock Plans, including each outstanding Option held by those holders of

record listed on the Options Schedule attached hereto, shall become immediately

vested and exercisable in full and (B) at the Effective Time, all Options shall

be canceled, in each case, in accordance with and pursuant to the terms of the

Stock Plans under which such Options were granted. In consideration of such

cancellation, each holder of an Option canceled in accordance with this Section

3.02(b) will be entitled to receive in settlement of such Option as promptly as

practicable following the Effective Time, but in no event later than 10 Business

Days after the Effective Time, a cash payment from the Payment Fund (as defined

in Section 3.03), subject to any required withholding of taxes, equal to the

product of (i) the total number of Common Shares otherwise issuable upon

exercise of such Option and (ii) the amount, if any, by which the Merger

Consideration per Common Share exceeds the applicable exercise price per Common

Share otherwise issuable upon exercise of such Option (the "Option

Consideration"); provided, however, that with respect to any person subject to

Section 16 of the Exchange Act, any such amount shall be paid as soon as

practicable after the first date payment can be made without liability to such

person under Section 16(b) of the Exchange Act.

commercially reasonable efforts to obtain from each holder of an Option issued

pursuant to the Stock Plans to execute a written acknowledgment of such holder

that effective as of the Effective Time, (i) the payment of the Option

Consideration, if any, will satisfy in full the Company's obligation to such

person pursuant to such Option and (ii) subject to the payment of the Option

Consideration, if any, all Options held by such holder shall, without any action

on the part of the Company or the holder, be deemed terminated, canceled, void

and of no further force and effect as between the Company and the holder and

neither party shall have any further rights or obligations with respect thereto.

Such written acknowledgment shall be substantially in the form attached hereto

as Exhibit D.

(d) Prior to the consummation of the acquisition of Common Shares by

Acquisition Corp. pursuant to the Offer, the Company shall take all actions

(including, if appropriate, amending the terms of the relevant Stock Plans or

amending or waiving relevant

<PAGE>

agreements providing for vesting conditions on Common Shares or Options

therefor) that are necessary to give effect to the transactions contemplated by

this Section 3.02.

(e) Except as otherwise provided herein or agreed to in writing by

Parent and the Company or as may be necessary to administer Options remaining

outstanding following the Effective Time, the Stock Plans shall terminate

effective as of the Effective Time and no participant in the Stock Plans shall

thereafter be granted any rights thereunder to acquire any equity securities of

the Company, the Surviving Corporation, Parent or any Subsidiary of any of the

foregoing.

(f) The Company covenants that prior to the Effective Time it will

take all actions necessary under that certain SEC no-action letter, dated

January 12, 1999, to Skadden, Arps, Slate, Meagher & Flom LLP, to provide that

the cancellation, cash-out and conversion of Options, pursuant to this Section

3.02, will qualify for exemption under Rule 16b-3(d) or (e), as applicable,

under the Exchange Act.

3.03 Payment for Common Shares and Options in the Merger.

(a) Prior to the Effective Time, Acquisition Corp. shall appoint a

commercial bank or trust company reasonably acceptable to the Company to act as

exchange and paying agent, registrar and transfer agent (the "Agent") for the

purpose of (i) exchanging certificates representing, immediately prior to the

Effective Time, Common Shares for the aggregate Merger Consideration and (ii)

making payment of the aggregate Option Consideration in exchange for the

cancellation of all then-outstanding Options. Subject to the Company's

obligations to deposit cash in the Payment Fund described in this Section

3.03(a), at or prior to the Effective Time, Acquisition Corp. shall deposit, or

Acquisition Corp. shall otherwise take all steps necessary to cause to be

deposited, in trust with the Agent for the benefit of the holders of Common

Shares and Options, as the case may be, cash in an aggregate amount equal to the

sum of (i) the product of (A) the number of Common Shares issued and outstanding

immediately prior to the Effective Time and entitled to receive the Merger

Consideration in accordance with Section 3.01(a) and (B) the Merger

Consideration and (ii) the amount necessary for the payment in full of the

Option Consideration (such aggregate amount described in (i) and (ii) being

hereinafter referred to as the "Payment Fund"). The Company shall, as of the

Offer Payment Date, have sufficient unrestricted domestic cash on hand to pay

any unpaid Expenses contemplated by Section 4.27 (including, without limitation,

those incurred or which may be incurred by the Financial Advisor and counsel to

the Company (including Expenses incurred in connection with any litigation with

respect to, arising from or related to the Transactions)) and at the request of

Acquisition Corp. or Parent, shall use commercially reasonable efforts to

deposit all other available domestic cash of the Company (taking into account

the reasonable short-term working capital needs of the Company) with the Agent

for deposit into the Payment Fund prior to the Effective Time. The Agent shall,

pursuant to instructions provided by Acquisition Corp., make the payments

provided for in Section 3.01 and Section 3.02 of this Agreement out of the

Payment Fund (it being understood that any and all interest earned on funds made

available to the Agent pursuant to this Agreement shall be turned over to the

party depositing such funds with the Agent). The Payment Fund shall not be used

for any other purpose except as provided in this Agreement.

<PAGE>

(b) Promptly after the Effective Time, but in no event later than 10

Business Days after the Effective Time, the Surviving Corporation shall cause

the Agent to mail to each record holder of certificates (the "Certificates")

that immediately prior to the Effective Time represented Common Shares (i) a

notice of the effectiveness of the Merger, (ii) a form letter of transmittal

which shall specify that delivery shall be effected, and risk of loss and title

to the Certificates shall pass, only upon proper delivery of the Certificates to

the Agent, and (iii) instructions for use in surrendering such Certificates and

receiving the Merger Consideration in respect thereof.

letter of transmittal duly executed and completed in accordance with the

instructions thereto, the holder of such Certificate shall be entitled to

receive, within 10 Business Days after such surrender, in exchange therefor, in

the case of Common Shares (other than Common Shares to be canceled pursuant to

Section 3.01(b)), cash in an amount equal to the product of (i) the number of

Common Shares formerly represented by such Certificate and (ii) the Merger

Consideration, which amounts shall be paid by Agent by check or wire transfer in

accordance with the instructions provided by such holder. No interest or

dividends will be paid or accrued on the consideration payable upon the

surrender of any Certificate. If the consideration provided for herein is to be

delivered in the name of a person other than the person in whose name the

Certificate surrendered is registered, it shall be a condition of such delivery

that the Certificate so surrendered shall be properly endorsed or otherwise in

proper form for transfer and that the person requesting such delivery shall pay

any transfer or other taxes required by reason of such delivery to a person

other than the registered holder of the Certificate, or that such person shall

establish to the satisfaction of the Surviving Corporation that such tax has

been paid or is not applicable. Until surrendered in accordance with the

provisions of this Section 3.03, each Certificate (other than Common Shares to

be canceled pursuant to Section 3.01(b)) shall represent, for all purposes, in

the case of Certificates representing Common Shares (other than Common Shares to

be canceled pursuant to Section 3.01(b)), only the right to receive an amount in

cash equal to the Merger Consideration multiplied by the number of Common Shares

formerly evidenced by such Certificate without any interest or dividends

thereon.

(d) The consideration issued upon the surrender of Certificates in

accordance with this Agreement shall be deemed to have been issued in full

satisfaction of all rights pertaining to such Common Shares formerly represented

thereby. After the Effective Time, there shall be no transfers on the stock

transfer books of the Surviving Corporation of any Common Shares that were

outstanding immediately prior to the Effective Time. If, after the Effective

Time, Certificates are presented to the Surviving Corporation, they shall be

canceled and exchanged as provided in this Article 3.

(e) Any portion of the Payment Fund (including any amounts that may be

payable to the former shareholders of the Company in accordance with the terms

of this Agreement) which remains unclaimed by the former shareholders of the

Company upon the 180th day immediately following the Closing Date shall be

returned to the Surviving Corporation, upon demand, and any former shareholders

of the Company who have not theretofore complied with this Article 3 shall,

subject to Section 3.03(f), thereafter look to the Surviving Corporation only as

general unsecured creditors thereof for payment of any Merger Consideration,

without any interest or dividends thereon, that may be payable in respect of

each Common Share held by

<PAGE>

such shareholder. Following the Closing, the Agent shall retain the right to

invest and reinvest the Payment Fund on behalf of the Surviving Corporation in

securities listed or guaranteed by the United States government or certificates

of deposit of commercial banks that have, or are members of a group of

commercial banks that has, consolidated total assets of not less than

$500,000,000 and the Surviving Corporation shall receive the interest earned

thereon.

(f) None of Acquisition Corp., the Company or Agent shall be liable to

a holder of Certificates or any other person in respect of any cash delivered to

a public official pursuant to any applicable abandoned property, escheat or

similar law. If any Certificates shall not have been surrendered upon the second

anniversary of the Closing Date (or immediately prior to such earlier date on

which any Merger Consideration, dividends (whether in cash, stock or property)

or other distributions with respect to Common Shares in respect of such

Certificate would otherwise escheat to or become the property of any

Governmental Authority (as defined in Section 4.06(b)), any such shares, cash,

dividends or distributions in respect of such Certificate shall, to the extent

permitted by applicable law, become the property of the Surviving Corporation,

free and clear of all claims or interests of any person previously entitled

thereto.

(g) In the event any Certificate shall have been lost, stolen or

destroyed, upon the making of an affidavit (in form and substance acceptable to

the Surviving Corporation) of that fact by the person (who shall be the record

owner of such Certificate) claiming such Certificate to be lost, stolen or

destroyed, the agreement to indemnify the Surviving Corporation against any

claim that may be made against it with respect to such Certificate and, if

required by the Surviving Corporation, the posting by such person of a bond in

such amount as the Surviving Corporation may direct as indemnity against any

claim that may be made against it with respect to such Certificate, the Agent

will issue in exchange for such lost, stolen or destroyed Certificate the Merger

Consideration deliverable in respect thereof pursuant to this Agreement.

(h) Each of the Agent, the Surviving Corporation and Parent shall be

entitled to deduct and withhold from the consideration otherwise payable to any

holder of Common Shares or Options pursuant to this Agreement such amounts as

may be required to be deducted or withheld with respect to the making of such

payment or any other payment in connection with the transactions contemplated by

this Agreement under the Internal Revenue Code of 1986, as amended (the "Code"),

or any applicable provision of state, local or foreign tax law. To the extent

that amounts are so deducted or withheld and paid over to the appropriate taxing

authority by Agent, the Surviving Corporation or Parent, such amounts shall be

treated for all purposes of this Agreement as having been paid to the person to

whom such amounts would otherwise have been paid.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth on the corresponding sections of the Company

Disclosure Schedule (as defined below), the Company represents and warrants to

each of Acquisition Corp. and

<PAGE>

Parent as of the date hereof and as of the scheduled expiration of the Offer and

the Offer Payment Date that:

4.01 Organization and Qualification. The Company and each of its

Subsidiaries (as described in Section 4.05) is a corporation, limited liability

company or limited partnership, as the case may be, duly organized or formed, as

the case may be, validly existing and in good standing (to the extent

applicable) under the laws of its state or jurisdiction of incorporation or

formation, as the case may be, and has the requisite power and authority to

carry on its business as now being conducted, except where the failure to be in

good standing (to the extent applicable) would not, individually or in the

aggregate, have a Company Material Adverse Effect (as defined below). Except as

set forth in Section 4.01 of the disclosure schedule delivered by the Company to

Acquisition Corp. and Parent prior to the execution of this Agreement (the

"Company Disclosure Schedule"), the Company and each of its Subsidiaries is duly

qualified or licensed as a foreign corporation to do business, and is in good

standing (to the extent applicable), in each jurisdiction where the nature of

its business makes such qualification or licensing necessary, except where the

failure to be so qualified or licensed and in good standing (to the extent

applicable) would not, individually or in the aggregate, have a Company Material

Adverse Effect. As used in this Agreement, the term "Company Material Adverse

Effect" means any effect, event, or change that (i) is, or is reasonably likely

to be, materially adverse to the business, financial condition or results of

operations of the Company and its Subsidiaries, taken as a whole, or (ii)

prevents or materially delays, or is reasonably likely to prevent or materially

delay, the ability of the Company and its Subsidiaries to perform in all

material respects their obligations under this Agreement or to consummate the

transactions contemplated hereby (the "Transactions") in accordance with the

terms hereof, except for any effect, event or change (w) that is generally

applicable to the industry or markets in which the Company and its Subsidiaries

operate and not affecting the Company or any of its Subsidiaries in any

materially more adverse manner or degree therefrom, (x) that is generally

applicable to the United States economy or securities markets or the world

economy or international securities markets, (y) the public announcement or

existence of this Agreement and the transactions contemplated hereby, or (z) the

failure by the Company to meet any internal or published projections, forecasts

or predictions of financial performance for any period ending on or after July

30, 2005 (but any underlying facts causing the Company to fail to meet such

projections, forecasts or predictions shall not constitute an exception to the

definition of Company Material Adverse Effect).

4.02 Charter Documents and Bylaws. The charter attached as Exhibit 3.1 of

the SEC Report for the period ending July 29, 1995 is a complete and correct

copy of the Charter and the bylaws attached as Exhibit 3.2 of the SEC Report for

the period ending January 29, 1995 is a complete and correct copy of the bylaws

of the Company, each in full force and effect as of the date hereof. The Company

is not in violation of any of the provisions of its charter or bylaws. The

Company has heretofore made available to Acquisition Corp. a complete and

correct copy of the Charter and the bylaws (or equivalent organizational

documents) of each Subsidiary of the Company in full force and effect as of the

date hereof. No Subsidiary of the Company is in violation in any material

respect of any of the provisions of its charter or bylaws (or equivalent

organizational documents).

4.03 Capitalization.

<PAGE>

(a) The authorized capital stock of the Company consists of

100,000,000 shares of Common Stock, of which 50,000,000 shares have been

designated as Common Shares and 50,000,000 shares have been designated as Class

B Common Stock, no par value per share ("Class B Common Stock"), and 2,000,000

shares of preferred stock, par value $1.00 per share ("Preferred Stock"). Except

for Common Shares issued after the date of this Agreement upon exercise of

Options outstanding as of the date of this Agreement, (i) 33,136,497 shares of

Common Shares are issued and outstanding, (ii) no shares of Class B Common Stock

are issued and outstanding, (iii) no shares of Preferred Stock are issued and

outstanding and (iv) no Common Shares are held by the Company in its treasury.

The Company has 8,625,000 Common Shares reserved for issuance pursuant to the

Stock Plans, of which 3,465,585 Common Shares are subject to outstanding

Options, and the weighted average exercise price for such Options is $7.81

(except for any changes caused by the exercise of Options after the date of this

Agreement which were outstanding on the date hereof). Except as set forth in

this Section 4.03, there are not now, and at the Effective Time there will not

be, any options, warrants, calls, subscriptions, or other rights, or other

agreements or commitments of any character relating to the issued or unissued

capital stock of the Company or obligating the Company to issue, transfer or

sell any shares of capital stock of, or other equity interests in, the Company

or any Subsidiary of the Company. Section 4.03(a) of the Company Disclosure

Schedule sets forth the name of each holder of an Option, together with the

grant date, exercise price, number of Common Shares issuable upon exercise of

each such Option, vesting schedule of each such Option, the number of vested and

unvested Options of each Option holder and the specific Stock Plan pursuant to

which such Option was issued, except with respect to any unintentional

misstatement which would not affect the number of Common Shares issuable upon

exercise of the Options or the aggregate Option Consideration with respect to

all Options. All issued and outstanding Common Shares are duly authorized,

validly issued, fully paid, nonassessable and free of preemptive rights. All of

the outstanding shares of capital stock of, or other equity interests in, each

Subsidiary of the Company have been duly authorized and validly issued and are

fully paid and non-assessable, are owned by either the Company or another of its

wholly-owned Subsidiaries, free and clear of all Liens (as defined in Section

4.06(a)) other than Permitted Liens (as defined in Section 4.24(d)). There are

no outstanding options, warrants, calls, subscriptions, convertible securities

or other rights, or other agreements or commitments, obligating any Subsidiary

of the Company to issue, transfer or sell any shares of its capital stock or

other equity interests. There are no outstanding obligations of the Company or

any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of

capital stock of, or other equity interests in, the Company or any Subsidiary of

the Company.

(b) To the knowledge of the Company, without having made inquiry of

any of its shareholders, except for estate planning and similar trust

agreements, there are no shareholders agreements, voting trusts or other

agreements or understandings relating to voting or disposition of any shares of

capital stock of the Company or granting to any person or group of persons the

right to elect, or to designate or nominate for election, a director to the

Company Board. The Company is not party to any agreement granting registration

rights to any Person.

4.04 Authority Relative to this Agreement. The Company has the requisite

corporate power and authority to execute and deliver this Agreement and the

Acquisition Corp. Stock Option Agreement, to perform its obligations hereunder

and thereunder, subject, with respect to this Agreement, to the approval of this

Agreement and the Merger by the holders of a majority of

<PAGE>

the outstanding Common Shares entitled to vote thereon with respect to the

Merger, and to consummate the Transactions. The execution and delivery of this

Agreement and the Acquisition Corp. Stock Option Agreement and the consummation

of the Merger and the other Transactions have been duly and validly authorized

by all necessary corporate action and no other corporate proceedings on the part

of the Company are necessary to authorize the Company's execution and delivery

of this Agreement or the Acquisition Corp. Stock Option Agreement or to

consummate the Transactions (other than, with respect to this Agreement and the

Merger, the approval of this Agreement and the Merger by the holders of a

majority of the outstanding Common Shares entitled to vote thereon and, with

respect to the Merger, the filing or recordation of appropriate merger documents

as required by the Tenn. Acts). This Agreement and the Acquisition Corp. Stock

Option Agreement have been duly and validly executed and delivered by the

Company, and (assuming this Agreement constitutes a valid and binding obligation

of Acquisition Corp. and Parent) constitute the valid and binding obligation of

the Company, enforceable against the Company in accordance with their terms,

subject to applicable bankruptcy, insolvency, reorganization, moratorium or

other similar laws relating to creditors' rights generally and to general

principles of equity. Upon consummation of the Transactions, Parent will own all

of the outstanding capital stock of the Company, including all of the

outstanding Common Shares, and all Options shall have been cancelled and be of

no further force or effect.

4.05 Company Subsidiaries. Section 4.05 of the Company Disclosure Schedule

contains a correct and complete list of each Subsidiary of the Company and the

jurisdiction in which each such Subsidiary is incorporated or organized. Section

4.05 of the Company Disclosure Schedule sets forth for each Subsidiary of the

Company: (i) its authorized capital stock or share capital; (ii) the number of

issued and outstanding shares of capital stock or share capital; and (iii) the

Company's direct or indirect equity interest therein. Except for (A) investments

in marketable securities set forth in Section 4.05 of the Company Disclosure

Schedule and (B) equity interests in the Company's Subsidiaries, the Company

does not own, directly or indirectly, any capital stock or other ownership

interest in any Person. No Subsidiary of the Company owns, directly or

indirectly, any capital stock or other ownership interest in any Person, except

for the capital stock and/or other ownership interest in another wholly-owned

Subsidiary of the Company. Each Subsidiary is directly or indirectly wholly

owned by the Company.

4.06 No Violation; Required Filings and Consents.

(a) The execution and delivery by the Company of this Agreement and

the Acquisition Corp. Stock Option Agreement do not, and the performance of this

Agreement and the Acquisition Corp. Stock Option Agreement by the Company and

the consummation of the Transactions will not, (i) conflict with or violate any

provision of the Company's charter or bylaws or conflict with or violate any

provision of the articles of incorporation or bylaws or equivalent organization

documents of any Subsidiary of the Company, (ii) assuming that all consents,

approvals, authorizations and other actions described in Section 4.06(b) have

been obtained and all filings and obligations described in Section 4.06(b) have

been made or complied with, conflict with or violate in any material respect any

foreign or domestic (federal, state or local) law, statute, ordinance, rule,

regulation, permit, license, injunction, writ, judgment, decree or order (each,

a "Law" and, collectively, "Laws") applicable to the Company or any of its

Subsidiaries or by which any asset of the Company or any of its Subsidiaries is

bound or

<PAGE>

affected, (iii) except as set forth in Section 4.06(a) of the Company Disclosure

Schedule, materially conflict with, result in any breach of or constitute a

material default (or an event that with notice or lapse of time or both would

become a default) under, or give to others any right of termination, amendment,

acceleration or cancellation of, require any notice, or require any payment

under, or give rise to a loss of any benefit to which the Company or any

Subsidiary of the Company is entitled under any provision of any Material

Contract or (iv) result in the creation or imposition of a material lien, claim,

security interest or other charge, title imperfection or encumbrance (each, a

"Lien" and, collectively, "Liens") on any asset of the Company or any Subsidiary

of the Company.

(b) The execution and delivery by the Company of this Agreement and

the Acquisition Corp. Stock Option Agreement do not, and the performance of this

Agreement and the Acquisition Corp. Stock Option Agreement and the consummation

by the Company of the Transactions will not, require any material consent,

approval, authorization or permit of, or filing with or notification to, any

domestic (federal, state or local) or foreign government or governmental,

regulatory or administrative authority, agency, commission, board, bureau, court

or instrumentality or arbitrator of any kind ("Governmental Authority"), except

for applicable requirements, if any, of the Exchange Act, the Securities Act of

1933, as amended (the "Securities Act"), Nasdaq, the Hart-Scott-Rodino Antitrust

Improvements Act of 1976, as amended (the "HSR Act"), and the rules and

regulations thereunder, and filing and recordation of appropriate documents for

the Merger as required by the Tenn. Acts.

Stock Option Agreement nor the consummation of the Transactions will give rise

to any dissenter or appraisal rights, including any contractual dissenter or

appraisal rights or similar rights pursuant to the Tenn. Acts.

4.07 SEC Reports and Financial Statements.

(a) The Company has filed all forms, reports, statements and schedules

and made all other filings (the "SEC Reports") with the SEC required to be filed

by it pursuant to the federal securities laws and the SEC rules and regulations

thereunder since February 2, 2002. The SEC Reports, as well as all forms,

reports, statements, schedules and other documents to be filed by the Company

with the SEC after date hereof and prior to the Effective Time (the "Future SEC

Reports") (i) were prepared in all material respects in accordance with the

requirements of the Securities Act, the Exchange Act and the published rules and

regulations of the SEC thereunder, each as applicable to such SEC Reports and

such later filed Future SEC Reports and (ii) did not and will not as of the time

they were filed contain any untrue statement of a material fact or omit to state

a material fact required to be stated therein or necessary in order to make the

statements therein, in light of the circumstances under which they were and will

be made, not misleading. No Subsidiary of the Company is subject to the periodic

reporting requirements of the Exchange Act. As of the date hereof, there are no

material unresolved comments issued by the staff of the SEC with respect to any

of the SEC Reports.

(b) Set forth in Section 4.07(b) of the Company Disclosure Schedule

are copies of the Company's unaudited, consolidated balance sheet as of August

27, 2005 and statements of income and cash flows for the seven-month period

ended August 27, 2005

<PAGE>

(collectively, the "Interim Financial Statements"). Each of the Interim

Financial Statements and the consolidated financial statements (including, in

each case, any notes thereto) of the Company included in the SEC Reports or any

Future SEC Report has been, and in the case of any Future SEC Report will be,

prepared in all material respects in accordance with the published rules and

regulations of the SEC (including Regulation S-X) and in accordance with United

States generally accepted accounting principles applied on a consistent basis

throughout the periods indicated ("GAAP") (except as otherwise stated in such

financial statements, including the related notes, or, in the case of unaudited

interim financial statements, as may be permitted by the SEC under Forms 10-Q,

8-K or any successor forms under the Exchange Act), except as otherwise

specifically set forth in Section 4.07(b) of the Company Disclosure Schedule,

and each fairly presents, in all material respects, the consolidated financial

position, results of operations and cash flows of the Company and its

consolidated Subsidiaries as at the respective dates thereof and for the

respective periods indicated therein, except as otherwise set forth in the notes

thereto (subject, in the case of unaudited statements, to the absence of

complete footnote disclosure and to normal and recurring quarterly and year-end

adjustments, none of which, individually or in the aggregate, has had or could

reasonably be expected to have a Company Material Adverse Effect). Except as set

forth in Section 4.07(b) of the Company Disclosure Schedule, neither the Company

nor any of its Subsidiaries have any outstanding Indebtedness (as hereinafter

defined). For purposes of this Agreement, "Indebtedness" shall mean, with

respect to any Person at a particular time and, in each case, except between or

among the Company and any of its Subsidiaries, (i) any obligation for borrowed

money or issued in substitution for or exchange of indebtedness for borrowed

money, (ii) any obligation evidenced by any note, bond, debenture or other debt

security, (iii) any obligation for the deferred purchase price of property or

services with respect to which such Person is liable, contingently or otherwise,

as obligor or otherwise (other than trade payables and other current Liabilities

(as defined in Section 4.07(d)) incurred in the ordinary course of business

consistent with past practice), (iv) any commitment by which such Person assures

a creditor against loss (including, without limitation, contingent reimbursement

obligations with respect to letters of credit), (v) any obligation guaranteed in

any manner by such Person (including, without limitation, guarantees in the form

of an agreement to repurchase or reimburse), (vi) any obligations under

capitalized or synthetic leases with respect to which such Person is liable,

contingently or otherwise, as obligor, guarantor or otherwise, or with respect

to which obligations such Person assures a creditor against loss, (vii) any

obligation secured by a Lien (other than a Permitted Lien) on such Person's

assets, (viii) any Liability under any deferred compensation plans, which

Liability is payable or becomes due as a result of the transactions contemplated

herein, and (ix) any fees, penalties, premiums or accrued and unpaid interest

with respect to the foregoing (in the case of prepayments or otherwise) that

would become due or payable as a result of the consummation of the Transactions.

There are no obligations under any letters of credit in effect as of September

23, 2005 in excess of the amounts set forth in Section 4.07(b) of the Company

Disclosure Schedule and any such obligations subsequent to the date hereof were

entered into in the ordinary course of business in compliance with Article 6.

and procedures (as defined under the Exchange Act) to ensure that material

information relating to the Company, including its consolidated Subsidiaries, is

made known to the management of the Company by others within those entities, and

(ii) disclosed, based on its most recent evaluation, to the Company's auditors

and the audit committee of the Company Board (A) all significant

<PAGE>

deficiencies in the design or operation of internal control over financial

reporting (as defined under the Exchange Act) which are reasonably likely to

adversely affect the Company's ability to record, process, summarize and report

financial data and have identified for the Company's auditors any material

weaknesses in internal control over financial reporting (as defined under the

Exchange Act) and (B) any fraud, whether or not material, that involves

management or other employees who have a significant role in the Company's

internal control over financial reporting (as defined under the Exchange Act). A

summary of such disclosure made by management to the Company's auditors and

audit committee is set forth in Section 4.07(c) of the Company Disclosure

Schedule.

(d) Except as disclosed in Section 4.07(d) of the Company Disclosure

Schedule, neither the Company nor any of its Subsidiaries is subject to any

liabilities or obligations of any kind or nature (whether accrued, absolute,

contingent, determinable or otherwise) (collectively, "Liabilities"), except (i)

Liabilities set forth on the face of the July 30, 2005 balance sheet included in

the Company's Quarterly Report on Form 10-Q for the quarter ended July 30, 2005

or the footnotes thereto, (ii) Liabilities that have arisen after July 30, 2005

in the ordinary course of business and consistent with past practice (none of

which is a liability for breach of contract, breach of warranty, tort,

infringement, violation of law, claim or lawsuit), (iii) Liabilities under

Contracts identified in Section 4.17(a) of the Company Disclosure Schedule or

under Contracts not required to be identified on such Company Disclosure

Schedule pursuant to Section 4.17 below which were entered into in the ordinary

course of business consistent with past practice (but not Liabilities for any

breach of any such Contract occurring on or prior to the Closing Date), or (iv)

Liabilities not required by GAAP to be reflected on the consolidated balance

sheet or notes thereto which would not reasonably be expected to have a Company

Material Adverse Effect. Except as set forth in Section 4.07(d) of the Company

Disclosure Schedule, neither the Company nor any of its Subsidiaries is a

guarantor or otherwise liable for any Liability (including Indebtedness) of any

Person other than the following bonds to the extent disclosed in Section 4.07(d)

of the Company Disclosure Schedule: (x) indemnity bonds entered into the

ordinary course of business (e.g., workers compensation), (y) utility bonds or

(z) bonds entered into in connection with certain promotional activities and any

similar Liabilities, in each case other than bonds which do not have a Liability

exceeding $200,000 in the aggregate. No such bonds require any collateral.

(e) Except as set forth in Section 4.07(e) of the Company Disclosure

Schedule, none of the Company or any of its Subsidiaries is indebted to any

director or officer of the Company or any of its Subsidiaries (except for

amounts due as normal salaries and bonuses or in reimbursement of ordinary

business expenses and directors' fees) and no such person is indebted to the

Company or any of its Subsidiaries.

(f) The Company does not have any unresolved comments from the staff

of the SEC with respect to any SEC Report covered by Section 4.07(a).

(g) The Company has no plans to file any amendments or modifications

to any previously filed SEC Reports.

4.08 Compliance with Applicable Laws. Except as set forth in Section 4.08

of the Company Disclosure Schedule and except as would not have a Company

Material Adverse

<PAGE>

Effect, (i) neither the Company nor any of its Subsidiaries is in violation of

any Order (as defined in Section 7.01(b)) of any Governmental Authority or any

Law of any Governmental Authority applicable to the Company or any Subsidiary of

the Company or any of their respective properties or assets and (ii) since

February 2, 2002, the business operations of the Company and its Subsidiaries

have been conducted in compliance with all Laws of each Governmental Authority.

4.09 Absence of Certain Changes or Events. Except as set forth in Section

4.09 of the Company Disclosure Schedule or as contemplated by this Agreement,

since January 29, 2005, the Company and its Subsidiaries have conducted their

businesses only in the ordinary course of business and in a manner consistent

with past practice and there has not been:

(a) any material change in any method of accounting or accounting

practice by the Company or any of its Subsidiaries or made any material

write-down in the value of its inventory or accounts receivable or reversed any

material accruals;

(b) any declaration of any dividend scheduled to be paid after the

date hereof or, other than regular quarterly dividends and distributions from

any Subsidiary of the Company to the Company or another wholly owned Subsidiary

of the Company, any declaration, setting aside or payment of any dividend

(whether in cash, stock or other property) or other distribution in respect of

the Company's securities or any redemption, purchase or other acquisition of any

of the Company's securities;

securities in respect of, in lieu of or in substitution for shares of its

capital stock, except for (i) the granting of Options set forth in Section

4.03(a) of the Company Disclosure Schedule and (ii) the issuance of any Common

Shares pursuant to the exercise of any Options;

(d) any amendment of any material term of any outstanding security of

the Company or any of its Subsidiaries;

(e) any issuance by the Company or any of its Subsidiaries of any

notes, bonds or other debt securities or any capital stock or other equity

securities or any securities convertible, exchangeable or exercisable into any

capital stock or other equity securities, except for (i) the granting of Options

set forth in Section 4.03(a) of the Company Disclosure Schedule and (ii) the

issuance of any Common Shares pursuant to the exercise of any Options;

(f) any incurrence, assumption or guarantee by the Company or any of

its Subsidiaries of any indebtedness for borrowed money other than the issuance

of letters of credit in the ordinary course of business consistent with past

practices of the Company and its Subsidiaries;

(g) any creation or assumption by the Company or any of its

Subsidiaries of any Lien on any material assets other than Permitted Liens;

(h) any making of any loans, advances or capital contributions to or

investment in any entity or person, other than loans, advances or capital

contributions to or investments in the Company or its wholly owned Subsidiaries

other than in connection with the

<PAGE>

construction of stores pursuant to a lease agreement relating to Leased Real

Property in the ordinary course of business (which as of August 27, 2005 is set

forth in Section 4.17(a) of the Company Disclosure Schedule);

(i) any entry into any Contract related to the acquisition or

disposition of any business or any material assets other than inventory in the

ordinary course of business;

(j) any effect, event or change that has had or is reasonably likely

to have a Company Material Adverse Effect;

(k) any material increase in the benefits under, or the establishment,

material amendment or termination of, any Benefit Plan (as defined in Section

4.13(b)) covering current or former employees, officers or directors of the

Company or any of its Subsidiaries, or any material increase in the compensation

payable or to become payable to or any other material change in the employment

terms for any directors or officers with a title of vice president or higher of

the Company or any of its Subsidiaries;

(l) any entry by the Company or any of its Subsidiaries into any

employment, consulting, severance, termination, change-of-control or

indemnification agreement with any director or officer of the Company or any of

its Subsidiaries or entry into any such agreement with director or officer with

a title of vice president or higher for a noncontingent cash amount in excess of

$50,000 per year or outside the ordinary course of business;

(m) any capital expenditures that amount in the aggregate to more than

$1,000,000 or any commitments with respect to capital expenditures and other

planned capital expenditures through the Offer Payment Date in the ordinary

course of business that amount in the aggregate to more than $2,000,000 (in each

case by category); or

(n) any authorization of, or agreement by the Company or any of its

Subsidiaries to take, any of the actions described in this Section 4.09, except

as expressly contemplated by this Agreement.

4.10 Change of Control. Section 4.10 of the Company Disclosure Schedule

sets forth (i) all Contracts with the Company or any of its Subsidiaries,

including but not limited to, severance plans, bonus plans, employment

agreements, or any other plan, agreement or arrangement with any Person,

pursuant to which a Liability is due or would become payable, in whole or in

part, directly as a result of the consummation of any of the Transactions and

(ii) the amount of any compensation, remuneration or other amounts which are or

may be due or payable by the Company or any of its Subsidiaries as a result of

the Transactions under such Contracts (including any such Liabilities which are

or may be due or payable by the Company or any of its Subsidiaries assuming that

each employee of the Company that is a party to a Contract is terminated without

Cause immediately following the consummation of the Offer or Merger).

4.11 Litigation. Section 4.11 of the Company Disclosure Schedule sets

forth, as of the date hereof, each material suit, claim, action, material

grievance, arbitration, proceeding or investigation pending or, to the knowledge

of the Company, threatened against the Company or any of its Subsidiaries, at

law or in equity other than workers' compensation claims or

<PAGE>

general liability claims which individually do not exceed $50,000, workers'

compensation claims or general liability claims which were made after September

30, 2005 in the ordinary course of business. Other than as set forth on Schedule

4.11 of the Company Disclosure Schedule, as of the date hereof, neither the

Company nor any of its Subsidiaries is subject to any outstanding material

order, writ, injunction or decree. All workers' compensation claims and general

liability claims taken in the aggregate have not had and would not reasonably be

expected to have a Company Material Adverse Effect.

4.12 Information in Offer Documents and Proxy Statement.

(a) Each document required to be filed by the Company with the SEC in

connection with the Transactions (the "Company Disclosure Documents"),

including, without limitation, the proxy or information statement of the Company

containing information required by Regulation 14A under the Exchange Act and the

Schedule 14d-9 (together with all amendments and supplements thereto, the "Proxy

Statement"), to be filed with the SEC in connection with the Merger, will, when

filed, comply as to form in all material respects with the applicable

requirements of the Exchange Act. The representations and warranties contained

in this Section 4.12(a) will not apply to statements or omissions included in

the Company Disclosure Documents based upon information furnished to the Company

in writing by Parent or any of their representatives specifically for use

therein.

(b) Neither the Schedule 14D-9, any other document required to be

filed by the Company with the SEC in connection with the Offer, the Merger or

any other transaction contemplated hereby, nor any information supplied by the

Company for inclusion in the Offer Documents shall, at the respective times the

Schedule 14D-9, any such other filings by the Company, the Offer Documents or

any amendments or supplements thereto are filed with the SEC or are first

published, sent or given to shareholders of the Company, as the case may be,

contain any untrue statement of a material fact or omit to state any material

fact required to be stated therein or necessary in order to make the statements

made therein, in light of the circumstances under which they are made, not

misleading.

supplement thereto is first mailed to shareholders of the Company and at the

time such shareholders vote on adoption of this Agreement and the Merger, the

Proxy Statement, as supplemented or amended, if applicable, will not contain any

untrue statement of a material fact or omit to state any material fact necessary

in order to make the statements made therein, in the light of the circumstances

under which they were made, not misleading. At the time of the filing of any

Company Disclosure Document other than the Proxy Statement and at the time of

any distribution thereof, such Company Disclosure Document will not contain any

untrue statement of a material fact or omit to state a material fact necessary

in order to make the statements made therein, in the light of the circumstances

under which they were made, not misleading.

4.13 Benefit Plans.

(a) Except as disclosed in Section 4.13(a) of the Company Disclosure

Schedule, there exist no employment, severance, retention, termination or

change-of-control agreements, arrangements or understandings between the Company

or any of its Subsidiaries and any individual current or former director or

officer with a title of vice president or higher (or any

<PAGE>

dependent, beneficiary or relative of any of the foregoing) of the Company or

any of its Subsidiaries (collectively, the "Employees") other than the Company's

obligations to former employees under the health care continuation requirements

of Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the Code or any

similar state law ("COBRA").

(b) Section 4.13(b) of the Company Disclosure Schedule contains a

complete and correct list of all existing (i) "employee pension benefit plans"

(as defined in Section 3(2) of the Employee Retirement Income Security Act of

1974, as amended ("ERISA")) (collectively, the "Pension Plans"), including any

such Pension Plans that are "multiemployer plans" (as such term is defined in

Section 4001(a)(3) of ERISA) (collectively, the "Multiemployer Pension Plans"),

(ii) "employee welfare benefit plans" (as defined in Section 3(1) of ERISA) and

(iii) other bonus, deferred compensation, severance pay, pension,

profit-sharing, retirement, insurance, stock purchase, stock option, vacation

pay, sick pay or other fringe benefit plan or arrangement maintained, or

contributed to, by the Company or any of its Subsidiaries for the benefit of any

of the Employees or with respect to which the Company has any liability other

than immaterial plans or arrangements (the foregoing clauses (i), (ii) and (iii)

collectively, the "Benefit Plans"). The Company has made available to

Acquisition Corp. correct and complete copies of (i) each Benefit Plan document

(or a written description of such Benefit Plan if no such formal document

exists), (ii) the three most recent annual reports on Form 5500 as filed with

the Internal Revenue Service with respect to each Benefit Plan (and all

attachments thereto), (iii) the most recent summary plan description for each

Benefit Plan for which such summary plan description is required, (iv) the most

recent determination letter received from the Internal Revenue Service, if

applicable, and (v) each trust agreement, insurance contract, group annuity

contract or funding arrangement relating to any Benefit Plan, if applicable.

Schedule, all Pension Plans intended to be qualified plans under Section 401(a)

of the Code may either rely on opinion letters issued for the form of plan or

have been the subject of favorable determination letters from the Internal

Revenue Service to the effect that such Pension Plans are qualified and exempt

from Federal income taxes under Section 401(a) and 501(a), respectively, of the

Code (taking into account the laws commonly referred to as "GUST"), no such

determination or opinion letter has been revoked and, to the knowledge of the

Company, nothing has occurred since the date of such determination that could

reasonably be expected to adversely affect the qualification of such Benefit

Plan.

(d) None of the Benefit Plans is, and neither the Company or any of

its Subsidiaries nor any ERISA Affiliate maintains, contributes to or has any

liability or potential liability with respect to (i) a "single employer plan"

(as such term is defined in Section 4001(a)(15) of ERISA) subject to Section 412

of the Code or Section 302 of Title I of ERISA or Title IV of ERISA, (ii) a

"multiple employer plan" (as such term is defined in ERISA), (iii) a

Multiemployer Pension Plan or (iv) a funded welfare benefit plan (as such term

is defined in Section 419 of the Code). Each Benefit Plan and all of its related

trusts have been maintained, funded and administered in all material respects in

accordance with its terms, the terms of any applicable collective bargaining

agreement and each Benefit Plan in compliance in all material respects with the

applicable provisions of ERISA, the Code and other applicable laws. With respect

to each Benefit Plan, all contributions (including all employer contributions

and employee salary reduction contributions) that are due have been made within

the time periods

<PAGE>

prescribed by ERISA and the Code, and all contributions for any period ending on

or before the Closing Date that are not yet due have been made or properly

accrued. All premiums or other payments for all periods ending on or prior to

the Closing Date have been paid or properly accrued with respect to each

Employee Benefit Plan that is an employee welfare benefit plan (as defined in

Section 3(1) of ERISA). Except as set forth in Section 4.13(d) of the Company

Disclosure Schedule, neither the Company nor any of its Subsidiaries has any

material unfunded liabilities with respect to any deferred compensation,

retirement or other Benefit Plan that is not accurately reflected on the

Company's balance sheet. For purposes of Section 4.13, "ERISA Affiliate" means

each entity that is treated as a single employer with the Company or any

Subsidiary for purposes of Section 414 of the Code.

(e) None of the Company nor any of its Subsidiaries has engaged in a

"prohibited transaction" (as such term is defined in Section 406 of ERISA and

Section 4975 of the Code) or any other breach of fiduciary responsibility with

respect to any Benefit Plan subject to ERISA that reasonably could be expected

to subject the Company or any of its Subsidiaries or any Employee to (i) any

material tax or penalty on prohibited transactions imposed by Section 4975 or

(ii) any liability under Section 502(i) or Section 502(l) of ERISA. Except as

disclosed in Section 4.13(e) of the Company Disclosure Schedule, as of the date

of this Agreement, with respect to any Benefit Plan: (i) no filing or

application is pending with the Internal Revenue Service, the Pension Benefit

Guaranty Corporation, the United States Department of Labor or any other

governmental body, other than filings or applications which are filed in the

ordinary course of the administration of any Benefit Plan and (ii) there is no

action, suit, investigation, inquiry or claim pending or to the knowledge of the

Company or any of its Subsidiaries threatened, other than routine claims for

benefits under any Benefit Plan.

(f) None of the Company or any of its Subsidiaries or any ERISA

Affiliates has any obligation to provide any health benefits or other welfare

benefits to retired or other former employees, except as specifically required

by COBRA. Except as disclosed in Section 4.13(f) of the Company Disclosure

Schedule, each Benefit Plan that provides medical, disability or other similar

health benefits is fully insured. Incurred but not reported claims under each

such Benefit Plan that is not fully insured have been properly accrued in

accordance with GAAP. The Company and each ERISA Affiliate have complied in all

material respects with the requirements of COBRA. With respect to any Benefit

Plan that is a "health plan" (as defined in 45 C.F.R. Section 160.103), all

required actions to comply in all material respects with the final privacy

regulations issued under the Health Insurance Portability and Accountability Act

of 1996 (45 CFR Parts 160 and 164 ("HIPAA privacy regulations") have been taken

by April 14, 2003.

(g) Except as set forth in Section 4.10 of the Company Disclosure

Schedule, neither the Benefit Plans nor any other arrangement obligates the

Company or any of its Subsidiaries to pay any separation, severance, termination

or similar benefit, accelerate any vesting schedule, or alter the timing of any

benefit payment, in whole or in part, as a result of any transaction

contemplated by this Agreement and the Acquisition Corp. Stock Option Agreement

or, in whole or in part, as a result of a change in control or ownership within

the meaning of any Benefit Plan (or any other arrangement) or Section 280G of

the Code.

(h) Neither the Company nor any Subsidiary has any liability

(potential or otherwise) with respect to any "employee benefit plan" (as defined

in Section 3(3) of ERISA)

<PAGE>

solely by reason of being treated as a single employer under Section 414 of the

Code with any other entity.

4.14 Taxes.

(a) Except as set forth in Section 4.14(a) of the Company Disclosure

Schedule: (i) the Company and each of its Subsidiaries has timely filed all

income Tax Returns and all other material Tax Returns required to be filed by

it, and each such Tax Return has been prepared in substantial compliance with

all applicable laws and regulations and all such Tax Returns are true and

correct; (ii) the Company and each of its Subsidiaries has paid (or the Company

has paid on behalf of its Subsidiaries) all material Taxes (as hereinafter

defined) required to be paid in respect of the periods covered by such returns

and has made adequate provision in the Company's financial statements for

payment of all material Taxes that have not been paid, whether or not shown as

due and payable on any Tax Return, in respect of all taxable periods or portions

thereof ending on or before the date hereof, subject to quarterly and year-end

adjustments; and (iii) neither the Company nor any of its Subsidiaries has

incurred any material liability for Taxes subsequent to the date of the most

recent financial statements contained in the SEC Reports other than in the

ordinary course of the Company's or such Subsidiary's business.

(b) Except as set forth in Section 4.14(b) of the Company Disclosure

Schedule or which are not material: (i) no Tax Return of the Company or any of

its Subsidiaries is under audit or examination by any taxing authority, and no

written notice of such an audit or examination or any other audit or examination

with respect to Taxes has been received by the Company or any of its

Subsidiaries; (ii) each deficiency resulting from any audit or examination

relating to Taxes by any taxing authority has been paid, except for deficiencies

currently being contested in good faith and for which adequate reserves, as

applicable, have been established in the Company's financial statements in

accordance with United States generally accepted accounting principles; (iii)

there are no Liens for Taxes upon the assets of the Company or any of its

Subsidiaries, except Liens relating to current Taxes not yet due and payable or

otherwise being contested in good faith as to which appropriate reserves have

been established in the Company's financial statements in accordance with United

States generally accepted accounting principles; (iv) all Taxes which the

Company or any of its Subsidiaries are required by law to withhold or to collect

for payment have been duly withheld and collected; (v) none of the Company or

any of its Subsidiaries has consented to extend the time in which any Tax may be

assessed or collected by any taxing authority; and (vi) no written claim has

been made by any taxing authority in a jurisdiction where the Company and its

Subsidiaries do not file Tax Returns that the Company or any of its Subsidiaries

is or may be subject to taxation in that jurisdiction.

Schedule, there is no Contract or other arrangement, plan or agreement by or

with the Company or any of its Subsidiaries covering any person that,

individually or collectively, could give rise to the payment of any amount by

the Company or any of its Subsidiaries that would not be deductible by the

Company or such Subsidiary by reason of Sections 280G or 162(m) of the Code (or

any corresponding provision of state, local or foreign law).

(d) Except as set forth in Section 4.14(d) of the Company Disclosure

Schedule, each of the Company and its Subsidiaries has made available to

Acquisition Corp. and

<PAGE>

Parent true, correct and complete copies of all income Tax Returns, and all

examination reports and statements of deficiencies assessed against or agreed to

by any of the Company or any of its Subsidiaries that have been filed by or

submitted to any of the Company or any of its Subsidiaries for all taxable years

not barred by the statute of limitations.

(e) Except as set forth in Section 4.14(e) of the Company Disclosure

Schedule, none of the Company or any of its Subsidiaries (i) has been a member

of an affiliated group filing a consolidated federal income Tax Return (other

than a group the common parent of which was the Company), (ii) is a party to or

bound by any Tax allocation or Tax sharing agreement with any persons or entity

other than the Company and its Subsidiaries, (iii) has any liability for the

Taxes of any Person (other than any of the Company or any of its Subsidiaries)

under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or

foreign law), as a transferee or successor, by contract, or otherwise or (iv)

has any liability for the Taxes of any Person other than the Company, the

Subsidiaries of the Company or in connection with the acquisition, directly or

indirectly, of any Person acquired by the Company or any of its Subsidiaries,

other than under leases relating to the Leased Real Property.

(f) Except as set forth in Section 4.14(f) of the Company Disclosure

Schedule, none of the Company or any of its Subsidiaries will be required to

include any item of income in, or exclude any item of deduction from, taxable

income for any taxable period (or portion thereof) ending after the Closing Date

as a result of any (i) change in method of accounting for a taxable period

ending on or prior to the Closing Date under Code Section 481(c) (or any

corresponding or similar provision of state, local or foreign income Tax Law);

(ii) "closing agreement" as described in Code Section 7121 (or any corresponding

or similar provision of state, local or foreign income Tax Law); (iii) deferred

intercompany gain or any excess loss account described in Treasury Regulations

under Code Section 1502 (or any corresponding or similar provision of state,

local or foreign income Tax Law); (iv) installment sale made prior to the

Closing Date; or (v) prepaid amount received on or prior to the Closing Date.

(g) None of the Company or any of its Subsidiaries has been a U.S.

real property holding corporation within the meaning of Section 897(c)(2) of the

Code during the applicable period specified in Section (897)(c)(1)(A)(ii) of the

Code.

(h) Except as set forth in Section 4.14(h) of the Company Disclosure

Schedule, none of the Company or any of its Subsidiaries has distributed stock

of another Person, or had its stock distributed by another Person, in a

transaction that was purported or intended to be governed in whole or in part by

Code Sections 355 or 361.

(i) As used in this Section 4.14, the terms (i) "Tax" (and, with

correlative meaning, "Taxes") means: (A) any federal, state, local or foreign

income, gross receipts, windfall profit, severance, property, production, sales,

use, license, excise, franchise, employment, payroll, withholding, alternative

or add-on minimum, ad valorem, value added, transfer, stamp, environmental or

other tax, or any other tax of any kind whatsoever, whether disputed or not,

together with any interest or penalty or addition to tax imposed by any

Governmental Authority and (B) any liability of the Company or any of its

Subsidiaries for payments of a type described in clause (A) as a result of (I)

any obligation of the Company or any of its Subsidiaries under any tax sharing

agreement or tax indemnity agreement or (II) the

<PAGE>

Company or any of its Subsidiaries being a member of an affiliated group (other

than one of which the Company is the parent); and (ii) "Tax Return" means any

report, return or other information or document required to be supplied to or

filed with a taxing authority in connection with Taxes.

4.15 Intellectual Property.

(a) Section 4.15(a) of the Company Disclosure Schedule contains a

complete and accurate list of all (a) except for shrink wrap, click wrap or

other standard form licenses for commercially available software, patented or

registered Intellectual Property (as defined in Section 4.15(b) below) owned or

used by and material to the Company and each of its Subsidiaries, (b) pending

patent applications and applications for registrations of other Intellectual

Property filed by the Company and each of its Subsidiaries, (c) material

unregistered trademarks and servicemarks owned by the Company and each of its

Subsidiaries, and (d) except for shrink-wrap, click-wrap or other standard form

licenses for unmodified commercially available software purchased or licensed

for less than $50,000, all written licenses and other agreements by which the

Company and each of its Subsidiaries grants to any third party the right to use

any Intellectual Property owned by the Company or its Subsidiaries, all licenses

and other agreements by which any third party grants to the Company or any of

its Subsidiaries the right to use any material Intellectual Property and all

other agreements that restrict the Company's and each of its Subsidiaries'

ability to use or disclose any material Intellectual Property owned or used by

the Company or any of its Subsidiaries, in each case identifying the subject

Intellectual Property.

(b) Except as set forth in Section 4.15(b) of the Company Disclosure

Schedule, the Company and each of its Subsidiaries owns and possesses, free and

clear of any Liens, or has a valid and enforceable license or otherwise has the

right to use, all material Intellectual Property set forth in or required to be

set forth in Section 4.15(a) of the Company Disclosure Schedule and all other

Intellectual Property necessary for the operation of their respective businesses

as currently conducted. As used in this Agreement, the term "Intellectual

Property" means: (i) registered and unregistered trademarks, service marks,

trade names, Internet domain names, and trade dress (including the good will

associated with each); (ii) patents, patent applications, patent disclosures,

inventions and related know how; (iii) registered and unregistered copyrights,

copyrightable works and mask works; (iv) computer software, data and databases

including, but not limited to, object code, source code, related documentation

and all copyrights therein; (v) trade secrets and confidential information; and

(vi) all other intellectual property rights. Without limiting the generality of

the foregoing and for the purpose of clarity, "Intellectual Property" includes

intellectual property identified in clauses (i) through (vi) of the preceding

sentence which may be embodied in: computer software (including source code,

object code, data, databases and related documentation); systems, processes,

methods, devices, machines, designs or articles of manufacture (whether

patentable or unpatentable and whether or not reduced to practice); improvements

thereto; technology; proprietary information; specifications; flowcharts;

blueprints; schematics; protocols; programmer notes; customer and supplier

lists; pricing and cost information; business and marketing plans; and

proposals.

Schedule, no loss or expiration of any Intellectual Property owned or used by

the Company or

<PAGE>

any of its Subsidiaries is pending, or to the knowledge of the Company,

threatened or reasonably foreseeable, which loss or expiration would have or

reasonably be expected to have a Company Material Adverse Effect. The Company

and each of its Subsidiaries have taken all necessary reasonable steps to

maintain and protect the material Intellectual Property owned by the Company or

any of its Subsidiaries and will continue to maintain and protect all of the

Intellectual Property prior to Closing, in each such case so as not to

materially and adversely affect the validity or enforceability thereof. The

Company and its Subsidiaries do not have any actual knowledge that the owners of

any material Intellectual Property licensed to the Company or any of its

Subsidiaries have not taken commercially reasonable action to maintain and

protect the Intellectual Property which are subject to such licenses.

(d) Except as set forth in Section 4.15(d) of the Company Disclosure

Schedule, (i) all of the material Intellectual Property owned by the Company or

any of its Subsidiaries is valid and enforceable, (ii) no material claim by any

third party has been made since February 1, 2004, is currently outstanding or,

to the knowledge of the Company is threatened, against the Company or any of its

Subsidiaries contesting the validity, enforceability, use or ownership of any of

the Intellectual Property owned or used by the Company or any of its

Subsidiaries, (iii) neither the Company nor any of its Subsidiaries has

infringed, misappropriated or otherwise conflicted with, and the operation of

their business as currently conducted will not infringe, misappropriate or

conflict with, any Intellectual Property of any third party, and neither the

Company nor any of its Subsidiaries has received any notices asserting such a

claim (including, without limitation, any demands to license any Intellectual

Property from any third party) since February 1, 2004, and (iv) to the knowledge

of the Company and its Subsidiaries, none of the material Intellectual Property

owned or used by the Company or any of its Subsidiaries has been or is currently

being infringed, misappropriated or otherwise violated by any third party. The

transactions contemplated by this Agreement will not have a Company Material

Adverse Effect on the Company's and its Subsidiaries' right, title or interest

in and to the Intellectual Property owned or used by the Company or any of its

Subsidiaries and all of such Intellectual Property shall be owned or available

for use by the Company and its Subsidiaries on substantially the same terms and

conditions immediately after the Closing.

(e) Except as set forth in Section 4.15(e) of the Company Disclosure

Schedule, to the knowledge of the Company, all of the computer software,

computer firmware, computer hardware (whether general or special purpose) and

other similar or related computer systems or software that are used or relied on

by Company and its Subsidiaries in the conduct of their respective businesses is

sufficient for the immediate and currently contemplated future needs of such

businesses and is currently functioning without material errors.

4.16 Licenses and Permits. The Company and its Subsidiaries are in

possession of all material franchises, grants, authorizations, licenses,

permits, easements, variances, exceptions, consents, certificates, approvals and

orders of any Governmental Authority ("Permits") necessary for the Company and

its Subsidiaries to own, lease and operate its properties and carry on its

business as it is now being conducted in all material respects (the "Company

Permits"). As of the date hereof, all of the Company Permits are in full force

and effect and no material violation, suspension or cancellation of any of the

Company Permits is pending or, to the knowledge of the Company, threatened.

Except as disclosed in Section 4.16 of the Company Disclosure Schedule,

<PAGE>

none of the Company Permits will be terminated or impaired in any material

respect or become terminable, in whole or in part, as a result of the

Transactions.

4.17 Material Contracts.

(a) Section 4.17(a) of the Company Disclosure Schedule sets forth a

list (in effect as of the date of this Agreement) of each of the following

Contracts (and each amendment or modification thereto), excluding purchase order

and sales orders made in the ordinary course of business consistent with past

practices: (i) pension, profit sharing, equity option, employee equity purchase,

bonus or other plan or Contract of the Company or any of its Subsidiaries

providing for deferred or other compensation to employees, former employees or

consultants, or any collective bargaining agreement or other Contract of the

Company or any of its Subsidiaries with any labor union; (ii) Contract for the

employment of any officer, individual employee or other Person relating to the

Company or any of its Subsidiaries on a full-time, part-time, consulting or

other basis or relating to loans to members, managers, officers, directors or

affiliates of the Company or any of its Subsidiaries; (iii) Contract under which

the Company or any of its Subsidiaries has advanced or loaned or agreed to

advance or loan to any other Person amounts exceeding $100,000 in the aggregate,

other than (x) from the Company or a Subsidiary in the ordinary course of

business, and (y) in connection with the construction of stores pursuant to a

lease agreement relating to such Leased Real Property in the ordinary course of

business, which is set forth in Section 4.17(a) of the Company Disclosure

Schedule but it is understood that such schedule is only current as of August

27, 2005); (iv) Contract of the Company or any of its Subsidiaries relating to

borrowed money or other Indebtedness or the mortgaging, pledging or otherwise

placing a Lien on any material asset or material group of assets of the Company

and its Subsidiaries; (v) Contract by which the Company or any of its

Subsidiaries guarantees, endorses or otherwise becomes or is contingently liable

upon the Liability of any other Person (other than by endorsements of

instruments in the ordinary course of collection), or guaranties of the payment

of dividends or other distributions upon the shares of any other Person; (vi)

Contract under which the Company or one of its Subsidiaries is lessee of or

holds or operates any property, real or personal, owned by any other Person,

except for any lease of real or personal property under which the aggregate

annual rental payments do not exceed $100,000; (vii) Contract under which the

Company or one of its Subsidiaries is lessor of or permits any other Person to

hold or operate any property, real or personal, owned or controlled by the

Company or one of its Subsidiaries other than immaterial rights of way,

easements, covenants or similar rights to real property; (viii) Contract of the

Company or any of its Subsidiaries that is a settlement, conciliation or similar

agreement requiring payment as of or after the execution date of this Agreement

of consideration in excess of $50,000; (ix) material Contract of the Company or

any of its Subsidiaries relating to any intangible property (including any

Intellectual Property) or any other agreements affecting the Company's or any of

its Subsidiaries' ability to use or disclose any Intellectual Property; (x)

warranty agreement of the Company or any of its Subsidiaries relating to the

services rendered or products sold or leased by it; (xi) distribution, supply or

franchise agreement of the Company or any of its Subsidiaries; (xii) each

Contract of the Company or any of its Subsidiaries with a term of more than

three (3) months which is not terminable by the Company or one of its

Subsidiaries upon less than thirty-two (32) days' notice without material

penalty and involves a consideration in excess of $250,000 in the aggregate

annually; (xiii) Contract prohibiting the Company or any of its Subsidiaries

from freely engaging in business in any jurisdiction in the world in any

material respect; (xiv) Contract of the Company or any of its

<PAGE>

Subsidiaries which involves the processing, auditing, originating or servicing

of credit cards, including private label credit cards, debit cards, gift cards

and other prepaid cards, and the related accounts and receivables; and (xv)

Contract or group of related Contracts of the Company or any of its Subsidiaries

which involves a consideration in excess of $500,000 in the aggregate annually

other than purchase orders for inventory in the ordinary course of business

consistent with past practices of the Company and its Subsidiaries (the items

listed in clauses (i) through (xv) hereof, together with any Contract required

to be disclosed pursuant to Section 4.15 hereof, collectively, the "Material

Contracts"). The Company has made available to Acquisition Corp. a correct and

complete copy of each Material Contract listed in Section 4.17(a) of the Company

Disclosure Statement.

(b) Except as disclosed in Section 4.17(b) of the Company Disclosure

Schedule, (i) neither the Company nor any of its Subsidiaries is, nor to the

Company's knowledge, is any other party, in material default under any Material

Contract and (ii) there has not occurred any event that, with the lapse of time

or giving of notice or both, would constitute a material default. All Contracts

to which the Company or any of its Subsidiaries is a party, or by which any of

their respective assets are bound, are valid and binding, in full force and

effect and enforceable against the Company or any such Subsidiary, as the case

may be, and to the Company's knowledge, the other parties thereto in accordance

with their respective terms, subject to applicable bankruptcy, insolvency,

reorganization, moratorium or other similar laws relating to creditors' rights

generally and to the general principles of equity and except as would not be

material to the Company and its Subsidiaries, taken as a whole.

4.18 Environmental Laws. Except as disclosed in Section 4.18 of the Company

Disclosure Schedule:

(a) The Company and its Subsidiaries have complied and are in

compliance in all material respects with all Environmental Laws, including

without limitation all environmental permits required by Environmental Law for

the occupation of the Company's or its Subsidiaries' properties or facilities.

(b) Neither the Company nor any of its Subsidiaries has received any

written, or to the knowledge of the Company other notice or report regarding any

violation of, or liability under, Environmental Laws with respect to its past or

current operations or its past or current real properties or facilities which

would be material to the Company and its Subsidiaries, taken as a whole.

predecessor or affiliate of the Company or its Subsidiaries has treated, stored,

disposed of, arranged for or permitted the disposal of, transported, handled, or

released, or exposed any Person to, any substance, or owned or operated its

business or any property or facility (and no such property or facility is

contaminated by any such substance) in a manner that has given or would give

rise to any material or potentially material liabilities or material or

potentially material investigative, corrective or remedial obligations pursuant

to CERCLA or any other Environmental Laws.

(d) The Company has made available to Acquisition Corp. and Parent all

material environmental audits, reports and other material environmental

documents relating to

<PAGE>

the Company or any of its Subsidiaries or its or their current operations,

properties or facilities (and any past operations, properties or facilities with

respect to which environmental matters remain unresolved and are material to the

Company and its Subsidiaries taken as a whole) which are in their possession or

under its or their reasonable control.

(e) Except for any other representations in this Agreement expressly

referring to environmental matters, the representations contained in this

Section 4.18 shall be the exclusive representations and warranties with respect

to environmental matters (including, without limitation, compliance with

Environmental Laws and Hazardous Substances).

"Environmental Laws" shall mean all federal, state, local and foreign

statutes, regulations, ordinances and other requirements having the force or

effect of law, all judicial and administrative orders and determinations, and

all common law concerning public health and safety, worker health and safety,

and pollution or protection of the environment, as the foregoing are enacted or

in effect, on or prior to the Closing Date.

"Hazardous Substances" shall mean any hazardous, toxic or polluting

substance, material or waste or any other substance for which liability or

standards of conduct are imposed under Environmental Laws, and shall include

including petroleum or any derivative or by-product thereof, asbestos containing

materials, radioactive materials, odors, mold and polychlorinated biphenyls.

"Release" shall mean any release, spill, leak, discharge, disposal,

pumping, pouring, emitting, emptying, injecting, leaching, dumping or allowing

to escape.

4.19 Opinion of Financial Advisor. The Special Committee has received the

written opinion of Rothschild Inc. (the "Financial Advisor") to the effect that,

as of the date hereof, subject to the factors and assumptions in the opinion,

the Offer Price and the Merger Consideration to be received by the holders of

Common Shares other than Robert M. Goodfriend and his immediate family and

family trusts pursuant to the Offer and the Merger are fair to such holders from

a financial point of view. The Company has made available a copy of such opinion

to Parent.

4.20 Brokers. Except for the liability to the Financial Advisor pursuant to

the engagement letter delivered to Acquisition Corp. prior to the date hereof,

none of the Company or any of its Subsidiaries has or will have any liability

for any brokerage fees, commissions, finder's fees or investment banking fees

connection with the Transactions. Prior to the execution hereof, the Company has

made available to Parent a complete and correct copy of all agreements between

the Company and any broker, finder or investment banker pursuant to which any

such Person would be entitled to any payment relating the Transactions.

4.21 Special Committee and Company Board Recommendations. The Special

Committee has unanimously (i) declared the advisability of this Agreement and

the Transactions, (ii) determined that this Agreement and the Transactions,

including the Offer and the Merger, are fair to and in the best interests of the

shareholders of the Company, (iii) determined that the consideration to be paid

in the Offer and the Merger is fair to and in the best interests of the

shareholders of the Company, (iv) recommended that the Company Board approve and

adopt this

<PAGE>

Agreement and the Transactions, including the Offer and the Merger, (v)

recommended that the Company's shareholders accept the Offer and tender their

Common Shares, and (vi) subject to the provisions of Section 6.08 hereof,

resolved to recommend that the shareholders of the Company approve and adopt

this Agreement and the Merger and the other Transactions. Based upon the

recommendation of the Special Committee, the Company Board, at a meeting duly

called and held, has (i) declared the advisability of this Agreement and the

Transactions and approved and adopted this Agreement and the Transactions,

including the Offer and the Merger, in accordance with the Tenn. Acts and the

Company's charter and bylaws, (ii) determined that this Agreement and the

Transactions, including the Offer and the Merger, are fair to and in the best

interests of the shareholders of the Company, (iii) determined that the

consideration to be paid in the Offer and the Merger is fair to and in the best

interests of the shareholders of the Company and (iv) subject to the provisions

of Section 6.08 hereof, resolved to recommend that the shareholders of the

Company accept the Offer and tender their Common Shares and approve and adopt

this Agreement and the Merger and the other Transactions.

4.22 Required Shareholder Vote. The approval of this Agreement at the

Shareholders Meeting (as defined in Section 6.02) by the holders of a majority

of the issued and outstanding Common Shares entitled to vote at the Shareholders

Meeting (the "Shareholder Approval") is the only vote of the holders of any

class or series of the Company's securities necessary to adopt and approve this

Agreement, the Merger and the other Transactions.

4.23 Related Party Transactions. Except as set forth in Section 4.23 of the

Company Disclosure Schedule or otherwise disclosed in the SEC Reports, no

director, executive officer or any person who beneficially owns 5% or more of

the issued and outstanding Common Shares is a party to any Contract with or

binding upon the Company or any of its Subsidiaries or any of their respective

properties or assets or has any material interest in any material property owned

by the Company or any of its subsidiaries or has engaged in a transaction with

any of the foregoing within the last 12 months, in each case, that is of the

type that would be required to be disclosed under Item 404 of Regulation S-K

under the Securities Act.

4.24 Assets and Properties.

(a) The Company and its Subsidiaries have good title to, or a valid

leasehold interest in or valid right to use, all material properties and assets

used by them, located on their premises or shown on the consolidated balance

sheet of the Company and its Subsidiaries as of August 27, 2005 or acquired

after the date thereof, free and clear of all Liens (other than properties and

assets disposed of in the ordinary course of business since August 27, 2005,

except for Liens disclosed on such consolidated balance sheet, and except for

Permitted Liens). The Company and its Subsidiaries own, have a valid leasehold

interest in, or have the valid and enforceable right to use all assets, tangible

or intangible, necessary for the conduct of their businesses as presently

conducted. Except as set forth in Section 4.24(a) of the Company Disclosure

Schedule and except as would not have a Company Material Adverse Effect, all of

the Company's and its Subsidiaries' buildings (including all components of such

buildings, structures and other improvements), and all equipment, machinery,

fixtures, improvements and other tangible assets (whether owned or leased) are

in adequate condition and repair (ordinary wear and tear excepted) for the

operation of their businesses as presently conducted.

<PAGE>

(b) Section 4.24(b) of the Company Disclosure Schedule sets forth the

address and description of each parcel of Owned Real Property. With respect to

each parcel of Owned Real Property, except as set forth in Section 4.24(b) of

the Company Disclosure Schedule: (i) the Company or its Subsidiaries have fee

simple title, free and clear of all Liens except Permitted Liens as of the

Closing Date; (ii) neither the Company nor any of its Subsidiaries has leased or

otherwise granted to any Person the right to use or occupy such Owned Real

Property or any portion thereof; and (iii) there are no outstanding options,

rights of first offer or rights of first refusal to purchase such Owned Real

Property or any portion thereof or interest therein.

address of each parcel of Leased Real Property, and a complete list of all

Leases for each such Leased Real Property (including the date and name of the

parties to such Lease document). The Company has made available to Parent and

Acquisition Corp. a complete copy of each such Lease. Neither the Company nor

its Subsidiaries are party to any oral Leases. Except as set forth in Section

4.24(c) of the Company Disclosure Schedule, with respect to each of the Leases:

(i) as to the Company and its Subsidiaries, such Lease is legal, valid, binding,

enforceable and in full force and effect in all material respects; (ii) the

transaction contemplated by this Agreement does not require the consent of or

notice to any other party to such Lease, will not result in a material breach of

or material default under such Lease, will not give rise to any recapture or

similar rights, and will not otherwise cause such Lease to cease to be legal,

valid, binding, enforceable and in full force and effect on identical terms

following the Closing; (iii) none of the Company, its Subsidiaries, or, to the

knowledge of the Company, any other party to the Lease is in material breach or

material default under such Lease and no event, with the passage of time or

giving of notice or both, would constitute a material breach or default under

such Lease; (iv) the other party to such Lease is not an affiliate of the

Company or any of its Subsidiaries; (v) neither the Company nor any of its

Subsidiaries has subleased, licensed or otherwise granted any Person the

contractual right to use or occupy such Leased Real Property or any portion

thereof; (vi) neither the Company nor any of its Subsidiaries has collaterally

assigned or granted any other security interest in such Lease or any interest

therein; and (vii) there are no Liens on the estate or interest created by such

Lease except for Permitted Liens. Except as set forth in Section 4.24(c) of the

Company Disclosure Schedule, none of the Leases contain any capital expenditure

requirements or remodeling obligations of the Company or any of its Subsidiaries

other than ordinary maintenance and repair obligations.

(d) For purposes of this Agreement, "Permitted Liens" shall mean (i)

statutory landlord's, mechanic's, carrier's, workmen's, repairmen's or other

similar Liens arising or incurred in the ordinary course of business for amounts

which are not due and payable and which wo

SITE SEARCH

AGREEMENTS / CONTRACTS

CLAUSES

Search Contract Clauses >>

Browse Contract Clause Library>>

Get Email Updates