Exhibit 10.1

 

AMENDED AND RESTATED STOCKHOLDERS’ AGREEMENT

 

Dated as of November 30, 2005

 

among

 

Pathmark Stores, Inc.

 

and

 

The Investors Identified on the Signature Pages Hereto

 

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Table of Contents

 

ARTICLE 1
CERTAIN DEFINITIONS

 

 

 

 

SECTION 1.01

Certain Definitions

 

 

 

 

ARTICLE 2
CORPORATE GOVERNANCE

 

 

 

 

SECTION 2.01

Composition of the Board

 

SECTION 2.02

Vacancies

 

SECTION 2.03

Committees

 

SECTION 2.04

Certificate of Incorporation and By-Laws to Be Consistent

 

SECTION 2.05

Approval of the Investor Group Required for Certain Actions

 

SECTION 2.06

Approval of Independent Directors Required for Certain Actions

 

 

 

 

ARTICLE 3
VOTING OF SHARES

 

 

 

 

SECTION 3.01

Agreement with Respect to Voting of Common Stock

 

 

 

 

ARTICLE 4
STANDSTILL, ACQUISITIONS
OF SECURITIES AND OTHER MATTERS

 

 

 

 

SECTION 4.01

Acquisitions of Common Stock

 

SECTION 4.02

No Participation in a Group or Solicitation of Proxies

 

SECTION 4.03

Rights to Purchase New Securities

 

SECTION 4.04

Takeover Proposals by the Investor Group

 

SECTION 4.05

Affiliate Transactions

 

SECTION 4.06

Termination of Standstill Provisions

 

 

 

 

ARTICLE 5
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES

 

 

 

 

SECTION 5.01

General

 

SECTION 5.02

Improper Sale or Encumbrance

 

SECTION 5.03

Restrictive Legends

 

SECTION 5.04

Sales of Significant Interests

 

 

 

 

ARTICLE 6
CORPORATE OPPORTUNITIES AND RELATED MATTERS

 

 

 

 

SECTION 6.01

Similar Activities or Lines of Business

 

 

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ARTICLE 7
REPRESENTATIONS AND WARRANTIES

 

 

 

SECTION 7.01

Representations of the Company

 

SECTION 7.02

Representations of the Members of the Investor Group

 

 

 

 

ARTICLE 8
CONFIDENTIALITY

 

 

 

 

SECTION 8.01

Confidentiality

 

SECTION 8.02

Furnishing of Information

 

 

 

 

ARTICLE 9
MISCELLANEOUS

 

 

 

 

SECTION 9.01

Termination

 

SECTION 9.02

Notices

 

SECTION 9.03

No Third Party Beneficiaries

 

SECTION 9.04

Expenses

 

SECTION 9.05

Governing Law

 

SECTION 9.06

Waiver of Jury Trial

 

SECTION 9.07

Specific Performance

 

SECTION 9.08

Counterparts

 

SECTION 9.09

Entire Agreement

 

SECTION 9.10

Assignment

 

SECTION 9.11

Amendment

 

SECTION 9.12

Waiver

 

SECTION 9.13

Severability

 

SECTION 9.14

No Partnership

 

SECTION 9.15

Public Announcements

 

SECTION 9.16

Cumulative Remedies

 

SECTION 9.17

Interpretation; Headings

 

SECTION 9.18

Construction

 

SECTION 9.19

Director Duties

 

SECTION 9.20

Investors Rights

 

 

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STOCKHOLDERS’ AGREEMENT

 

This Amended and Restated Stockholders’ Agreement (this “Agreement”) is made as
of November 30, 2005, among Pathmark Stores, Inc., a Delaware corporation (the
“Company”), and the Investors identified on the signature pages hereto
(collectively, the “Investors”).

 

RECITALS

 

WHEREAS, the Company and the Investors previously entered into the Securities
Purchase Agreement dated as of March 23, 2005 (the “Securities Purchase
Agreement”) and, in connection therewith, entered into the Stockholders’
Agreement dated as of June 9, 2005 and amended and restated on August 23, 2005
(the “Amended Stockholders’ Agreement”);

 

WHEREAS, the consummation of the transactions contemplated by the Securities
Purchase Agreement has resulted in the Investors owning an aggregate of
20,000,000 investment units (“Units”), consisting of an aggregate of 20,000,000
shares (the “Shares”) of common stock, par value $0.01 per share, of the Company
(the “Common Stock”), 10,060,000 Series A warrants (the “Series A Investor
Warrants”) to purchase additional shares of Common Stock and 15,046,350 Series B
warrants (the “Series B Investor Warrants”; together with the Series A Investor
Warrants, the “Investor Warrants”) to purchase additional shares of Common Stock
(the Units, Shares and the Investor Warrants are collectively referred to herein
as the “Purchased Securities”); and

 

WHEREAS, the Company and the Investors wish to amend and restate the Amended
Stockholders’ Agreement to, among other things, change the authorized
composition of the Company’s Board of Directors (the “Board”) in order to allow
the reduction in the size of the Board.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements and
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

 

ARTICLE 1
CERTAIN DEFINITIONS

 

SECTION 1.01                    Certain Definitions.  As used in this Agreement,
the following terms shall have the following respective meanings:

 

“affiliate” means, with respect to a specified person, a person that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such specified person.

 

“beneficial owner” (and the related terms “beneficially owned”, “beneficial
owner” and “beneficial ownership”) has the meaning ascribed to such term in
Rule 13d-3 under the Exchange Act.

 

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“By-Laws” means the Amended and Restated By-Laws of the Company, effective
August 23, 2004, as they may hereafter be amended from time to time.

 

“Cash Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof,
(b) marketable direct obligations issued by any state of the United States or
any political subdivision of any such state or any public instrumentality
thereof maturing within one year from the date of acquisition thereof and, at
the time of acquisition, having the highest rating obtainable from either
Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc.,
(c) commercial paper maturing not more than one year from the date of issuance
thereof and, at the time of acquisition, having the highest rating obtainable
from either Standard & Poor’s Ratings Services or Moody’s Investors
Service, Inc., (d) certificates of deposit or bankers’ acceptances maturing
within one year from the date of acquisition thereof issued by any bank
organized under the Laws of the United States or any state thereof having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000, (e) demand deposit accounts maintained with any bank organized
under the Laws of the United States or any state thereof so long as the amount
maintained with any individual bank is less than or equal to $100,000 and is
insured by the Federal Deposit Insurance Corporation and (f) investments in
money market funds substantially all of whose assets are invested in the types
of assets described in clauses (a) through (e) above.

 

“Certificate of Incorporation” means the Amended and Restated Certificate of
Incorporation of the Company, dated as of September 19, 2000, as it may
hereafter be amended from time to time.

 

“Closing” means the closing on June 9, 2005 of the issuance, purchase and sale
of the Units pursuant to the Securities Purchase Agreement.

 

“Commission” means the Securities and Exchange Commission.

 

“Confidentiality Agreement” means the Confidentiality Agreement, dated as of
January 7, 2005, between an affiliate of the Investors and the Company.

 

“control” (including the terms “controlled by” and “under common control with”)
means the possession, directly or indirectly, or as trustee or executor, of the
power to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, as trustee or
executor, by contract, credit agreement or otherwise, including, without
limitation, the ownership, directly or indirectly, of securities having the
power to elect a majority of the board of directors or similar body governing
the affairs of such person.

 

“Discriminatory Transaction”  means any corporate action that would (a ) impose
material limitations on the legal rights of any member of the Investor Group as
a holder of a class of voting stock, including any action that would impose
material restrictions that are based on the size of security holding, any
business in which a security holder is engaged or any other considerations
applicable to any member of the

 

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Investor Group and not to holders of the same class of voting stock generally,
or (b) deny any material benefit to any member of the Investor Group
proportionately as a holder of any class of voting stock that is made available
to other holders of that same class of voting stock generally.

 

“Encumbrance” (including correlative terms such as “Encumber”) means any
security interest, pledge, mortgage, lien, charge, adverse claim of ownership or
use, hypothecation, violation, condition or restriction of any kind or other
encumbrance of any kind.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Fair Market Value” means, for any applicable measurement date, the closing
price of the Common Stock on Nasdaq or, in the event that trading hours on
Nasdaq are extended past 4:00 p.m. New York Time, the last sale price at
4:00 p.m. New York Time.

 

“Fully Diluted Basis” means, in respect of the Common Stock or warrants to
purchase shares of Common Stock, the method of calculating the number of shares
of Common Stock outstanding on an applicable measurement date, pursuant to which
the following shares shall be deemed to be outstanding:  (i) all shares of
Common Stock outstanding on such measurement date and (ii) all shares of Common
Stock issuable pursuant to any stock options of the Company or warrants
outstanding at such time which are or may become exercisable (assuming all other
conditions to or limitations on such exercise were satisfied) for shares of
Common Stock at an exercise price at or below the then current Fair Market Value
of the Common Stock.

 

“Geographic Region” means the States of Maine, New Hampshire, Vermont,
Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania,
Delaware, Maryland and Virginia and the District of Columbia.

 

“group” means a “group” within the meaning of Section 13(d)(3) of the Exchange
Act.

 

“Independence Standard” means the standard of independence necessary for a
director to qualify as an “Independent Director” as such term (or any
replacement term) is used under the rules and listing standards of Nasdaq as
such rules and listing standards may be amended from time to time.

 

“Independent Director” means such person who (a) complies with the Independence
Standards and (b) was designated by the Board prior to the Closing to serve as a
Continuing Independent Director (as defined in the Securities Purchase
Agreement) of the Board in accordance with Section 6.08 of the Securities
Purchase Agreement.  “Independent Director” shall also include any successor to
such Independent Director who is nominated and elected pursuant to Section 2.01
hereof or appointed or elected pursuant to Section 2.02 hereof by the then
current Independent Directors after the Closing to serve as an Independent
Director of the Board.

 

“Investor Designated Director” means such person who is so designated by the
Investors prior to the Closing, or the Investor Group after the Closing, from
time to time in accordance with this Agreement, to serve as a member of the
Board and who is nominated and elected pursuant to Section 2.01 hereof or
appointed or elected pursuant to Section 2.02 hereof to serve as a member of the
Board.

 

“Investor Group” means the Investors and any Permitted Transferee of the
Investors that has become a party to this Agreement in accordance with the
provisions of Section 5.01(c) hereof.

 

“Law” means any statute, law, ordinance, regulation, rule, code, executive
order, injunction, judgment, decree or other order issued or promulgated by any
national, supranational, state, federal, provincial, local or municipal
government or any administrative or regulatory body with authority therefrom
with jurisdiction over the Company or any member of the Investor Group, as the
case may be (including any requirements under the Exchange Act).

 

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“Management Agreement” means the Management Agreement dated as of March 23,
2005, between the Company and an affiliate of the Investors, as it may hereafter
be amended from time to time.

 

“Marketable Securities” means securities that are (a) (i) securities of or other
interests in any person that are traded on a United States national securities
exchange or quoted on the Nasdaq Stock Market or (ii) debt securities on market
terms of an issuer that has debt or equity securities that are so traded or so
reported on and in which Marketable Securities a nationally recognized
securities firm has agreed to make a market, and (b) not subject to restrictions
on transfer as a result of any applicable contractual provisions or the
provisions of the Securities Act or, if subject to such restrictions under the
Securities Act, are also subject to registration rights reasonably acceptable to
the person receiving such Marketable Securities as consideration in a
transaction pursuant to Section 4.03.

 

“Nasdaq” means The Nasdaq Stock Market, Inc.

 

“Nasdaq Regulation” means the rules and regulations of Nasdaq or any other
applicable securities exchange on which the Common Stock is then listed.

 

“New Securities” means any capital stock of the Company, whether now authorized
or not, and rights, options or warrants to purchase such capital stock, and
securities of any type whatsoever (including, without limitation, convertible
debt securities) that are, or may become, convertible into or exchangeable or
exercisable for capital stock of the Company; provided that the term “New
Securities” does not include (i) capital stock or rights, options or warrants to
acquire capital stock of the Company issued to the employees, consultants,
officers or directors of the Company, or which have been reserved for issuance,
pursuant to employee stock option, stock purchase, stock bonus plan, or other
similar compensation plan or arrangement approved by the Board, (ii) securities
of the Company issued to all then-existing stockholders in connection with any
stock split, stock dividend, reclassification or recapitalization of the
Company, (iii) securities of the Company issued upon the exercise of warrants
that are outstanding as of the date of this Agreement, (iv) securities of the
Company issued in connection with a transaction of the type described in
Rule 145 under the Securities Act, and (v) securities of the Company issued
pursuant to a bona fide underwritten public offering.

 

“Permitted Transferee” means, with respect to a specified person, any affiliate
of such person, provided that such person is not a Restricted Person.

 

“person” means any individual, corporation, partnership, limited partnership,
limited liability company, syndicate, person (including, without limitation, a
“person” or “group” within the meaning of Section 13(d)(3) of the Exchange Act),
trust, association, or entity or government, political subdivision, agency or
instrumentality of government.

 

The terms “register,” “registered” and “registration” refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act and the declaration or ordering of the effectiveness of such
registration statement by the Commission.

 

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“Related Agreements” means the Securities Purchase Agreement and the Management
Agreement, together with that certain Registration Rights Agreement and that
certain Warrant Agreement among the parties hereto and dated as of the date
hereof.

 

“Representative” means, as to any person, such person’s affiliates and its and
their directors, officers, employees, agents, advisors (including, without
limitation, financial advisors, counsel and accountants) and such person’s
financing sources.

 

“Restricted Person” means any person that derives at least 20% of its
consolidated revenues from the operation by it of retail supermarkets which are
located in the Geographic Region.

 

“Rule 144” means Rule 144 (or any successor provisions) under the Securities
Act.

 

“Sale” means, in respect of any Common Stock, Investor Warrants, or any other
voting capital stock, any sale, assignment, transfer, distribution or other
disposition thereof or of a participation therein, or other conveyance of legal
or beneficial interest therein, or any short position in a security or any other
action or position otherwise reducing risk related to ownership through hedging
or other derivative instruments, whether voluntarily or by operation of Law.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“Sell” and “Sold” means to complete a Sale.

 

“subsidiary” or “subsidiaries” of any person means any corporation, partnership,
limited liability company, joint venture, association or other legal entity of
which such person (either alone or together with any other subsidiary) owns,
directly or indirectly, more than 50% of the stock or other equity interests,
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other legal
entity.

 

A “Substantial Portion” of any person means, as of any date of determination,
more than 10% of the total consolidated assets of such person and its
subsidiaries as of the end of its most recent fiscal quarter ending prior to the
date of such determination.

 

Each of the following terms is defined in the Section set forth opposite such
term:

 

Term

 

Section

 

 

 

Agreement

 

Preamble

Board

 

Recitals

Change of Control Proposal

 

4.04

Common Stock

 

Recitals

 

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Term

 

Section

 

 

 

Company

 

Preamble

Confidential Information

 

8.01(b)

Covered Securities

 

5.01(a)

Credit Facility

 

2.05(f)

Initial Restricted Period

 

5.01(a)

Investor Warrants

 

Recitals

Investors

 

Preamble

Notice of Issuance

 

4.03(b)

Original Stockholders’ Agreement

 

Recitals

Purchased Securities

 

Recitals

Securities Purchase Agreement

 

Recitals

Series A Investor Warrants

 

Recitals

Series B Investor Warrants

 

Recitals

Shares

 

Recitals

Special Committee

 

4.04(b)

Subsidiary Board

 

2.01(f)

Units

 

Recitals

 

 

 

 

ARTICLE 2
CORPORATE GOVERNANCE

 

SECTION 2.01                                Composition of the Board.  (a)  The
By-Laws shall be amended to provide that the authorized number of directors
comprising the Board shall be not less than nine nor more than ten, unless
changed in accordance with the provisions of this Agreement and the By-Laws. 
The Board shall initially be composed of (i) four Investor Designated Directors,
(ii) five Independent Directors and (iii) one director, who shall be Chief
Executive Officer of the Company.  In the event that, immediately after the
Closing, there are less than six Independent Directors, the vacancies shall be
filled in the manner set forth in Section 2.02, except that the individual(s)
selected shall be subject to the consent of the Investor Group, which consent
shall not be unreasonably withheld.  The Investor Designated Directors and the
Independent Directors shall serve in a manner consistent with the terms of the
Certificate of Incorporation and By-Laws.

 

(B) FROM AND AFTER THE CLOSING, THE PARTIES HERETO SHALL USE ALL REASONABLE
EFFORTS UNDER APPLICABLE LAW AND NASDAQ REGULATIONS TO CAUSE THERE TO BE (I) SO
LONG AS THE INVESTOR GROUP BENEFICIALLY OWNS 30% OR MORE OF THE COMMON STOCK, A
NUMBER OF INVESTOR DESIGNATED DIRECTORS THAT IS ONE LESS THAN THE AUTHORIZED
NUMBER OF INDEPENDENT DIRECTORS; (II) SO LONG AS THE INVESTOR GROUP BENEFICIALLY
OWNS LESS THAN 30% BUT 20% OR MORE OF THE COMMON STOCK, A NUMBER OF INVESTOR
DESIGNATED DIRECTORS THAT IS TWO LESS THAN THE AUTHORIZED NUMBER OF INDEPENDENT
DIRECTORS;

 

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AND (III) SO LONG AS THE INVESTOR GROUP BENEFICIALLY OWNS LESS THAN 20% BUT 10%
OR MORE OF THE COMMON STOCK, A NUMBER OF INVESTOR DESIGNATED DIRECTORS THAT IS
THREE LESS THAN THE AUTHORIZED NUMBER OF INDEPENDENT DIRECTORS.  IN THE EVENT
THAT, AT ANY TIME, THE NUMBER OF INVESTOR DESIGNATED DIRECTORS THEN IN OFFICE
EXCEEDS THE NUMBER SET FORTH IN THE PRECEDING SENTENCE, AT THE REQUEST OF THE
MAJORITY OF THE INDEPENDENT DIRECTORS THEN IN OFFICE, AN APPROPRIATE NUMBER OF
INVESTOR DESIGNATED DIRECTORS SHALL RESIGN FROM OFFICE.  IN THE EVENT THE
INVESTOR GROUP BENEFICIALLY OWNS LESS THAN 10% OF THE COMMON STOCK, THE INVESTOR
GROUP SHALL HAVE NO RIGHT TO DESIGNATE ANY INVESTOR DESIGNATED DIRECTOR, AND, AT
THE REQUEST OF A MAJORITY OF THE INDEPENDENT DIRECTORS THEN IN OFFICE, SHALL
CAUSE ANY INVESTOR DESIGNATED DIRECTORS THEN IN OFFICE TO RESIGN IMMEDIATELY
UPON SUCH EVENT.  FOR PURPOSES OF THE CALCULATIONS OF THE PERCENTAGES SET FORTH
IN THIS SECTION 2.01(B), ANY SHARES OF VOTING EQUITY SECURITIES ISSUED AFTER THE
DATE OF THIS AGREEMENT (OTHER THAN SHARES OF COMMON STOCK ISSUED UPON EXERCISE
OF THE INVESTOR WARRANTS) SHALL NOT BE INCLUDED IN THE COMPUTATIONS OF
BENEFICIAL OWNERSHIP FOR PURPOSES OF THIS SECTION 2.01(B).

 

(C) AT EACH STOCKHOLDERS’ MEETING OF THE COMPANY AT WHICH DIRECTORS WILL BE
ELECTED, THE INVESTOR GROUP SHALL BE ENTITLED, ANY TIME PRIOR TO THE MAILING OF
THE APPLICABLE PROXY STATEMENT OF THE COMPANY, TO PROPOSE AND NOMINATE THAT
NUMBER OF INVESTOR DESIGNATED DIRECTORS AS SET FORTH IN SECTION 2.01(B) AS
MEMBERS OF THE BOARD.  THE INDEPENDENT DIRECTORS TO BE NOMINATED AND ELECTED AT
ANY SUCH STOCKHOLDERS’ MEETING SHALL BE NOMINATED BY A MAJORITY OF THE
INDEPENDENT DIRECTORS THEN IN OFFICE.  THE COMPANY AND THE BOARD WILL INCLUDE
THE PERSONS SO NOMINATED BY THE MEMBERS OF THE INVESTOR GROUP AND THE
INDEPENDENT DIRECTORS IN EACH SLATE OF DIRECTORS PROPOSED, RECOMMENDED OR
NOMINATED FOR ELECTION BY THE COMPANY OR THE BOARD AND WILL RECOMMEND AND USE
ALL REASONABLE EFFORTS TO CAUSE THE ELECTION OF SUCH PERSONS NOMINATED.  THE
COMPANY AGREES TO USE ALL REASONABLE EFFORTS TO SOLICIT PROXIES FOR SUCH
NOMINEES FOR DIRECTOR FROM ALL HOLDERS OF VOTING STOCK ENTITLED TO VOTE
THEREON.  SUCH NOMINEES SHALL SERVE IN A MANNER CONSISTENT WITH THE TERMS OF THE
CERTIFICATE OF INCORPORATION AND BY-LAWS.

 

(D) TO THE EXTENT REQUIRED BY NASDAQ REGULATIONS (AND WITHOUT REGARD TO THE FACT
THAT ONE OR MORE INVESTOR DESIGNATED DIRECTORS MAY ALSO SATISFY THE INDEPENDENCE
STANDARD), THOSE MEMBERS OF THE BOARD THAT ARE NEITHER INVESTOR DESIGNATED
DIRECTORS NOR THE CHIEF EXECUTIVE OFFICER OF THE COMPANY SHALL AT ALL TIMES
SATISFY THE INDEPENDENCE STANDARD.

 

(E) THE BOARD SHALL TAKE ALL NECESSARY ACTION, INCLUDING AMENDING THE BY-LAWS,
TO PROVIDE THAT AT EVERY MEETING OF THE BOARD, FIVE DIRECTORS SHALL CONSTITUTE A
QUORUM.

 

(F) AT ANY TIME AFTER THE CLOSING, UPON THE REQUEST OF THE INVESTOR GROUP, THE
COMPANY AND THE BOARD SHALL TAKE ALL ACTIONS NECESSARY SO THAT THE COMPOSITION
OF THE BOARD OF DIRECTORS, GENERAL PARTNER, MANAGING MEMBER (OR CONTROLLING
COMMITTEE THEREOF) OR ANY OTHER BOARD OR COMMITTEE SERVING A SIMILAR FUNCTION
WITH RESPECT TO EACH OF THE COMPANY’S SUBSIDIARIES (EACH A “SUBSIDIARY BOARD”)
AND EACH COMMITTEE OF EACH SUBSIDIARY BOARD SHALL BE PROPORTIONATE TO THE
COMPOSITION REQUIREMENTS OF THE BOARD AND OF EACH COMMITTEE THEREOF SUCH THAT
MEMBERS OF THE INVESTOR GROUP SHALL HAVE THE SAME PROPORTIONAL REPRESENTATION
(ROUNDED TO THE NEAREST WHOLE NUMBER OF DIRECTORS, BUT IN NO EVENT LESS THAN
ONE) ON EACH SUBSIDIARY BOARD AND COMMITTEE THEREOF AS THE MEMBERS OF

 

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THE INVESTOR GROUP HAVE THE RIGHT TO DESIGNATE TO THE BOARD AND COMMITTEES
THEREOF.  THE QUORUM AND ACTION REQUIREMENTS OF EACH SUBSIDIARY BOARD AND OF
EACH COMMITTEE OF EACH SUBSIDIARY BOARD SHALL, TO THE EXTENT REQUESTED BY THE
INVESTOR GROUP, BE THE SAME AS THE QUORUM AND ACTION REQUIREMENTS OF THE BOARD
AND EACH COMMITTEE THEREOF.

 

SECTION 2.02                    Vacancies.  In the event of any vacancy for any
reason in any Board seat reserved for Investor Designated Directors, the
Investor Group shall have the sole right to nominate another individual to serve
as an Investor Designated Director.  In the event of any vacancy for any reason
in any Board seat reserved for Independent Directors, a majority vote of the
Independent Directors then in office shall have the sole right to nominate
another individual to serve as an Independent Director, so long as he or she
complies with the Independence Standard, and such new director, when appointed
or elected, shall be an Independent Director for purposes of this Agreement.  In
the event of any vacancy for any reason in any Board seat reserved for the Chief
Executive Officer of the Company, subject to Section 2.06 of this Agreement, a
vote of a majority of the directors then in office, plus one director, shall
have the sole right but shall not be obligated to nominate any replacement Chief
Executive Officer of the Company as a director of the Company.  In each case, to
the extent permitted by the Certificate of Incorporation and By-Laws, the Board
shall elect each such person so nominated as soon as possible after the
occurrence of the nomination to fill such vacancy.  No Investor Designated
Director shall be removed as a director of the Company without cause, without
the approval of a majority of the other Investor Designated Directors then in
office.  No Independent Director shall be removed as a director of the Company
without cause, without the approval of a majority of the other Independent
Directors then in office.  No Chief Executive Officer Director shall be removed
as a director of the Company without cause, without the approval of a majority
of the other directors then in office, plus one director.

 

SECTION 2.03                    Committees.  (a)  The Board shall have such
committees as may be required by Law or Nasdaq Regulation, and such other
committees as the Board may from time to time establish.  Each such committee
and the Board shall take all actions necessary so that each such committee shall
be comprised of not less than three directors.  To the extent permitted by
Nasdaq Regulation, and subject to Section 2.03(b), a number of Investor
Designated Directors equal to one less than a majority of all directors serving
on each committee shall be appointed to such committee.

 

(B) TO THE EXTENT THAT NO INVESTOR DESIGNATED DIRECTOR IS PERMITTED UNDER NASDAQ
REGULATIONS TO SERVE ON A PARTICULAR COMMITTEE OF THE BOARD, THE COMPANY AND THE
BOARD SHALL TAKE ALL NECESSARY ACTION TO PERMIT AT LEAST ONE INVESTOR DESIGNATED
DIRECTOR TO ATTEND EACH MEETING OF SUCH COMMITTEE AS A NON-VOTING OBSERVER, IN
EACH CASE TO THE EXTENT PERMITTED BY SUCH NASDAQ REGULATION, AND SUCH OBSERVER
SHALL BE PROVIDED WITH SUCH NOTICE OF THE MEETING AND INFORMATION REGARDING THE
MEETING AS IS PROVIDED TO MEMBERS OF SUCH COMMITTEE.

 

SECTION 2.04                    Certificate of Incorporation and By-Laws to Be
Consistent.  The Board shall take or cause to be taken all lawful action
necessary or appropriate to ensure that none of the Certificate of Incorporation
or the By-Laws or any of the corresponding constituent documents of the
Company’s subsidiaries contain any provisions inconsistent with this Agreement
or which would in any way nullify or impair the terms of this Agreement or the
rights of the Company or of the Investor Group hereunder.

 

SECTION 2.05                    Approval of the Investor Group Required for
Certain Actions.  In addition to any approval by the Board required by the
Certificate of Incorporation, the By-Laws, applicable Law or Nasdaq Regulation,
the prior written approval of the

 

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Investor Group shall be required in order for the Board to validly approve and
authorize any of the following:

 

(A) THE ENTRY BY THE COMPANY OR ANY OF ITS SUBSIDIARIES INTO ANY MERGER OR
CONSOLIDATION, OR THE ACQUISITION (WHETHER BY MERGER, CONSOLIDATION, PURCHASE OF
ASSETS OR STOCK OR OTHERWISE) BY THE COMPANY OR ANY OF ITS SUBSIDIARIES OF ANY
BUSINESS OR ASSETS, IF THE VALUE OF THE CONSIDERATION TO BE PAID OR RECEIVED BY
THE COMPANY AND/OR ITS STOCKHOLDERS IN ANY SUCH INDIVIDUAL TRANSACTION, OR IN
SUCH TRANSACTION WHEN ADDED TO THE AGGREGATE VALUE OF THE CONSIDERATION PAID OR
RECEIVED BY THE COMPANY AND/OR ITS STOCKHOLDERS IN ALL OTHER SUCH TRANSACTIONS
APPROVED BY THE BOARD DURING THE PRECEDING 12 MONTHS, EXCEEDS A SUBSTANTIAL
PORTION OF THE COMPANY;

 

(B) THE AUTHORIZATION OR ISSUANCE OF ANY EQUITY SECURITIES OR ANY SECURITIES
CONVERTIBLE INTO OR EXERCISABLE FOR EQUITY SECURITIES OF THE COMPANY OR ANY
SUBSIDIARY OF THE COMPANY (OTHER THAN OPTIONS OR WARRANTS OUTSTANDING ON THE
DATE OF THIS AGREEMENT OR PURSUANT TO EMPLOYEE OR DIRECTOR STOCK OPTION OR
INCENTIVE COMPENSATION OR SIMILAR PLANS APPROVED BY THE BOARD OR A DULY
AUTHORIZED COMMITTEE OF THE BOARD AFTER THE DATE OF THIS AGREEMENT, INCLUDING BY
AT LEAST ONE OF THE INVESTOR DESIGNATED DIRECTORS ON SUCH BOARD OR COMMITTEE);

 

(C) ANY SALE, ASSET EXCHANGE, LEASE, EXCHANGE, MORTGAGE, PLEDGE, TRANSFER OR
OTHER DISPOSITION BY MERGER OR OTHERWISE BY THE COMPANY OR ANY OF ITS
SUBSIDIARIES (IN ONE TRANSACTION OR A SERIES OF RELATED TRANSACTIONS) OF ANY
SECURITIES OR ASSETS OF THE COMPANY OR ANY SUBSIDIARY THEREOF WHICH CONSTITUTES
A SUBSTANTIAL PORTION OF THE COMPANY;

 

(D) ANY AMENDMENT TO THE CERTIFICATE OF INCORPORATION OR BY-LAWS, OR THE
ADOPTION OF OR AMENDMENT TO THE CERTIFICATE OF INCORPORATION OR BY-LAWS OF ANY
SUBSIDIARY OF THE COMPANY;

 

(E) ANY CHANGE IN THE AUTHORIZED NUMBER OF DIRECTORS OF THE BOARD OF THE COMPANY
OR THE ESTABLISHMENT OR ABOLITION OF ANY BOARD COMMITTEE;

 

(F) ANY INCURRENCE OR REPAYMENT (PRIOR TO SCHEDULED MATURITY) OF INDEBTEDNESS
(INCLUDING CAPITALIZED LEASES) IN AN AGGREGATE AMOUNT GREATER THAN $10,000,000,
EXCEPT FOR BORROWINGS UNDER THE COMPANY’S EXISTING AMENDED AND RESTATED CREDIT
FACILITY DATED AS OF OCTOBER 1, 2004 (THE “CREDIT FACILITY”) AS SUCH CREDIT
FACILITY MAY BE AMENDED, RESTATED, REFINANCED OR REPLACED, IN WHOLE OR IN PART,
FROM TIME TO TIME WITH THE PRIOR WRITTEN APPROVAL OF THE INVESTOR GROUP;

 

(G) ANY ACTION TO REPURCHASE, RETIRE, REDEEM OR OTHERWISE ACQUIRE ANY EQUITY
SECURITIES OF THE COMPANY OR ANY SUBSIDIARY OF THE COMPANY, PURSUANT TO
SELF-TENDER OFFERS, STOCK REPURCHASE PROGRAMS, OPEN MARKET TRANSACTIONS,
PRIVATELY-NEGOTIATED PURCHASES OR OTHERWISE;

 

(H) THE ENTRY BY THE COMPANY OR ANY OF ITS SUBSIDIARIES INTO ANY DISCRIMINATORY
TRANSACTION;

 

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(I) TAKE ANY ACTION TO DECLARE, SET ASIDE, MAKE OR PAY ANY DIVIDEND OR OTHER
DISTRIBUTION, PAYABLE IN CASH, STOCK, PROPERTY OR OTHERWISE, WITH RESPECT TO ANY
OF ITS CAPITAL STOCK OR ENTER INTO ANY AGREEMENT WITH RESPECT TO THE VOTING OF
ITS CAPITAL STOCK;

 

(J) ANY APPOINTMENT OR TERMINATION OF ANY PERSON AS THE CHIEF EXECUTIVE OFFICER,
PRESIDENT OR CHIEF FINANCIAL OFFICER OF THE COMPANY; OR

 

(K) ANY ACTION TO ADOPT, PROPOSE TO ADOPT, OR MAINTAIN ANY SHAREHOLDERS’ RIGHTS
PLAN, “POISON PILL” OR OTHER SIMILAR PLAN OR AGREEMENT (OR ANY OTHER PLAN OR
ARRANGEMENT THAT COULD REASONABLY BE EXPECTED TO DISADVANTAGE ANY STOCKHOLDER ON
THE BASIS OF THE SIZE OR VOTING POWER OF ITS SHAREHOLDING).

 

The Company shall not, and shall not permit any of its subsidiaries to, take any
of the actions specified above without the Investor Group approvals required
above. Notwithstanding the foregoing, no approval of the Investor Group shall be
required for the Board to approve or authorize (a) the payment of any dividend
or the making of any other distributions by any subsidiary of the Company to the
Company or another subsidiary of the Company, (b) the payment by any subsidiary
of the Company of any indebtedness owed to the Company, (c) the making of any
loans by, or advances from, any subsidiary of the Company to the Company, or
(d) the transfer by any subsidiary of the Company of any of its property or
assets to the Company.

 

SECTION 2.06                    Approval of Independent Directors Required for
Certain Actions.  In addition to any approval by the Board required by the
Certificate of Incorporation, the By-Laws, applicable Law or Nasdaq Regulations,
the vote of at least one of the Independent Directors then in office shall be
required in order for the Board to approve and authorize any action; provided,
however,  that, at any time when the number of Independent Directors then in
office on the Board is five or more, the vote of at least two of the Independent
Directors then in office shall be required in order for the Board to approve and
authorize any of the following actions:

 

(A) ANY AMENDMENT TO THE CERTIFICATE OF INCORPORATION OR BY-LAWS, OR THE
ADOPTION OF OR AMENDMENT TO THE CERTIFICATE OF INCORPORATION OR BY-LAWS OF ANY
SUBSIDIARY OF THE COMPANY (OTHER THAN TO FILE ANY AMENDMENT THAT WOULD INCREASE
THE AMOUNT OF THE COMPANY’S AUTHORIZED COMMON STOCK OR ONE OR MORE CERTIFICATES
OF DESIGNATION TO ESTABLISH ONE OR MORE SERIES OF PREFERRED STOCK);

 

(B) ANY CHANGE IN THE AUTHORIZED NUMBER OF DIRECTORS OF THE BOARD OR THE
ESTABLISHMENT OR ABOLITION OF ANY BOARD COMMITTEE;

 

(C) THE ENTRY BY THE COMPANY OR ANY OF ITS SUBSIDIARIES INTO ANY MERGER OR
CONSOLIDATION, OR THE ACQUISITION (WHETHER BY MERGER, CONSOLIDATION, PURCHASE OF
ASSETS OR STOCK OR OTHERWISE) BY THE COMPANY OR ANY OF ITS SUBSIDIARIES OF ANY
BUSINESS OR ASSETS, IF THE VALUE OF THE CONSIDERATION TO BE PAID OR RECEIVED BY
THE COMPANY AND/OR ITS SUBSIDIARIES AND/OR THE COMPANY’S STOCKHOLDERS IN ANY
SUCH TRANSACTION EXCEEDS $100 MILLION;

 

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(D) TAKE ANY ACTION TO DECLARE, SET ASIDE, MAKE OR PAY ANY DIVIDEND OR OTHER
DISTRIBUTION, PAYABLE IN CASH, STOCK, PROPERTY OR OTHERWISE, WITH RESPECT TO ANY
OF ITS CAPITAL STOCK OR ENTER INTO ANY AGREEMENT WITH RESPECT TO THE VOTING OF
IT’S CAPITAL STOCK;

 

(E) ANY INCURRENCE OF INDEBTEDNESS (INCLUDING CAPITALIZED LEASES) WHICH WOULD,
WHEN COMBINED WITH ALL OTHER INDEBTEDNESS OF THE COMPANY AND ITS SUBSIDIARIES
THEN OUTSTANDING, AS REFLECTED ON THE MOST RECENT AVAILABLE CONSOLIDATED BALANCE
SHEET OF THE COMPANY PLUS INDEBTEDNESS INCURRED AFTER THE DATE OF SUCH BALANCE
SHEET, EXCEED $750 MILLION IN THE AGGREGATE; AND

 

(F) ANY ACTION TO REPURCHASE, RETIRE, REDEEM OR OTHERWISE ACQUIRE ANY EQUITY
SECURITIES OF THE COMPANY OR ANY SUBSIDIARY OF THE COMPANY, PURSUANT TO SELF-
TENDER OFFERS, STOCK REPURCHASE PROGRAMS, OPEN MARKET TRANSACTIONS, PRIVATELY
NEGOTIATED PURCHASES OR OTHERWISE TO THE EXTENT THAT THE AGGREGATE PAYMENTS MADE
BY THE COMPANY THEREFOR AFTER THE DATE OF THIS AGREEMENT EXCEED $100 MILLION.

 

Notwithstanding the foregoing, no approval of any Independent Directors shall be
required for the Board to approve or authorize (a) the payment of any dividend
or the making of any other distributions by any subsidiary of the Company to the
Company or another subsidiary of the Company, (b) the payment by any subsidiary
of the Company of any indebtedness owed to the Company, (c) the making of any
loans by, or advances from, any subsidiary of the Company to the Company, or
(d) the transfer by any subsidiary of the Company of any of its property or
assets to the Company.

 

ARTICLE 3
VOTING OF SHARES

 

SECTION 3.01                                Agreement with Respect to Voting of
Common Stock.  (a)  In any election of directors at a meeting of the
stockholders of the Company, the Investor Group shall cause all shares of Common
Stock held by them to be represented at such meeting either in person or by
proxy and shall vote their shares of voting stock for all nominees nominated by
the Independent Directors, in proportion to the votes cast by the holders of
Common Stock (other than the Investor Group); provided, however, that, in their
sole and absolute discretion, the Investor Group shall be permitted to cast a
greater number of votes held by them in excess of such proportion in favor of
the nominees nominated by the Independent Directors.

 

(B) WITH RESPECT TO ALL MATTERS SUBMITTED TO A VOTE OF HOLDERS OF COMMON STOCK
(EXCEPT AS PROVIDED IN SECTIONS 3.01(A)), THE INVESTOR GROUP MAY VOTE, OR
ABSTAIN FROM VOTING, OR FAIL TO VOTE, SOME OR ALL SHARES OF COMMON STOCK HELD BY
THEM, IN THEIR SOLE AND ABSOLUTE DISCRETION.

 

(C) THE INVESTOR GROUP SHALL NOT EXECUTE ANY WRITTEN CONSENT PURSUANT TO
SECTION 228 OF THE DELAWARE GENERAL CORPORATION LAW AS TO ANY SHARES
BENEFICIALLY OWNED BY THEM, EXCEPT FOR ANY WRITTEN CONSENT APPROVED BY A
MAJORITY OF THE INDEPENDENT DIRECTORS.

 

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ARTICLE 4
STANDSTILL, ACQUISITIONS
OF SECURITIES AND OTHER MATTERS

 

SECTION 4.01                    Acquisitions of Common Stock.  After the Closing
and until the fifth anniversary thereof, without the prior approval of a
majority of the Independent Directors then in office, the Investor Group shall
not purchase or otherwise acquire, directly or indirectly, beneficial ownership
of any shares of Common Stock such that the aggregate beneficial ownership of
the Investor Group, after giving effect to any such acquisition, is in excess of
49.9% (or such greater percentage as the Investor Group may beneficially own
immediately following the exercise, in whole or in part, of the Series B
Investor Warrants) of the Common Stock of the Company, except (i) by way of
stock splits, stock dividends, reclassifications, recapitalizations, or other
distributions by the Company to holders of the Common Stock, (ii) pursuant to
the exercise of the Investor Warrants in accordance with the terms thereof,
(iii) by acquisition of any New Securities pursuant to Section 4.03, or
(iv) pursuant to Section 4.04.

 

SECTION 4.02                    No Participation in a Group or Solicitation of
Proxies.  Except for actions permitted by, or taken in compliance with,
Sections 4.01, 4.03 and 4.04 and its exercise of rights pursuant to the
provisions of this Agreement, the Investor Group agrees that, prior to the fifth
anniversary of the Closing, it will not, without the prior approval of a
majority of the Independent Directors then in office, directly or indirectly:

 

(A) ACQUIRE, OFFER TO ACQUIRE, OR AGREE TO ACQUIRE, DIRECTLY OR INDIRECTLY, BY
PURCHASE OR OTHERWISE, ANY SECURITIES OR DIRECT OR INDIRECT RIGHTS TO ACQUIRE
ANY SECURITIES OF THE COMPANY OR ANY SUBSIDIARY THEREOF, OR OF ANY SUCCESSOR TO
OR PERSON IN CONTROL OF THE COMPANY, OR ANY ASSETS OF THE COMPANY OR ANY
DIVISION THEREOF OR OF ANY SUCH SUCCESSOR OR CONTROLLING PERSON;

 

(B) MAKE OR IN ANY WAY PARTICIPATE, DIRECTLY OR INDIRECTLY, IN ANY
“SOLICITATION” OF “PROXIES” (AS SUCH TERMS ARE USED IN THE RULES OF THE
COMMISSION) TO VOTE ANY VOTING SECURITIES OF THE COMPANY OR ANY SUBSIDIARY
THEREOF; PROVIDED, HOWEVER, THAT THE PROHIBITION IN THIS SECTION 4.02(B) SHALL
NOT APPLY TO SOLICITATIONS EXEMPTED FROM THE PROXY SOLICITATION RULES BY
RULE 14A-2 UNDER THE EXCHANGE ACT OR ANY SUCCESSOR PROVISION;

 

(C) SUBMIT TO THE BOARD A WRITTEN PROPOSAL FOR OR OFFER OF (WITH OR WITHOUT
CONDITIONS), ANY MERGER, RECAPITALIZATION, REORGANIZATION, BUSINESS COMBINATION
OR OTHER EXTRAORDINARY TRANSACTION INVOLVING THE COMPANY OR ANY SUBSIDIARY
THEREOF OR ANY OF THEIR SECURITIES OR ASSETS, OR MAKE ANY PUBLIC ANNOUNCEMENT
WITH RESPECT TO SUCH A PROPOSAL OR OFFER;

 

(D) ENTER INTO ANY DISCUSSIONS, NEGOTIATIONS, ARRANGEMENTS OR UNDERSTANDINGS
WITH ANY THIRD PARTY (OTHER THAN ANY PERSON THAT WOULD BE A PERMITTED
TRANSFEREE) WITH RESPECT TO ANY OF THE FOREGOING, OR OTHERWISE FORM, JOIN OR IN
ANY WAY ENGAGE IN DISCUSSIONS RELATING TO THE FORMATION OF, OR PARTICIPATE IN, A
GROUP WITH ANY THIRD PARTY (OTHER THAN ANY PERSON THAT WOULD BE A PERMITTED
TRANSFEREE), IN CONNECTION WITH ANY OF THE FOREGOING; OR

 

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(E) REQUEST THE COMPANY OR ANY OF ITS REPRESENTATIVES, DIRECTLY OR INDIRECTLY,
TO AMEND OR WAIVE ANY PROVISION OF THIS PARAGRAPH (INCLUDING THIS SENTENCE);

 

provided, however, that none of the foregoing (i) shall prevent, restrict,
Encumber or in any way limit the exercise of the fiduciary rights and
obligations of any Investor Designated Director as a director or prevent,
restrict, Encumber or in any way limit the ability of any Investor Designated
Director to vote on matters, influence officers, employees, agents, management
or the other directors of the Company, take any action or make any statement at
any meeting of the Board or any committee thereof, or otherwise to act in their
capacity as directors; (ii) shall prevent any member of the Investor Group from
Selling any Covered Securities held by it or voting its Common Stock;
(iii) shall apply to or restrict any discussions or other communications between
or among directors, members, officers, employees or agents of any member of the
Investor Group or any affiliate thereof; (iv) shall prohibit any member of the
Investor Group from soliciting, offering, seeking to effect or negotiating with
any person with respect to transfers of Covered Securities otherwise permitted
by Section 5.01 or (v) restrict any disclosure or statements required to be made
by any Investor Designated Director or the Investor Group under applicable Law
or Nasdaq Regulation.

 

SECTION 4.03                    Rights to Purchase New Securities.  (a)  In the
event that the Company proposes to issue New Securities, each member of the
Investor Group shall have the right to purchase, in lieu of the person to whom
the Company proposed to issue such New Securities, in accordance with paragraph
(b) below, a number of New Securities equal to the product of (i) the total
number or amount of New Securities which the Company proposes to issue at such
time and (ii) a fraction, the numerator of which shall be the total number of
shares of Common Stock which such member owns at such time on a Fully Diluted
Basis, and the denominator of which shall be the total number of shares of
Common Stock then outstanding on a Fully Diluted Basis.

 

(B) IN THE EVENT THAT THE COMPANY PROPOSES TO UNDERTAKE AN ISSUANCE OF NEW
SECURITIES, IT SHALL GIVE WRITTEN NOTICE (A “NOTICE OF ISSUANCE”) OF ITS
INTENTION TO EACH OF THE MEMBERS OF THE INVESTOR GROUP, DESCRIBING THE MATERIAL
TERMS OF THE NEW SECURITIES, INCLUDING THE PRICE THEREOF, AND THE MATERIAL TERMS
UPON WHICH THE COMPANY PROPOSES TO ISSUE SUCH NEW SECURITIES.  THE MEMBERS OF
THE INVESTOR GROUP SHALL HAVE 30 DAYS FROM THE DATE OF RECEIPT OF THE NOTICE OF
ISSUANCE TO AGREE TO PURCHASE ALL OR A PORTION OF SUCH MEMBER’S PRO RATA SHARE
OF SUCH NEW SECURITIES (AS DETERMINED PURSUANT TO PARAGRAPH (A) ABOVE) FOR THE
SAME CONSIDERATION, IF SUCH PROPOSED CONSIDERATION SHALL CONSIST SOLELY OF CASH,
OR, IF SUCH CONSIDERATION CONSISTS OF PROPERTY OR ASSETS OTHER THAN CASH, FOR
CASH, CASH EQUIVALENTS OR MARKETABLE SECURITIES HAVING AN EQUIVALENT VALUE (AS
REASONABLY DETERMINED BY A MAJORITY OF THE INDEPENDENT DIRECTORS) TO THE
CONSIDERATION PAYABLE BY THE PERSON TO WHOM THE COMPANY PROPOSES TO ISSUE SUCH
NEW SECURITIES AT THE TIME OF PAYMENT, AND OTHERWISE UPON THE TERMS SPECIFIED IN
THE NOTICE OF ISSUANCE BY GIVING WRITTEN NOTICE TO THE COMPANY AND STATING
THEREIN THE QUANTITY OF NEW SECURITIES TO BE PURCHASED BY SUCH MEMBER OF THE
INVESTOR GROUP AND THE ALLOCATION OF SUCH NEW SECURITIES AMONG THE MEMBERS.  THE
RIGHTS GIVEN BY THE COMPANY UNDER THIS SECTION 4.03(B) SHALL TERMINATE IF
UNEXERCISED WITHIN 30 DAYS AFTER RECEIPT OF THE NOTICE OF ISSUANCE REFERRED TO
IN THIS PARAGRAPH (B).

 

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(C) THE COMPANY AND EACH MEMBER OF THE INVESTOR GROUP, IF IT ELECTS TO PURCHASE
THE NEW SECURITIES TO BE SOLD BY THE COMPANY, SHALL SELECT A DATE NOT LATER THAN
20 DAYS (OR LONGER IF REQUIRED BY LAW) AFTER THE EXPIRATION OF THE 30-DAY NOTICE
PERIOD REFERENCED IN SECTION 4.03(B) FOR THE CLOSING OF THE PURCHASE AND SALE OF
THE NEW SECURITIES.  IN THE EVENT ANY PURCHASE BY THE MEMBERS OF THE INVESTOR
GROUP IS NOT CONSUMMATED, OTHER THAN AS A RESULT OF THE FAULT OF THE COMPANY,
WITHIN THE PROVIDED TIME PERIOD, THE COMPANY MAY ISSUE THE NEW SECURITIES
SUBJECT TO PURCHASE BY SUCH MEMBER FREE AND CLEAR FROM THE RESTRICTIONS UNDER
THIS SECTION 4.03.  ANY NEW SECURITIES NOT ELECTED TO BE PURCHASED BY SUCH
MEMBERS MAY BE SOLD BY THE COMPANY TO THE PERSON TO WHICH THE COMPANY INTENDED
TO SELL SUCH NEW SECURITIES ON TERMS AND CONDITIONS NO LESS FAVORABLE TO THE
COMPANY THAN THOSE OFFERED TO SUCH MEMBERS.

 

SECTION 4.04                    Takeover Proposals by the Investor Group.  No
member of the Investor Group shall, without the prior approval of a majority of
the Independent Directors then in office, submit a proposal to acquire a
majority of the Common Stock owned by persons other than the Investor Group (a
“Change of Control Proposal”) to any person unless either of the following
conditions are satisfied:

 

(A) THE CHANGE OF CONTROL PROPOSAL SHALL CONTEMPLATE EITHER (I) A TENDER OFFER
FOR ALL OUTSTANDING SHARES OF COMMON STOCK NOT OWNED BY THE INVESTOR GROUP AND
MUST BE CONDITIONED UPON A MAJORITY OF SUCH COMMON STOCK NOT OWNED BY THE
INVESTOR GROUP BEING TENDERED, OR (II) A MERGER, COMBINATION, ASSET SALE OR
OTHER SIMILAR TRANSACTION WHICH CONDITIONED UPON THE HOLDERS OF A MAJORITY OF
THE COMMON STOCK NOT OWNED BY THE INVESTOR GROUP PRESENT, IN PERSON OR BY PROXY,
AT A MEETING OF STOCKHOLDERS, VOTING IN FAVOR OF SUCH TRANSACTION.  IN THE CASE
OF EITHER (I) OR (II), THE SAME CONSIDERATION MUST BE OFFERED TO ALL OF THE
COMPANY’S STOCKHOLDERS (OTHER THAN THE INVESTOR GROUP); OR

 

(B) THE CHANGE OF CONTROL PROPOSAL SHALL CONTEMPLATE THAT A SPECIAL COMMITTEE OF
THE BOARD SHALL BE CREATED CONSISTING ONLY OF THE INDEPENDENT DIRECTORS (THE
“SPECIAL COMMITTEE”), THE SPECIAL COMMITTEE SHALL RETAIN A NATIONALLY RECOGNIZED
INVESTMENT BANKING FIRM TO ADVISE THE SPECIAL COMMITTEE WITH RESPECT TO THE
FAIRNESS OF THE CHANGE OF CONTROL PROPOSAL TO THE STOCKHOLDERS OF THE COMPANY
(OTHER THAN THE INVESTOR GROUP), AND THE CHANGE OF CONTROL PROPOSAL SHALL BE
APPROVED BY THE SPECIAL COMMITTEE, WHICH SHALL NOT GIVE ITS APPROVAL UNLESS IT
HAS RECEIVED AN OPINION FROM SUCH INVESTMENT BANKING FIRM THAT THE CHANGE OF
CONTROL PROPOSAL IS FAIR, FROM A FINANCIAL POINT OF VIEW, TO THE STOCKHOLDERS OF
THE COMPANY OTHER THAN ANY MEMBER OF THE INVESTOR GROUP.

 

SECTION 4.05                    Affiliate Transactions.  No member of the
Investor Group shall engage in any transaction with the Company without the
prior approval of a majority of the Independent Directors then in office; 
provided, however, that the foregoing provision shall not apply to any
transactions contemplated by this Agreement or any of the Related Agreements or
to any transactions involving the purchase or sale of goods or services in the
ordinary course of business which are consistent with guidelines adopted by the
Board from time to time and approved by a majority of the Independent Directors
then in office.

 

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SECTION 4.06                    Termination of Standstill Provisions.  The
provisions of Sections 4.01, 4.02 and 4.04 of this Agreement shall terminate
without any further action by any party upon the earlier of:

 

(I)                                     180 DAYS AFTER SUCH TIME AS THE INVESTOR
GROUP BENEFICIALLY OWNS LESS THAN 10% OF THE OUTSTANDING COMMON STOCK OF THE
COMPANY;

 

(II)                                  SUCH DATE AS THE BOARD DETERMINES TO
SOLICIT, OR PUBLICLY ANNOUNCES, WHETHER BY PRESS RELEASE, FILING WITH THE
COMMISSION OR OTHERWISE, ITS INTENTION TO SOLICIT, AN ACQUISITION PROPOSAL (AS
DEFINED IN THE SECURITIES PURCHASE AGREEMENT);

 

(III)                               SUCH DATE AS THE BOARD PUBLICLY APPROVES,
ACCEPTS, AUTHORIZES OR RECOMMENDS TO THE COMPANY’S STOCKHOLDERS THEIR APPROVAL
OF, OR THEIR CONVEYANCE OF ANY COMMON STOCK OR OTHER SECURITIES PURSUANT TO, ANY
ACQUISITION PROPOSAL;

 

(IV)                              SUCH DATE THAT THE COMPANY OR ANY AFFILIATE
THEREOF HAS ENTERED INTO A LETTER OF INTENT, AGREEMENT IN PRINCIPLE, DEFINITIVE
AGREEMENT, OR ANY OTHER AGREEMENT WITH ANY PARTY, WITH RESPECT TO AN ACQUISITION
PROPOSAL FOR THE COMPANY;

 

(V)                                 SUCH DATE THAT ANY PERSON OR GROUP, OTHER
THAN THE INVESTOR GROUP OR ANY OF ITS AFFILIATES, SHALL HAVE ACQUIRED OR
ANNOUNCED ITS INTENTION TO ACQUIRE, INCLUDING BY COMMENCEMENT OF A TENDER OFFER
OR EXCHANGE OFFER) BENEFICIAL OWNERSHIP OF 20% OF THE COMPANY’S OUTSTANDING
COMMON STOCK;

 

(VI)                              SUCH DATE AS THE COMPANY, THE BOARD OR ANY
COMMITTEE OF THE BOARD TAKES ANY ACTION, OR FAILS TO TAKE APPROPRIATE ACTION,
WHICH ACTION, OR FAILURE TO TAKE ACTION, RESULTS IN A BREACH OF ANY PROVISION OF
SECTION 2.05; AND

 

(VII)                           SUCH DATE AS THE COMPANY BREACHES THIS AGREEMENT
IN THAT THE NUMBER OF INVESTOR DESIGNATED DIRECTORS ON THE BOARD, ANY COMMITTEE
THEREOF OR ON ANY SUBSIDIARY BOARD OR ANY COMMITTEE THEREOF, IS LESS THAN THE
NUMBER OF DIRECTORS TO WHICH THE INVESTOR GROUP IS ENTITLED AT SUCH TIME
PURSUANT TO ARTICLE 2, SUBJECT TO NOTICE FROM THE MEMBERS OF THE INVESTOR GROUP
AND THE EXPIRATION OF A 30-DAY PERIOD IN WHICH TO CURE SUCH ACTION OR FAILURE TO
ACT (IF SUCH ACTION OR FAILURE TO ACT IS REASONABLY CAPABLE OF BEING CURED).

 

ARTICLE 5
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES

 

SECTION 5.01                    General.  (a)  Each member of the Investor Group
understands and agrees that the shares of Common Stock acquired pursuant to the
Securities Purchase Agreement have not been registered and are restricted
securities under the Securities Act.  During the period ending six months after
the Closing (the “Initial Restricted Period”), no member of the Investor Group
shall make or solicit any Sale of, or create, incur or assume any Encumbrance
with respect to, the Units, the Investor Warrants or any shares of Common Stock
now owned or hereafter acquired by it (collectively, the “Covered Securities”);
provided, however, that members of the

 

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Investor Group may, during the Initial Restricted Period, make or solicit a Sale
to a Permitted Transferee or as described in clauses (v), (vii) and
(viii) below.

 

(B) AFTER THE INITIAL RESTRICTED PERIOD (OTHER THAN WITH RESPECT TO CLAUSES (V),
(VII) AND (VIII) BELOW WHICH MAY OCCUR AT ANY TIME), EACH MEMBER OF THE INVESTOR
GROUP AGREES THAT NEITHER IT NOR ANY OF ITS AFFILIATES WILL MAKE ANY SALE OF, OR
CREATE, INCUR OR ASSUME ANY ENCUMBRANCE WITH RESPECT TO, ANY OF THE COVERED
SECURITIES EXCEPT FOR A SALE:

 

(I)                                     IN COMPLIANCE WITH RULE 144 UNDER THE
SECURITIES ACT;

 

(II)                                  (X)  PURSUANT TO A BONA FIDE PUBLIC
OFFERING REGISTERED UNDER THE SECURITIES ACT, OR

 

(Y) IN ONE OR MORE BLOCK TRADES OR PRIVATELY NEGOTIATED TRANSACTIONS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT;

 

PROVIDED, HOWEVER, THAT IN EACH CASE NO SALE UNDER THIS CLAUSE (II) IS MADE, TO
THE ACTUAL KNOWLEDGE OF SUCH MEMBER OF THE INVESTOR GROUP (WITHOUT INQUIRY IN
THE CASE OF A SALE PURSUANT TO THE PRECEDING CLAUSE (X)) TO ANY PERSON OR GROUP
THAT, AFTER GIVING EFFECT TO SUCH SALE, WOULD HAVE BENEFICIAL OWNERSHIP OF
COMMON STOCK REPRESENTING MORE THAN 5% OF THE VOTING POWER OF THE COMPANY’S
OUTSTANDING CAPITAL STOCK (EXCEPT THAT, IN THE CASE OF A TRANSFER TO A PERSON
SPECIFIED IN RULE 13D-1(B)(1)(II) PROMULGATED UNDER THE EXCHANGE ACT THAT WOULD
BE ELIGIBLE BASED ON SUCH PERSON’S STATUS AND PASSIVE INTENT WITH RESPECT TO THE
OWNERSHIP, HOLDING AND VOTING OF SUCH COVERED SECURITIES TO REPORT SUCH PERSON’S
OWNERSHIP OF COVERED SECURITIES ON SCHEDULE 13G (ASSUMING SUCH PERSON OWNED A
SUFFICIENT NUMBER OF SUCH COVERED SECURITIES TO REQUIRE SUCH FILING), NO SALE
UNDER THIS CLAUSE (II) IS MADE TO ANY SUCH PERSON THAT, AFTER GIVING EFFECT TO
SUCH SALE, WOULD HAVE BENEFICIAL OWNERSHIP OF COVERED SECURITIES REPRESENTING
10% OR MORE OF THE VOTING POWER OF THE COMPANY’S OUTSTANDING CAPITAL STOCK);
AND, PROVIDED, FURTHER, THAT IN THE CASE OF ANY SALE IN AN UNDERWRITTEN PUBLIC
OFFERING PURSUANT TO CLAUSE (X) ABOVE, THE MEMBERS OF THE INVESTOR GROUP SHALL
BE DEEMED TO HAVE FULFILLED THEIR OBLIGATIONS HEREUNDER IF THEY HAVE INSTRUCTED
THE UNDERWRITER(S) OF SUCH OFFERING TO USE THEIR REASONABLE EFFORTS TO PREVENT
ANY PURCHASE OF COVERED SECURITIES IN SUCH OFFERING BY ANY PERSON OR GROUP THAT
WOULD, UPON SUCH PURCHASE, EXCEED THE FOREGOING THRESHOLDS, AS APPLICABLE;

 

(III)                               TO PERMITTED TRANSFEREES IN ACCORDANCE WITH
SECTION 5.01(C) HEREOF;

 

(IV)                              OF 15% OR LESS OF THE COMMON STOCK ON A FULLY
DILUTED BASIS TO ANY PERSON, OTHER THAN ANY PERSON WHICH IS A RESTRICTED PERSON
IN A SALE IN WHICH THE CERTIFICATES REPRESENTING SUCH COVERED SECURITIES ISSUED
TO THE TRANSFEREE (X) BEAR THE LEGEND PROVIDED IN SECTION 5.03(A), IF REQUIRED
BY SUCH SECTION AND (Y) THE TRANSFEREE (IF

 

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NOT ALREADY A PARTY HERETO) HAS EXECUTED AND DELIVERED TO THE COMPANY, AS A
CONDITION PRECEDENT TO SUCH SALE, AN INSTRUMENT OR INSTRUMENTS, REASONABLY
ACCEPTABLE TO THE COMPANY, CONFIRMING THAT SUCH TRANSFEREE AGREES TO BE BOUND BY
THE OBLIGATIONS OF SUCH MEMBER OF THE INVESTOR GROUP UNDER THIS AGREEMENT.

 

(V)                                 TRANSFERS (I) PURSUANT TO ANY BUSINESS
COMBINATION, TENDER OR EXCHANGE OFFER TO ACQUIRE COMMON STOCK OR OTHER
EXTRAORDINARY TRANSACTION THAT THE BOARD HAS RECOMMENDED, OR (II) PURSUANT TO A
TENDER OR EXCHANGE OFFER THAT THE BOARD HAS NOT RECOMMENDED BUT ONLY AFTER SUCH
TIME AS A MAJORITY OF THE SHARES OF COMMON STOCK OUTSTANDING (OTHER THAN THOSE
OWNED BY THE INVESTOR GROUP) HAVE BEEN TENDERED INTO SUCH OFFER AND AFTER ALL
MATERIAL CONDITIONS WITH RESPECT TO SUCH OFFER (INCLUDING ANY FINANCING
CONDITION, ANY MINIMUM CONDITION WITH RESPECT TO NUMBER OF SHARES TENDERED AND
ANY CONDITION WITH RESPECT TO REMOVAL OF ANY ANTI-TAKEOVER PROTECTIONS) HAVE
BEEN SATISFIED OR IRREVOCABLY WAIVED BY THE OFFEROR; PROVIDED, HOWEVER, THAT NO
INVESTOR GROUP SECURITIES SHALL BE TENDERED INTO ANY TENDER OFFER OR EXCHANGE
OFFER NOT RECOMMENDED BY THE BOARD PRIOR TO THE TIME ALL SUCH MATERIAL
CONDITIONS (OTHER THAN ANY SUCH CONDITION THAT CAN BE SATISFIED ONLY AT THE
CLOSING OF SUCH OFFER) HAVE BEEN SATISFIED OR IRREVOCABLY WAIVED BY THE OFFEROR;

 

(VI)                              TRANSFERS TO THE COMPANY OR A SUBSIDIARY OF
THE COMPANY;

 

(VII)                           SWAPS, EXCHANGES, HEDGES OR OTHER SIMILAR
AGREEMENTS OR ARRANGEMENTS DESIGNED TO PROTECT AGAINST FLUCTUATIONS IN THE VALUE
OF THE EQUITY SECURITIES OF THE COMPANY AND NOT ENTERED INTO WITH THE PURPOSE OF
CIRCUMVENTING THE PROVISIONS OF THIS SECTION 5.01;

 

(VIII)                        PLEDGES OF COVERED SECURITIES IN CONNECTION WITH
ANY MARGIN LOAN OR OTHER EXTENSIONS OF CREDIT FROM A BROKER-DEALER, BANK OR
OTHER FINANCIAL INSTITUTION AND NOT ENTERED INTO WITH THE PURPOSE OF
CIRCUMVENTING THE PROVISIONS OF THIS SECTION 5.01; OR

 

(IX)                                IN ACCORDANCE WITH AND SUBJECT TO
SECTION 5.04.

 

(C) NO SALE OF COVERED SECURITIES TO A PERMITTED TRANSFEREE SHALL BE EFFECTIVE
UNTIL SUCH TIME AS SUCH PERMITTED TRANSFEREE HAS EXECUTED AND DELIVERED TO THE
COMPANY, AS A CONDITION PRECEDENT TO SUCH SALE, AN INSTRUMENT OR INSTRUMENTS,
REASONABLY ACCEPTABLE TO THE COMPANY, CONFIRMING THAT SUCH PERMITTED TRANSFEREE
AGREES TO BE BOUND BY ALL OBLIGATIONS OF THE INVESTOR GROUP HEREUNDER.  THE
INVESTOR GROUP SHALL NOT TRANSFER CONTROL OF A PERMITTED TRANSFEREE TO ANY
PERSON THAT IS NOT ALSO A PERMITTED TRANSFEREE IF A DIRECT SALE OF COVERED
SECURITIES TO SUCH PERSON WOULD VIOLATE THE PROVISIONS OF SECTION 5.01 OF THIS
AGREEMENT.

 

SECTION 5.02                    Improper Sale or Encumbrance.  Any attempt not
in compliance with this Agreement to make any Sale of, or create, incur or
assume any Encumbrance with respect to, any Covered Securities shall be null and
void and of no force and effect, the purported transferee shall have no rights
or privileges in or with respect to the Company, and the Company shall not give
any effect in the Company’s stock records to such attempted Sale or Encumbrance.

 

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SECTION 5.03                    Restrictive Legends.  (a)  Each certificate
evidencing the Covered Securities shall be stamped or otherwise imprinted with
legends in substantially the following form (in addition to any legends required
by agreement or by applicable state securities Laws):

 

(I)            THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED
FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF.  SUCH SECURITIES GENERALLY MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR PURSUANT TO AN APPLICABLE EXEMPTION FROM
THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.

 

(II)           THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO CERTAIN
RESTRICTIONS UNDER THE TERMS OF THE STOCKHOLDERS’ AGREEMENT DATED AS OF JUNE 9,
2005, AS AMENDED FROM TIME TO TIME, BETWEEN THE ISSUER AND THE HOLDER HEREOF AND
MAY NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE TERMS OF THAT AGREEMENT.

 

(B) EACH CERTIFICATE EVIDENCING ANY SHARES OF COMMON STOCK OR OTHER SECURITIES
OF THE COMPANY ACQUIRED BY ANY MEMBER OF THE YELLOWSTONE GROUP OTHER THAN THE
COVERED SECURITIES SHALL BE STAMPED OR OTHERWISE IMPRINTED WITH LEGENDS IN
SUBSTANTIALLY THE FOLLOWING FORM (IN ADDITION TO ANY LEGENDS REQUIRED BY
AGREEMENT OR BY APPLICABLE STATE SECURITIES LAWS):

 

THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO CERTAIN RESTRICTIONS UNDER THE
TERMS OF THE STOCKHOLDERS’ AGREEMENT DATED AS OF JUNE 9, 2005, AS AMENDED FROM
TIME TO TIME, BETWEEN THE ISSUER AND THE HOLDER HEREOF AND MAY NOT BE OFFERED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE TERMS
OF THAT AGREEMENT.

 

(C) EACH MEMBER OF THE INVESTOR GROUP CONSENTS TO THE COMPANY MAKING A NOTATION
ON ITS RECORDS AND GIVING INSTRUCTIONS TO ANY TRANSFER AGENT OF ITS CAPITAL
STOCK IN ORDER TO IMPLEMENT THE RESTRICTIONS ON TRANSFER ESTABLISHED IN THIS
AGREEMENT.

 

(D) THE COMPANY SHALL, AT THE REQUEST OF A HOLDER OF PURCHASED SECURITIES,
REMOVE FROM EACH CERTIFICATE EVIDENCING PURCHASED SECURITIES TRANSFERRED IN
COMPLIANCE WITH THE TERMS OF SECTION 5.01 AND WITH RESPECT TO WHICH NO RIGHTS OR
OBLIGATIONS UNDER THIS AGREEMENT SHALL TRANSFER, THE LEGEND DESCRIBED IN
SECTIONS 5.03(A)(II) AND (B), AND SHALL REMOVE FROM EACH CERTIFICATE EVIDENCING
SUCH PURCHASED SECURITIES THE LEGEND DESCRIBED IN SECTION 5.03(A)(I) IF, AT THE
REQUEST OF THE COMPANY, SUCH REQUESTING HOLDER PROVIDES, AT ITS

 

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EXPENSE, AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT THE SECURITIES
EVIDENCED THEREBY MAY BE TRANSFERRED WITHOUT THE IMPOSITION OF SUCH LEGEND.

 

SECTION 5.04                    Sales of Significant Interests.  Each member of
the Investor Group may Sell Covered Securities to a person that would, following
the consummation of such Sale, beneficially own more than 20% of the Common
Stock; provided, however, that, in the event that such Sale is not otherwise
permitted to be made pursuant to Section 5.01 above, such member of the Investor
Group conditions such Sale by them to such person upon such person
contemporaneously therewith acquiring, or offering to acquire, on the same price
and other financial terms and conditions as are applicable to such member of the
Investor Group in such Sale, a number of shares of Common Stock owned by
stockholders of the Company other than the Investor Group equal to the product
of (A) the aggregate number of shares of Common Stock owned by stockholders of
the Company other than the Investor Group, multiplied by (B) a fraction, the
numerator of which is the number of shares of Common Stock (including Common
Stock issuable upon the exercise of warrants) proposed to be Sold by such member
of the Investor Group to such person, and the denominator of which is the
aggregate number of shares of Common Stock (including shares of Common Stock
issuable upon the exercise of warrants) owned by such member of the Investor
Group on a Fully Diluted Basis on the date of such Sale.  In order for the
conditions in the preceding proviso to be satisfied, (A) such person shall make
such offer in compliance with applicable Law, including, if applicable,
Section 14(d)(1) of the Exchange Act and Regulation 14D promulgated thereunder
and (B) if as a result of such Sale, such person would, following such Sale,
beneficially own shares of Common Stock representing in the aggregate more than
20% of the Common Stock but less than 90% of the shares of Common Stock then
outstanding, such person must, in connection with the closing of such
transaction, agree to be bound by the obligations of the Investor Group under
this Agreement.  The provisions of this Section 5.04 shall only apply for as
long as the Investor Group beneficially owns at least 25% of the shares of
Common Stock.

 

ARTICLE 6
CORPORATE OPPORTUNITIES AND RELATED MATTERS

 

SECTION 6.01                    Similar Activities or Lines of Business.  

 

(A) THE COMPANY MAY FROM TIME TO TIME ENTER INTO AND PERFORM, ONE OR MORE
AGREEMENTS (OR MODIFICATIONS OR SUPPLEMENTS TO PRE-EXISTING AGREEMENTS) WITH A
MEMBER OF THE INVESTOR GROUP PURSUANT TO WHICH THE COMPANY, ON THE ONE HAND, AND
SUCH MEMBER, ON THE OTHER HAND, AGREE TO ENGAGE IN TRANSACTIONS OF ANY KIND OR
NATURE WITH EACH OTHER AND/OR AGREE TO COMPETE, OR TO REFRAIN FROM COMPETING OR
TO LIMIT OR RESTRICT THEIR COMPETITION, WITH EACH OTHER, INCLUDING TO ALLOCATE
AND TO CAUSE THEIR RESPECTIVE REPRESENTATIVES (INCLUDING ANY WHO ARE DIRECTORS,
OFFICERS OR EMPLOYEES OF BOTH) TO ALLOCATE OPPORTUNITIES BETWEEN OR TO REFER
OPPORTUNITIES TO EACH OTHER.  SUBJECT TO THIS SECTION 6.01, NO SUCH AGREEMENT,
OR THE PERFORMANCE THEREOF BY THE COMPANY OR THE MEMBERS OF THE INVESTOR GROUP,
SHALL, TO THE FULLEST EXTENT PERMITTED BY LAW, BE CONSIDERED CONTRARY TO (I) ANY
FIDUCIARY DUTY THAT A MEMBER OF THE INVESTOR GROUP MAY OWE TO THE COMPANY OR TO
ANY STOCKHOLDER OF THE COMPANY BY REASON OF THE INVESTOR GROUP BEING A
CONTROLLING OR SIGNIFICANT STOCKHOLDER OF THE COMPANY OR PARTICIPATING IN THE
CONTROL OF THE

 

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COMPANY OR (II) ANY FIDUCIARY DUTY OF ANY DIRECTOR OR OFFICER OF THE COMPANY WHO
IS ALSO A DIRECTOR, OFFICER, MEMBER OR EMPLOYEE OF A MEMBER OF THE INVESTOR
GROUP TO THE COMPANY OR TO ANY STOCKHOLDER THEREOF.  SUBJECT TO THIS
SECTION 6.01, TO THE FULLEST EXTENT PERMITTED BY LAW, A MEMBER OF THE INVESTOR
GROUP, AS A STOCKHOLDER OF THE COMPANY, OR AS A PARTICIPANT IN CONTROL OF THE
COMPANY, SHALL NOT HAVE OR BE UNDER ANY FIDUCIARY DUTY TO REFRAIN FROM ENTERING
INTO ANY AGREEMENT OR PARTICIPATING IN ANY TRANSACTION REFERRED TO ABOVE AND NO
DIRECTOR, OFFICER OR EMPLOYEE OF THE COMPANY WHO IS ALSO A DIRECTOR, OFFICER OR
EMPLOYEE OF A MEMBER OF THE INVESTOR GROUP SHALL HAVE OR BE UNDER ANY FIDUCIARY
DUTY TO THE COMPANY, TO REFRAIN FROM ACTING ON BEHALF OF THE COMPANY OR OF A
MEMBER OF THE INVESTOR GROUP IN RESPECT OF ANY SUCH AGREEMENT OR TRANSACTION OR
PERFORMING ANY SUCH AGREEMENT IN ACCORDANCE WITH ITS TERMS.

 

(B) EXCEPT AS OTHERWISE AGREED IN WRITING BETWEEN THE COMPANY AND THE INVESTOR
GROUP OR AS PROVIDED IN PARAGRAPH (D) BELOW, EACH MEMBER OF THE INVESTOR GROUP
SHALL TO THE FULLEST EXTENT PERMITTED BY LAW HAVE NO DUTY TO REFRAIN FROM
SERVING AS AN OFFICER OR DIRECTOR OF, OR INVESTING IN, ANY PERSON WHICH IS
(I) ENGAGED IN THE SAME OR SIMILAR BUSINESS AS THE COMPANY OR (II) DOING
BUSINESS WITH ANY CLIENT, CUSTOMER OR VENDOR OF THE COMPANY AND SUCH MEMBER OF
THE INVESTOR GROUP SHALL NOT, TO THE FULLEST EXTENT PERMITTED BY LAW, BE DEEMED
TO HAVE BREACHED ITS OR HIS FIDUCIARY DUTIES, IF ANY, TO THE COMPANY SOLELY BY
REASON OF ENGAGING IN ANY SUCH ACTIVITY.  EXCEPT AS OTHERWISE AGREED IN WRITING
BETWEEN THE COMPANY AND THE INVESTOR GROUP OR AS PROVIDED IN PARAGRAPH
(D) BELOW, IN THE EVENT THAT ANY MEMBER OF THE INVESTOR GROUP ACQUIRES KNOWLEDGE
OF A POTENTIAL TRANSACTION OR MATTER WHICH MAY BE A CORPORATE OPPORTUNITY FOR
BOTH A MEMBER OF THE INVESTOR GROUP AND THE COMPANY, SUCH MEMBER OF THE INVESTOR
GROUP SHALL TO THE FULLEST EXTENT PERMITTED BY LAW HAVE NO DUTY TO COMMUNICATE
OR OFFER SUCH CORPORATE OPPORTUNITY TO THE COMPANY AND SHALL NOT, TO THE FULLEST
EXTENT PERMITTED BY LAW, BE LIABLE TO THE COMPANY OR ITS STOCKHOLDERS FOR BREACH
OF ANY FIDUCIARY DUTY AS A STOCKHOLDER OF THE COMPANY BY REASON OF THE FACT THAT
SUCH MEMBER OF THE INVESTOR GROUP ACQUIRES OR SEEKS SUCH CORPORATE OPPORTUNITY
FOR ITSELF, DIRECTS SUCH CORPORATE OPPORTUNITY TO ANOTHER PERSON OR ENTITY, OR
OTHERWISE DOES NOT COMMUNICATE INFORMATION REGARDING SUCH CORPORATE OPPORTUNITY
TO THE COMPANY, AND THE COMPANY TO THE FULLEST EXTENT PERMITTED BY LAW SHALL
RENOUNCE ANY INTEREST OR EXPECTANCY IN SUCH BUSINESS OPPORTUNITY AND SHALL WAIVE
ANY CLAIM THAT SUCH BUSINESS OPPORTUNITY CONSTITUTED A CLAIM THAT SHOULD HAVE
BEEN PRESENTED TO THE COMPANY.

 

(C) EXCEPT AS OTHERWISE AGREED IN WRITING BETWEEN THE COMPANY AND THE INVESTOR
GROUP OR AS PROVIDED IN PARAGRAPH (D) BELOW, IN THE EVENT THAT A DIRECTOR OR
OFFICER OF THE COMPANY WHO IS ALSO AN OFFICER, DIRECTOR, MEMBER OR EMPLOYEE OF A
MEMBER OF THE INVESTOR GROUP ACQUIRES KNOWLEDGE OF A POTENTIAL TRANSACTION OR
MATTER WHICH MAY BE A CORPORATE OPPORTUNITY FOR BOTH THE COMPANY AND A MEMBER OF
THE INVESTOR GROUP, SUCH DIRECTOR OR OFFICER SHALL TO THE FULLEST EXTENT
PERMITTED BY LAW HAVE FULLY SATISFIED AND FULFILLED HIS OR HER FIDUCIARY DUTY
WITH RESPECT TO SUCH CORPORATE OPPORTUNITY, AND THE COMPANY TO THE FULLEST
EXTENT PERMITTED BY LAW SHALL RENOUNCE ANY INTEREST OR EXPECTANCY IN SUCH
BUSINESS OPPORTUNITY AND SHALL WAIVE ANY CLAIM THAT SUCH BUSINESS OPPORTUNITY
CONSTITUTED A CORPORATE OPPORTUNITY THAT SHOULD HAVE BEEN PRESENTED TO THE
COMPANY OR ANY OF ITS AFFILIATES, IF SUCH DIRECTOR OR OFFICER ACTS IN A MANNER
CONSISTENT WITH THE FOLLOWING POLICY: (I) A CORPORATE OPPORTUNITY OFFERED TO ANY
PERSON WHO IS AN OFFICER OF

 

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THE COMPANY AND WHO IS ALSO A DIRECTOR BUT NOT AN OFFICER OF A MEMBER OF THE
INVESTOR GROUP SHALL BELONG TO THE COMPANY, UNLESS SUCH OPPORTUNITY IS EXPRESSLY
OFFERED TO SUCH PERSON SOLELY IN HIS OR HER CAPACITY AS A DIRECTOR OF A MEMBER
OF THE INVESTOR GROUP, IN WHICH CASE SUCH OPPORTUNITY SHALL BELONG TO SUCH
MEMBER OF THE INVESTOR GROUP; (II) A CORPORATE OPPORTUNITY OFFERED TO ANY PERSON
WHO IS A DIRECTOR BUT NOT AN OFFICER OF THE COMPANY AND WHO IS ALSO A DIRECTOR
OR OFFICER OF A MEMBER OF THE INVESTOR GROUP SHALL BELONG TO THE COMPANY ONLY IF
SUCH OPPORTUNITY IS EXPRESSLY OFFERED TO SUCH PERSON SOLELY IN HIS OR HER
CAPACITY AS A DIRECTOR OF THE COMPANY AND OTHERWISE SHALL BELONG TO SUCH MEMBER
OF THE INVESTOR GROUP; AND (III) A CORPORATE OPPORTUNITY OFFERED TO ANY PERSON
WHO IS AN OFFICER OF BOTH THE COMPANY AND INVESTOR GROUP SHALL BELONG TO THE
COMPANY UNLESS SUCH OPPORTUNITY IS EXPRESSLY OFFERED TO SUCH PERSON SOLELY IN
HIS OR HER CAPACITY AS AN OFFICER OF A MEMBER OF THE INVESTOR GROUP, IN WHICH
CASE SUCH OPPORTUNITY SHALL BELONG TO SUCH MEMBER OF THE INVESTOR GROUP.

 

(D) NO MEMBER OF THE INVESTOR GROUP NOR ANY OF THEIR RESPECTIVE AFFILIATES
(OTHER THAN THE COMPANY OR THEIR RESPECTIVE SUBSIDIARIES) SHALL, DIRECTLY OR
INDIRECTLY, ENTER INTO, OR AGREE OR COMMIT TO ENTER INTO, ANY MATERIAL
INVESTMENT, IN OR OTHERWISE EXPLOIT ANY BUSINESS OPPORTUNITY PRIMARILY RELATED
TO, ANY RESTRICTED PERSON (OTHER THAN AN INVESTMENT IN THE SHARES OF ANY PUBLIC
COMPANY REPRESENTING LESS THAN 20% OF SUCH COMPANY’S FULLY DILUTED COMMON
EQUITY) EXCEPT WITH THE APPROVAL OF A MAJORITY OF THE INDEPENDENT DIRECTORS THEN
IN OFFICE.

 

(E) AS USED IN THIS SECTION 6.01, THE TERM “COMPANY” INCLUDES ALL OF ITS
SUBSIDIARIES, AND THE TERM “INVESTOR GROUP” INCLUDES ALL OF ITS AFFILIATES
(OTHER THAN THE COMPANY).

 

ARTICLE 7
REPRESENTATIONS AND WARRANTIES

 

SECTION 7.01                    Representations of the Company.  The Company
hereby represents and warrants to the Investor Group that:

 

(A) THE EXECUTION, DELIVERY AND PERFORMANCE BY THE COMPANY OF THIS AGREEMENT AND
THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS CONTEMPLATED HEREBY ARE
WITHIN THE COMPANY’S POWER AND AUTHORITY AND HAVE BEEN DULY AUTHORIZED BY ALL
NECESSARY CORPORATE ACTION.  THIS AGREEMENT CONSTITUTES A VALID AND BINDING
AGREEMENT OF THE COMPANY, ENFORCEABLE AGAINST THE COMPANY IN ACCORDANCE WITH ITS
TERMS.

 

(B) THE EXECUTION, DELIVERY AND PERFORMANCE BY THE COMPANY OF THIS AGREEMENT
REQUIRES NO ACTION BY OR IN RESPECT OF, OR FILING WITH, ANY GOVERNMENTAL BODY,
AGENCY, OFFICIAL OR AUTHORITY, OTHER THAN (I) COMPLIANCE WITH ANY APPLICABLE
REQUIREMENTS OF THE FEDERAL SECURITIES LAWS; AND (II) COMPLIANCE WITH ANY
APPLICABLE FOREIGN OR STATE SECURITIES OR BLUE SKY LAWS.

 

(C) THE EXECUTION, DELIVERY AND PERFORMANCE BY THE COMPANY OF THIS AGREEMENT AND
THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS CONTEMPLATED HEREBY DO NOT
AND WILL NOT (I) CONTRAVENE OR CONFLICT WITH THE CERTIFICATE OF INCORPORATION OR

 

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THE BY-LAWS, AND (II) ASSUMING COMPLIANCE WITH THE MATTERS REFERRED TO IN
SECTION 7.01(B), CONTRAVENE OR CONFLICT WITH OR CONSTITUTE A VIOLATION OF,
PROVISION OF ANY LAW APPLICABLE TO THE COMPANY.

 

SECTION 7.02                    Representations of the Members of the Investor
Group.  Each member of the Investor Group hereby represents, jointly and
severally, that:

 

(A) THE EXECUTION, DELIVERY AND PERFORMANCE BY SUCH MEMBER OF THE INVESTOR GROUP
OF THIS AGREEMENT AND THE CONSUMMATION BY SUCH MEMBER OF THE INVESTOR GROUP OF
THE TRANSACTIONS CONTEMPLATED HEREBY ARE WITHIN EACH SUCH MEMBER’S POWER AND
AUTHORITY AND HAVE BEEN DULY AUTHORIZED BY ALL REQUISITE ACTION ON THE PART OF
SUCH MEMBER. THIS AGREEMENT CONSTITUTES A VALID AND BINDING AGREEMENT OF EACH
MEMBER OF THE INVESTOR GROUP, ENFORCEABLE AGAINST SUCH MEMBER OF THE INVESTOR
GROUP IN ACCORDANCE WITH ITS TERMS.

 

(B) THE EXECUTION, DELIVERY AND PERFORMANCE BY SUCH MEMBER OF THE INVESTOR GROUP
OF THIS AGREEMENT REQUIRE NO ACTION BY OR IN RESPECT OF, OR FILING WITH, ANY
GOVERNMENTAL BODY, AGENCY, OFFICIAL OR AUTHORITY, OTHER THAN (I) COMPLIANCE WITH
ANY APPLICABLE REQUIREMENTS OF THE FEDERAL SECURITIES LAWS; AND (II) COMPLIANCE
WITH ANY APPLICABLE FOREIGN OR STATE SECURITIES OR BLUE SKY LAWS.

 

(C) THE EXECUTION, DELIVERY AND PERFORMANCE BY SUCH MEMBER OF THE INVESTOR GROUP
OF THIS AGREEMENT AND THE CONSUMMATION BY SUCH MEMBER OF THE INVESTOR GROUP OF
THE TRANSACTIONS CONTEMPLATED HEREBY DO NOT AND WILL NOT (I) CONTRAVENE OR
CONFLICT WITH THE ORGANIZATIONAL DOCUMENTS OF SUCH MEMBER, AND (II) ASSUMING
COMPLIANCE WITH THE MATTERS REFERRED TO IN SECTION 7.02(B), CONTRAVENE OR
CONFLICT WITH OR CONSTITUTE A VIOLATION OF, PROVISION OF ANY LAW.

 

ARTICLE 8
CONFIDENTIALITY

 

SECTION 8.01                                Confidentiality.  (a)  Unless
otherwise agreed to in writing by the Company, each member of the Investor
Group, on behalf of itself and its Representatives, agrees (i) except as
required by Law, to keep confidential and not to disclose or reveal any
Confidential Information (as defined below) to any person (other than such
member’s Representatives), (ii) not to use Confidential Information for any
purpose other than in connection with its ownership of Company securities and
not in any way detrimental to the Company or its stockholders and (iii) except
as required by Law, not to disclose to any person (other than such member’s
Representatives) any Confidential Information.  In the event that any member of
the Investor Group or its Representatives are requested pursuant to, or required
by, Law to disclose any Confidential Information, such member of the Investor
Group agrees that it will provide the Company with prompt notice of such request
or requirement in order to enable the Company to seek an appropriate protective
order or other remedy (and if the Company seeks such an order, such person will
provide such cooperation as the Company shall reasonably request) or to consult
with such member with respect to the Company taking steps to resist or narrow
the scope of such request or legal process.

 

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(B) “CONFIDENTIAL INFORMATION” MEANS ALL INFORMATION ABOUT THE COMPANY FURNISHED
BY THE COMPANY, WHETHER FURNISHED BEFORE OR AFTER THE DATE HEREOF, WHETHER ORAL
OR WRITTEN, AND REGARDLESS OF THE MANNER OR FORM IN WHICH IT IS FURNISHED,
INCLUDING, WITHOUT LIMITATION, ALL NOTES, ANALYSES, COMPILATIONS, STUDIES,
FORECASTS, INTERPRETATIONS OR OTHER DOCUMENTS PREPARED BY ANY MEMBER OF THE
INVESTOR GROUP OR ITS REPRESENTATIVES WHICH CONTAIN, REFLECT OR ARE BASED UPON,
IN WHOLE OR IN PART, THE INFORMATION FURNISHED TO ANY MEMBER OF THE INVESTOR
GROUP OR ITS REPRESENTATIVES.  CONFIDENTIAL INFORMATION DOES NOT INCLUDE,
HOWEVER, INFORMATION WHICH (I) IS OR BECOMES GENERALLY AVAILABLE TO THE PUBLIC
OTHER THAN AS A RESULT OF A DISCLOSURE BY ANY MEMBER OF THE INVESTOR GROUP OR
ITS REPRESENTATIVES IN VIOLATION OF THIS AGREEMENT, THE CONFIDENTIALITY
AGREEMENT OR OTHER OBLIGATION OF CONFIDENTIALITY, (II) WAS AVAILABLE TO ANY
MEMBER OF THE INVESTOR GROUP ON A NON-CONFIDENTIAL BASIS PRIOR TO ITS DISCLOSURE
BY THE COMPANY TO SUCH MEMBER, OR (III) BECOMES AVAILABLE TO ANY MEMBER OF THE
INVESTOR GROUP ON A NON-CONFIDENTIAL BASIS FROM A PERSON (OTHER THAN THE
COMPANY) WHO IS NOT PROHIBITED FROM DISCLOSING SUCH INFORMATION TO ANY MEMBER OF
THE INVESTOR GROUP BY A LEGAL, CONTRACTUAL OR FIDUCIARY OBLIGATION TO THE
COMPANY.

 

(C) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, ANY
INVESTOR DESIGNATED DIRECTOR SHALL BE PERMITTED TO PROVIDE TO MEMBERS OF THE
INVESTOR GROUP AND THEIR REPRESENTATIVES INFORMATION CONCERNING THE COMPANY THAT
SUCH INDIVIDUALS RECEIVE IN THEIR CAPACITY AS DIRECTORS;  PROVIDED, HOWEVER,
THAT WITH RESPECT TO ANY SUCH INFORMATION PROVIDED, THE INVESTOR GROUP AND ITS
REPRESENTATIVES SHALL BE BOUND BY THE SAME RESTRICTIONS ON DISCLOSURE AND USE OF
CONFIDENTIAL INFORMATION AS APPLY TO SUCH INVESTOR DESIGNATED DIRECTORS IN THEIR
CAPACITY AS DIRECTORS, IN ADDITION TO ANY APPLICABLE RESTRICTIONS UNDER THIS
ARTICLE VIII.

 

(D) AS USED IN THIS ARTICLE VIII, THE TERM “COMPANY” INCLUDES THE COMPANY AND
ALL OF ITS SUBSIDIARIES, AND THE TERM “INVESTOR GROUP” INCLUDES THE MEMBERS OF
THE INVESTOR GROUP AND ALL OF THEIR RESPECTIVE AFFILIATES (OTHER THAN THE
COMPANY).

 

SECTION 8.02                    Furnishing of Information.  The Company shall
furnish or make available to each member of the Investor Group and its
Representatives any documents filed by the Company pursuant to each of Sections
13, 14 and 15(d) of the Exchange Act and all annual, quarterly or other reports
furnished to the Company’s public security holders and all such other
information concerning the Company and its subsidiaries as such member of the
Investor Group may reasonably request.  The Company shall provide each member of
the Investor Group and its Representatives with reasonable access to the books
and records of the Company and its subsidiaries during normal business hours
upon reasonable notice, including without limitation, financial data (including
projections) and operating data covering each of such entities, their
businesses, operations and financial performance.

 

ARTICLE 9
MISCELLANEOUS

 

SECTION 9.01                    Termination.   This Agreement shall terminate
upon the earliest to occur of:

 

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(I)                                     WRITTEN AGREEMENT TO THAT EFFECT, SIGNED
BY ALL PARTIES HERETO OR ALL PARTIES THEN POSSESSING ANY RIGHTS HEREUNDER;

 

(II)                                  THE INVESTOR GROUP CEASING TO BENEFICIALLY
OWN AT LEAST 10% OF THE COMMON STOCK ON A FULLY DILUTED BASIS; PROVIDED THAT
PRIOR TO SUCH TERMINATION THE INVESTOR DESIGNATED DIRECTORS SHALL HAVE RESIGNED
IF REQUIRED TO DO SO UNDER SECTION 2.01(B) OF THIS AGREEMENT;

 

(III)                               THE INVESTOR GROUP BECOMING THE BENEFICIAL
OWNER OF 90% OR MORE OF THE COMMON STOCK ON A FULLY DILUTED BASIS; AND

 

(IV)                              ON THE DATE THAT IS THE FIFTH ANNIVERSARY OF
THE DATE OF THIS AGREEMENT;.

 

provided that no termination of this Agreement pursuant to this Section 9.01
shall affect the right of any party to recover damages for any breach of the
representations, warranties or covenants herein that occurred prior to such
termination; and, provided, further, that the provisions of Article VIII shall
continue in effect for a period of 18 months following any such termination.

 

SECTION 9.02                    Notices.  All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by recognized overnight courier service to the respective parties at
the following addresses (or at such other address for a party as shall be
specified by notice given in accordance with this Section 9.02):

 

(A) IF TO THE COMPANY:

 

Pathmark Stores, Inc.
200 Milik Street
Carteret, New Jersey 07008
Attention:  Marc A. Strassler

 

with a copy to:

 

Shearman & Sterling LLP
599 Lexington Avenue
New York, New York  10022
Telecopy No.:  (212) 848-7179
Attention:  W. Jeffrey Lawrence

 

(B) IF TO ANY MEMBER OF THE INVESTOR GROUP:

 

9130 W. Sunset Boulevard

Los Angeles, California 90069

Attention:  Robert P. Bermingham

 

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with a copy to:

 

Latham & Watkins LLP
633 West Fifth Street, Suite 4000
Los Angeles, CA  90071-2007
Telecopy No.:  (213) 891-8763
Attention:  Thomas C. Sadler

 

SECTION 9.03                    No Third Party Beneficiaries.  This Agreement
shall be binding upon and inure solely to the benefit of each party hereto and,
to the extent permitted by this Agreement, their respective successors and
permitted assigns, and nothing herein, express or implied, is intended to or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.

 

SECTION 9.04                    Expenses.  Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs or expenses.

 

SECTION 9.05                    Governing Law.  This Agreement shall be governed
by, and construed in accordance with, the Laws of the State of New York, except
as to matters governed by the internal corporation Laws of the State of
Delaware.  All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined exclusively in any New York state or
federal court, in each case sitting in the Borough of Manhattan.  The parties
hereto hereby (a) submit to the exclusive jurisdiction of any New York state or
federal court, in each case sitting in the Borough of Manhattan, for the purpose
of any action or proceeding arising out of or relating to this Agreement brought
by any party hereto, and (b) irrevocably waive, and agree not to assert by way
of motion, defense, or otherwise, in any such action or proceeding, any claim
that it is not subject personally to the jurisdiction of the above-named courts,
that its property is exempt or immune from attachment or execution, that the
action or proceeding is brought in an inconvenient forum, that the venue of the
action or proceeding is improper, or that this Agreement or the transactions
contemplated hereby may not be enforced in or by any of the above-named courts.

 

SECTION 9.06                    Waiver of Jury Trial.  Each of the parties
hereto hereby waives to the fullest extent permitted by applicable Law any right
it may have to a trial by jury with respect to any litigation directly or
indirectly arising out of, under or in connection with this Agreement or the
transactions contemplated hereby.  Each of the parties hereto (a) certifies that
no representative, agent or attorney of any other party has represented,
expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce that foregoing waiver and (b) acknowledges that it
and the other parties hereto have been induced to enter into this Agreement and
the transactions contemplated hereby, as applicable, by, among other things, the
mutual waivers and certifications in this Section 9.06.

 

SECTION 9.07                    Specific Performance.  The parties hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties
hereto shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at Law or in equity.

 

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SECTION 9.08                    Counterparts.  This Agreement may be executed
and delivered (including by facsimile transmission) in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.

 

SECTION 9.09                    Entire Agreement.  This Agreement and the
Related Agreements constitute the entire agreement among the parties with
respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both written and oral, (including, without
limitation the Confidentiality Agreement and that certain Exclusivity Agreement
dated as of March 9, 2005), among the parties, or any of them, with respect to
the subject matter hereof and thereof.

 

SECTION 9.10                    Assignment.  This Agreement shall not be
assigned by operation of Law or otherwise without the express written consent of
the parties hereto (which consent may be granted or withheld in the sole
discretion of any party) and any such assignment or attempted assignment without
such consent shall be void.

 

SECTION 9.11                    Amendment.  This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
Company and each member of the Investor Group or (b) by a waiver in accordance
with Section 9.12.

 

SECTION 9.12                    Waiver.  Any party to this Agreement may
(a) extend the time for the performance of any of the obligations or other acts
of the other party or (c) waive compliance with any of the agreements of the
other party or conditions to such party’s obligations contained herein.  Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party to be bound thereby.  Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
or condition of this Agreement.  The failure of any party hereto to assert any
of its rights hereunder shall not constitute a waiver of any of such rights. 
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.

 

SECTION 9.13                    Severability.  If any term or other provision of
this Agreement is held to be invalid, illegal or incapable of being enforced by
any rule of Law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect for so long as the
economic or legal substance of the transactions is not affected in any manner
materially adverse to any party.  Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the fullest extent possible.

 

SECTION 9.14                    No Partnership.  No partnership, joint venture
or joint undertaking is intended to be, or is, formed among the parties hereto
or any of them by reason of this Agreement or the transactions contemplated
herein.

 

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SECTION 9.15                    Public Announcements.  Except as required by
Law, no party to this Agreement shall make, or cause to be made, any press
release or public announcement in respect of this Agreement or otherwise
communicate with any news media without the prior written consent of the other
parties, and the parties shall cooperate as to the timing and contents of any
such press release or public announcement.

 

SECTION 9.16                    Cumulative Remedies.  The rights and remedies
provided by this Agreement are cumulative and the use of any one right or remedy
by any party shall not preclude or waive its right to use any or all other
remedies.  Said rights and remedies are given in addition to any other rights
the parties may have by Law or otherwise.

 

SECTION 9.17                    Interpretation; Headings.  Throughout this
Agreement, nouns, pronouns and verbs shall be construed as masculine, feminine,
neuter, singular or plural, whichever shall be applicable.  Unless otherwise
specified, all references herein to “Articles”, “Sections” and paragraphs shall
refer to corresponding provisions of this Agreement.  The descriptive headings
and subheadings in this Agreement are included for convenience of reference only
and shall not affect in any way the meaning or interpretation of this Agreement
or any provision hereto.

 

SECTION 9.18                    Construction.  Each party hereto acknowledges
and agrees it has had the opportunity to draft, review and edit the language of
this Agreement and that no presumption for or against any party arising out of
drafting all or any part of this Agreement will be applied in any controversy,
claim or dispute relating to, in connection with or involving this Agreement. 
Accordingly, the parties hereto hereby waive the benefit of any rule of Law or
any legal decision that would require, in cases of uncertainty, that the
language of a contract should be interpreted most strongly against the party who
drafted such language.

 

SECTION 9.19                    Director Duties.  Notwithstanding anything to
the contrary in this Agreement, no provision hereof shall prevent, restrict,
Encumber or in any way limit the exercise of the fiduciary rights and
obligations of any Investor Designated Director as a director, or his or her
ability to vote on matters, influence management or the other directors or
otherwise to discharge their fiduciary or other duties as directors.  The
Company shall not approve or recommend to its stockholders any transaction or
resolution, or approve, recommend or take any other action (other than those
expressly contemplated by this Agreement) that would restrict the right of any
Investor Designated Director to vote on any matter as such director believes
appropriate in light of his or her duties as a director or the manner in which
an Investor Designated Director may participate in his or her capacity as a
director in deliberations or discussions at meetings of the Board or any
committee thereof.

 

SECTION 9.20                    Investors Rights.  For purposes of this
Agreement, all actions which the Investors or members of the Investor Group are
permitted to take shall be effected by the Investors or such members, as the
case may be, holding a majority of the Purchased Securities then held by all the
Investors or such members, as the case may be.  In addition, the rights of the
Investors under this Agreement shall be allocated among them in such manner as
they shall agree from time to time.  Notwithstanding the foregoing, the parties
hereto acknowledge and agree that, for so long as the Investor Group has the
right to nominate two or more Investor Designated Directors, Yucaipa American
Alliance Fund I, L.P. and Yucaipa

 

27

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American Alliance (Parallel) Fund I, L.P. shall each be entitled to designate
one of such Investor Designated Directors and to fill any vacancies created if
such director designated by it ceases to serve for any reason, and any
additional Investor Designated Directors shall be designated by the members of
the Investor Group holding a majority of the Purchased Securities then held by
all of such members.

 

(signature page follows)

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.

 

 

COMPANY:

 

 

 

PATHMARK STORES, INC., a Delaware
corporation

 

 

 

 

 

By:

/s/ Frank Vitrano

 

 

Name:

Frank Vitrano

 

Title:

President and Chief Financial Officer

 

S-1

Stockholders’ Agreement

 

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INVESTORS:

 

 

 

YUCAIPA CORPORATE INITIATIVES FUND I, L.P., a

 

 

Delaware limited partnership

 

 

 

 

By:

Yucaipa Corporate Initiatives Fund I, LLC

 

Its:

General Partner

 

 

 

 

 

/s/ Robert P. Bermingham

 

 

By: Robert P. Bermingham

 

Title: Vice President

 

 

 

 

 

YUCAIPA AMERICAN ALLIANCE

 

 

(PARALLEL) FUND I, L.P., a Delaware

 

 

limited partnership

 

 

 

 

By:

Yucaipa American Alliance Fund I, LLC

 

Its:

General Partner

 

 

 

 

 

/s/ Robert P. Bermingham

 

 

By: Robert P. Bermingham

 

Title: Vice President

 

 

 

 

 

YUCAIPA AMERICAN ALLIANCE FUND I,

 

 

L.P., a Delaware limited partnership

 

 

 

 

By:

Yucaipa American Alliance Fund I, LLC

 

Its:

General Partner

 

 

 

 

 

/s/ Robert P. Bermingham

 

 

By: Robert P. Bermingham

 

Title: Vice President

 

S-2

Stockholders’ Agreement

 

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