exv10w2





EXHIBIT
10.2



EXECUTION COPY





INVESTMENT AGREEMENT




By and Among




THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.




and




YUCAIPA AMERICAN ALLIANCE FUND II, LP,




YUCAIPA AMERICAN ALLIANCE (PARALLEL) FUND II, LP




and




YUCAIPA AMERICAN ALLIANCE FUND II, LLC, as Investors’ Representative




and




the other signatories hereto




Dated as of July 23, 2009














 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I Issuance and Sale of Investor Shares; Closing
	 	 	2	 
	SECTION 1.01 Issuance and Sale of the Investor Shares
	 	 	2	 
	SECTION 1.02 Closing Date
	 	 	2	 
	SECTION 1.03 Transactions To Be Effected at the Closing
	 	 	2	 
	 
	 	 	 	 
	ARTICLE II Representations and Warranties Relating to the Company
	 	 	3	 
	SECTION 2.01 Corporate Status
	 	 	3	 
	SECTION 2.02 Authorization; Noncontravention; No Change of Control
	 	 	4	 
	SECTION 2.03 Capital Structure
	 	 	6	 
	SECTION 2.04 Real Property
	 	 	8	 
	SECTION 2.05 Intellectual Property
	 	 	9	 
	SECTION 2.06 Environmental Matters
	 	 	10	 
	SECTION 2.07 Legal Proceedings
	 	 	11	 
	SECTION 2.08 Taxes
	 	 	11	 
	SECTION 2.09 Labor
	 	 	13	 
	SECTION 2.10 Employee Benefit Plans
	 	 	13	 
	SECTION 2.11 Compliance with Laws
	 	 	15	 
	SECTION 2.12 SEC Reports and Company Financial Statements
	 	 	16	 
	SECTION 2.13 Absence of Certain Changes
	 	 	18	 
	SECTION 2.14 Insurance
	 	 	20	 
	SECTION 2.15 Private Placement
	 	 	21	 
	SECTION 2.16 Form S-3 Eligibility
	 	 	21	 
	SECTION 2.17 Listing and Maintenance Requirements
	 	 	21	 
	SECTION 2.18 Registration Rights
	 	 	21	 
	SECTION 2.19 No Restriction on the Ability to Pay Cash Dividends
	 	 	21	 
	SECTION 2.20 Inventories
	 	 	21	 
	SECTION 2.21 Contracts
	 	 	21	 
	 
	 	 	 	 
	ARTICLE III Representations and Warranties of the Investors
	 	 	22	 
	SECTION 3.01 Corporate Status
	 	 	22	 
	SECTION 3.02 Authorization; Noncontravention
	 	 	22	 
	SECTION 3.03 Securities Act
	 	 	23	 
	SECTION 3.04 Available Funds
	 	 	24	 
	SECTION 3.05 Ownership of Common Stock
	 	 	24	 
	 
	 	 	 	 
	ARTICLE IV Covenants
	 	 	24	 
	SECTION 4.01 Confidentiality
	 	 	24	 
	SECTION 4.02 Reasonable Best Efforts
	 	 	24	 
	SECTION 4.03 Fees and Expenses
	 	 	25	 
	SECTION 4.04 NYSE
	 	 	25	 
	SECTION 4.05 Use of Proceeds
	 	 	25	 
	SECTION 4.06 Conduct of Business
	 	 	25	 






i









 






	 	 	 	 	 
	 	 	Page	 
	ARTICLE V Additional Agreements
	 	 	26	 
	SECTION 5.01 Publicity
	 	 	26	 
	SECTION 5.02 Transfer Restrictions
	 	 	26	 
	SECTION 5.03 Purchase for Investment
	 	 	26	 
	SECTION 5.04 Legend
	 	 	26	 
	SECTION 5.05 Investors’ Representative
	 	 	27	 
	SECTION 5.06 Waiver
	 	 	28	 
	 
	 	 	 	 
	ARTICLE VI Conditions Precedent
	 	 	28	 
	SECTION 6.01 Conditions to Each Party’s Obligation
	 	 	28	 
	SECTION 6.02 Conditions to Obligation of the Investors
	 	 	29	 
	SECTION 6.03 Conditions to Obligation of the Company
	 	 	30	 
	SECTION 6.04 Satisfaction of Sections 6.01(d) and 6.01(h)
	 	 	30	 
	SECTION 6.05 Frustration of Closing Condition
	 	 	31	 
	 
	 	 	 	 
	ARTICLE VII Indemnification
	 	 	31	 
	SECTION 7.01 Indemnification
	 	 	31	 
	 
	 	 	 	 
	ARTICLE VIII Termination
	 	 	33	 
	SECTION 8.01 Termination
	 	 	33	 
	SECTION 8.02 Effect of Termination
	 	 	34	 
	 
	 	 	 	 
	ARTICLE IX General Provisions
	 	 	34	 
	SECTION 9.01 Amendments and Waivers
	 	 	34	 
	SECTION 9.02 Assignment
	 	 	35	 
	SECTION 9.03 No Third-Party Beneficiaries
	 	 	35	 
	SECTION 9.04 Notices
	 	 	35	 
	SECTION 9.05 Interpretation; Exhibits and Schedules; Certain Definitions
	 	 	36	 
	SECTION 9.06 Counterparts
	 	 	44	 
	SECTION 9.07 Entire Agreement
	 	 	44	 
	SECTION 9.08 Severability
	 	 	45	 
	SECTION 9.09 Consent to Jurisdiction
	 	 	45	 
	SECTION 9.10 Governing Law
	 	 	45	 
	SECTION 9.11 Waiver of Jury Trial
	 	 	45	 
	SECTION 9.12 No Personal Liability of Partners, Directors, Officers, Owners, Etc
	 	 	46	 
	SECTION 9.13 Rights of Holders
	 	 	46	 
	SECTION 9.14 Adjustment in Share Numbers and Prices
	 	 	46	 







ii












 





Index of Defined Terms




	 	 	 
	 	 	Location of
	Term	 	Definition
	2011 Notes

	 	2.02(d) 
	ABL Credit Agreement

	 	9.05 
	Action

	 	9.05 
	affiliate

	 	9.05 
	Agreement

	 	Preamble
	Amended and Restated Stockholder Agreement

	 	Recital B
	Amended and Restated Tengelmann Stockholder Agreement

	 	Recital E
	Ancillary Agreements

	 	2.02(a) 
	Board of Directors

	 	2.12(e) 
	Business Day

	 	9.05 
	By-Laws

	 	9.05 
	Capital Lease Obligation

	 	9.05 
	Charter

	 	9.05 
	ChaseMellon Warrants

	 	9.05 
	Closing

	 	1.02 
	Closing Date

	 	1.02 
	Code

	 	9.05 
	Collective Bargaining Agreement

	 	9.05 
	Common Stock

	 	2.02(a) 
	Company

	 	Preamble 
	Company By-Laws Amendment

	 	9.05 
	Company Contract

	 	9.05 
	Company Disclosure Letter

	 	Article II 
	Company Indemnified Liabilities

	 	7.01(b) 
	Company Leases

	 	2.04(b) 
	Company Multiemployer Plans

	 	2.10(b) 
	Company Plans

	 	9.05 
	Company Tenant Lease

	 	2.04(b) 
	Company Title IV Plan

	 	2.10(c) 
	Confidentiality Agreement

	 	4.01 
	Contract

	 	9.05 
	Conversion Stockholder Approval

	 	2.02(a) 
	Convertible Notes

	 	9.05 
	Convertible Preferred Articles Supplementary

	 	Recital A 
	Convertible Preferred Stock

	 	Recital A 
	Copyrights

	 	9.05 
	Default

	 	9.05 
	DOJ

	 	9.05 
	Encumbrance

	 	9.05 






iii









 






	 	 	 
	 	 	Location of
	Term	 	Definition
	Environment

	 	9.05 
	Environmental Law

	 	9.05 
	ERISA

	 	9.05 
	ERISA Affiliate

	 	9.05 
	Exchange Act

	 	9.05 
	Existing Investors

	 	Preamble
	Facilities

	 	9.05 
	FTC

	 	9.05 
	GAAP

	 	9.05 
	Governmental Entity

	 	9.05 
	Hazardous Materials

	 	9.05 
	HSR Act

	 	9.05 
	including

	 	9.05 
	Indebtedness

	 	9.05 
	Indemnified Liabilities

	 	7.01(c) 
	Indemnified Party

	 	7.01(d) 
	Indemnitor

	 	7.01(d) 
	Investors

	 	Preamble
	Investor Indemnified Liabilities

	 	7.01(c) 
	Investors’ Representative

	 	Preamble 
	Investor Shares

	 	Recital A 
	Intellectual Property

	 	9.05 
	IRS

	 	2.10(d) 
	Judgment

	 	9.05 
	Labor Laws

	 	9.05 
	Laws

	 	9.05 
	Losses

	 	9.05 
	Material Adverse Effect

	 	9.05 
	NYSE

	 	9.05 
	Offering

	 	1.01 
	Patents

	 	9.05 
	PBGC

	 	2.10(c) 
	Permits

	 	9.05 
	Permitted Encumbrances

	 	9.05 
	person

	 	9.05 
	Purchase Price

	 	1.01 
	Real Property

	 	9.05 
	Registered Intellectual Property

	 	9.05 
	Release

	 	9.05 
	SEC

	 	9.05 
	SEC Reports

	 	2.12(a) 
	Securities Act

	 	9.05 
	Senior Secured Notes

	 	Recital C 






iv









 






	 	 	 
	 	 	Location of
	Term	 	Definition
	Senior Secured Notes Offering

	 	Recital C 
	Series B Yucaipa Warrants

	 	9.05 
	Shares

	 	Recital A 
	SOX

	 	9.05 
	Stockholder Agreement

	 	Recital B 
	subsidiary

	 	9.05 
	Tax

	 	9.05 
	Tax Returns

	 	9.05 
	Tengelmann

	 	Recital E 
	Tengelmann Initial Shares

	 	Recital D 
	Tengelmann Investment Agreement

	 	Recital D 
	Tengelmann Partners

	 	Recital D 
	Third Party

	 	9.05 
	Third-Party Claim

	 	7.04(d) 
	Trade Secrets

	 	9.05 
	Trademarks

	 	9.05 
	Trading Market

	 	9.05 
	Underlying Securities

	 	2.03(a) 
	Voting Debt

	 	9.05 
	Voting Stock

	 	9.05 
	YAAF

	 	Preamble 
	YAAF Parallel

	 	Preamble 







v









 








List of Exhibits and Schedules




	 	 	 	 	 
	Exhibit A

	 	-
	 	Convertible Preferred Articles Supplementary
	Exhibit B

	 	-
	 	Amended and Restated Stockholder Agreement
	Exhibit C

	 	-
	 	Opinion of Counsel
	Exhibit D

	 	-
	 	Opinion of Maryland Counsel
	Schedule 1

	 	-
	 	Wire Information







vi












 





     INVESTMENT AGREEMENT, dated as of July 23, 2009 (this
“Agreement”), among THE GREAT ATLANTIC & PACIFIC TEA COMPANY,
INC., a Maryland corporation (the “Company”), and YUCAIPA AMERICAN
ALLIANCE FUND II, LP (“YAAF”) and YUCAIPA AMERICAN ALLIANCE
(PARALLEL) FUND II, LP (“YAAF Parallel” and, together with YAAF,
the “Investors”), YUCAIPA CORPORATE INITIATIVES FUND I, LP,
YUCAIPA AMERICAN ALLIANCE FUND I, LP and YUCAIPA AMERICAN ALLIANCE
(PARALLEL) FUND I, LP (collectively, the “Existing Investors”)
(who are parties to this Agreement solely with respect to Section 3.02 and
Section 3.05 hereof) and YUCAIPA AMERICAN ALLIANCE FUND II, LLC (the
“Investors’ Representative”) (which is a party to this Agreement
solely with respect to Section 5.05 hereof).



     A. WHEREAS, the Investors desire to purchase from the Company, and the Company desires to
issue and sell to the Investors, pursuant to the terms and conditions set forth in this Agreement,
an aggregate of 115,000 shares of the Company’s 8.00% Convertible Preferred Stock due August 1,
2016 (the “Convertible Preferred Stock”), to be issued on the Closing Date (as defined
below), each share with an initial liquidation preference of $1,000 (the “Investor Shares”,
and, together with any other shares of Convertible Preferred Stock issued pursuant to the
Tengelmann Investment Agreement (as defined below) or issued pursuant to Section 4 of the
Convertible Preferred Articles Supplementary (as defined below), the “Shares”), having the
powers, preferences and rights and the qualifications, limitations and restrictions as specified in
the Convertible Preferred Articles Supplementary in the form attached hereto as Exhibit A (the
“Convertible Preferred Articles Supplementary”);



     B. WHEREAS, the Company and the Existing Investors are parties to a stockholder agreement
dated as of March 4, 2007 (the “Stockholder Agreement”), and on the Closing Date, the
Company, the Existing Investors, the Investors’ Representative and the Investors will enter into an
amended and restated stockholder agreement in the form attached hereto as Exhibit B (the
“Amended and Restated Stockholder Agreement”);



     C. WHEREAS, on the date hereof, the Company will announce and promptly commence a debt
offering (the “Senior Secured Notes Offering”) of second-lien senior secured notes (the
“Senior Secured Notes”) for an aggregate principal amount of at least $225,000,000;



     D. WHEREAS, simultaneously with the execution of this Agreement, the Company and Erivan Karl
Haub, Christian Wilhelm Erich Haub, Karl-Erivan Warder Haub and Georg Rudolf Otto Haub
(collectively, the “Tengelmann Partners”) are entering into an investment agreement, dated
as of the date hereof (the “Tengelmann Investment Agreement”), which sets forth the terms
and conditions by which the Tengelmann Partners shall purchase 60,000 shares of the Convertible
Preferred Stock, to



 









 







be issued on the Closing Date for an aggregate cash purchase price of $60,000,000 (the
“Tengelmann Initial Shares”), and, immediately following such purchase, the Tengelmann
Partners shall contribute the Tengelmann Initial Shares to Tengelmann (as defined below); and



     E. WHEREAS, the Company and Tengelmann Warenhandels-Gesellschaft KG, a limited partnership
organized under the law of Germany (“Tengelmann”), are parties to a stockholder agreement
dated as of March 4, 2007, and on the Closing Date, the Company and Tengelmann will enter into an
amended and restated stockholder agreement (the “Amended and Restated Tengelmann Stockholder
Agreement”).



     NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and
warranties contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:



ARTICLE I




Issuance and Sale of Investor Shares; Closing




     SECTION 1.01 Issuance and Sale of the Investor Shares. On the terms and subject to
the conditions set forth in this Agreement, at the Closing the Company shall issue, sell and
deliver in certificated form to the Investors, and the Investors shall purchase from the Company,
the Investor Shares for an aggregate cash purchase price of $115,000,000 (the “Purchase
Price”), payable as set forth below in Section 1.03. The issuance and sale of the Investor
Shares is referred to in this Agreement as the “Offering”.



     SECTION 1.02 Closing Date. The closing of the Offering (the “Closing”) shall
take place at the offices of Cravath, Swaine & Moore LLP, 825 Eighth Avenue, New York, New York
10019, at 10:00 a.m. on the date on which the condition set forth in Section 6.01(d) has been
satisfied (or, to the extent permitted, waived), or, if on such day any condition set forth in
Article VI has not been satisfied (or, to the extent permitted, waived by the party entitled to the
benefit thereof), as soon as practicable after all the conditions set forth in Article VI have been
satisfied (or, to the extent permitted, waived by the parties entitled to the benefits thereof), or
at such other place, time and date as shall be agreed between the Company and the Investors. The
date on which the Closing occurs is referred to in this Agreement as the “Closing Date”.



     SECTION 1.03 Transactions To Be Effected at the Closing. At the Closing, each of the
following shall occur substantially simultaneously and be dependent upon each other:



     (a) The Company shall file the Convertible Preferred Articles Supplementary with the State
Department of Assessments and Taxation of the State of Maryland and deliver to the Investors
certificates representing the Investor Shares;



2









 





     (b) The Investors shall deliver to the Company payment, by wire transfer to the bank account
of the Company specified on Schedule 1, immediately available funds in an amount equal to the
Purchase Price;



     (c) The Company, the Investors, the Existing Investors and the Investors’ Representative
shall each execute the Amended and Restated Stockholder Agreement; and



     (d) The Company shall deliver to the Investors payment, by wire transfer to the bank account
of the Investors specified on Schedule 1, immediately available funds of the amounts owed to the
Investors pursuant to Section 4.03.



ARTICLE II




Representations and Warranties

Relating to the Company




     Prior to the execution and delivery of this Agreement, the Company has delivered to the
Investors a letter, dated as of the date of this Agreement, from the Company to the Investors (the
“Company Disclosure Letter”), with numbering corresponding to the sections and subsections
of this Article II. Any items disclosed in any provision, section or subsection of the Company
Disclosure Letter, with respect to a particular representation or warranty contained in this
Article II shall be deemed to be disclosed for purposes of any other representation or warranty
contained in this Article II to the extent its relationship thereto is reasonably apparent on its
face. Except as set forth in the Company Disclosure Letter and except with respect to Sections
2.01, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.10, 2.11, 2.13 (other than the first sentence of
Section 2.13) and 2.14 only (and not any other sections) as disclosed in the Company’s Annual
Report on Form 10-K for the fiscal year ended February 28, 2009 or the Company’s other reports
filed with the SEC under Sections 12, 13, 14 or 15(d) of the Exchange Act after February 28, 2009
through and including the date hereof (excluding any forward-looking disclosures contained in such
reports under the headings “Risk Factors” or “Cautionary Note” or any similar sections and any
other forward looking statement, disclaimer or disclosure that is similarly nonspecific and
predictive or forward-looking in nature), the Company represents and warrants to the Investors as
follows as of the date of this Agreement (except as of July 20, 2009, as expressly provided in
Section 2.03(a)):



     SECTION 2.01 Corporate Status. Each of the Company and its material subsidiaries is
duly incorporated or otherwise organized, validly existing and in good standing under the Laws of
its governing jurisdiction and each (a) has all requisite corporate or other power and authority to
carry on its business as it is now being conducted and (b) is duly qualified to do business in each
of the jurisdictions in which the ownership, operation or leasing of its assets or the conduct of
its business requires it to be so qualified, except where the failure to have such corporate or
other power or authority or to be so qualified, has not had and would not reasonably be expected to
have a Material Adverse Effect.



3









 





     SECTION 2.02 Authorization; Noncontravention; No Change of Control. (a)
Authorization. The Company has all necessary corporate power and authority to execute and
deliver this Agreement, the Tengelmann Investment Agreement, the Amended and Restated Stockholder
Agreement and the Amended and Restated Tengelmann Stockholder Agreement (collectively, the
“Ancillary Agreements”), to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The Board of Directors has duly
adopted resolutions at a meeting duly called and held (i) adopting, authorizing, approving and
declaring this Agreement, the Ancillary Agreements, the classification of the Shares as Convertible
Preferred Stock, the issuance of the Investor Shares at Closing, the reservation for issuance of
the shares of Convertible Preferred Stock issued pursuant to Section 4 of the Convertible Preferred
Articles Supplementary and the Underlying Securities and the other transactions contemplated hereby
and by the Ancillary Agreements on the terms and subject to the conditions set forth herein and
therein advisable, fair to and in the best interest of the Company, (ii) adopting the Company
By-Laws Amendment and the Convertible Preferred Articles Supplementary, (iii) directing that the
proposal for the Conversion Stockholder Approval be submitted to a vote at a meeting of the
stockholders of the Company and (iv) recommending that the stockholders of the Company adopt the
proposal for the Conversion Stockholder Approval. No “fair price,” “moratorium,” “control share
acquisition,” “business combination,” or other similar anti-takeover provision under Maryland or
Federal Laws, including Section 3-702 of the Maryland General Corporation Law, apply to this
Agreement, the Offering and the other transactions contemplated hereby, and pursuant to the Company
By-Laws Amendment, the Company will be exempt from the application of the Maryland Control Share
Acquisition Act (Section 3-701, et seq. of the Maryland General Corporation Law) following the date
thereof. The execution, delivery and performance of this Agreement and the Ancillary Agreements
and the consummation by the Company of the transactions contemplated hereby and thereby, including
the issuance (or reservation for issuance), sale and delivery of the Shares and the Underlying
Securities, have been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Company or its material subsidiaries or vote of holders of
any class or series of capital stock of the Company or its material subsidiaries is necessary to
authorize this Agreement or the Ancillary Agreements or to consummate the transactions contemplated
hereby and thereby, including the issuance (or reservation for issuance), sale and delivery of the
Shares and the Underlying Securities, other than the approval, to the extent and as required under
the rules and regulations of the NYSE, of (1) the Shares, when voting together with common stock,
par value $1.00 per share, of the Company (“Common Stock”), becoming entitled to cast the
full number of votes on an as-converted basis and (2) the issuance of the full amount Common Stock
upon the exercise of conversion rights of the Shares, in each case by the affirmative vote of
holders of a majority of the votes present and entitled to vote at the stockholders’ meeting duly
called, noticed and convened for such purpose, at which the total votes cast represent over 50% in
interest of all Voting Stock in accordance with the NYSE rules for stockholder approval (the
“Conversion Stockholder Approval”). This Agreement has been duly executed and delivered by
the Company and (assuming due authorization, execution and delivery by each Investor, each Existing
Investor and the Investors’ Representative) constitutes, and



4









 







each Ancillary Agreement, when executed and delivered by the Company (assuming due
authorization, execution and delivery by the other parties thereto), will constitute, a valid and
binding obligation of the Company, enforceable against the Company in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and
other similar Laws relating to or affecting creditors’ rights generally or by general equitable
principles (regardless of whether such enforceability is considered in a proceeding in equity or at
Law). The sale and issuance of the Shares at Closing are not, and the issuance of shares of
Convertible Preferred Stock pursuant to Section 4 of the Convertible Preferred Articles
Supplementary and the issuance of the Underlying Securities will not be, subject to any preemptive
rights or rights of first offer.



     (b) No Conflict. The Company is not in violation or Default of any provision of its
Charter or By-Laws. None of the Company or its material subsidiaries is in breach or Default under
any material Collective Bargaining Agreement. The execution, delivery and performance by the
Company of this Agreement and the Ancillary Agreements do not, and the consummation of the
Offering, the Senior Secured Notes Offering (assuming satisfaction of Sections 6.01(d) and 6.02(h))
and the other transactions contemplated hereby and thereby and compliance with the provisions of
this Agreement and the Ancillary Agreements will not, result in a change of control under, or
conflict with, or result in any Default under, or give rise to an increase in, or right of
termination, cancellation or acceleration of, any obligation or to the loss of a benefit under, or
result in the suspension, revocation, impairment, forfeiture or amendment of any term or provision
of or the creation of any Encumbrance upon any of the properties or assets of the Company or any of
its material subsidiaries under, or require any consent or waiver under, any provision of (i) the
Charter of the Company, the By-Laws of the Company upon effectiveness of the Company By-Laws
Amendment or the comparable organizational documents of any of the Company’s subsidiaries, (ii) any
material Contract to which the Company or any of its material subsidiaries is a party or by which
any of its assets are bound, (iii) any Law, material Judgment or material Permit, in each case
applicable to the Company and its material subsidiaries or its assets or (iv) any Collective
Bargaining Agreement, Company Multiemployer Plans or Company Plans. No Permit, order or
authorization of, or registration, qualification, declaration or filing with, or notice to, any
Governmental Entity is required to be obtained or made by or with respect to the Company or any of
its material subsidiaries in connection with the execution, delivery and performance of this
Agreement or any of the Ancillary Agreements by the Company or the consummation by the Company of
the Offering, the Senior Secured Notes Offering or the other transactions contemplated by this
Agreement or the Ancillary Agreements, including the issuance of the Shares, the Underlying
Securities and the Senior Secured Notes, except for (A) the filing of the Convertible Preferred
Articles Supplementary with the State Department of Assessments and Taxation of the State of
Maryland, (B) the filing with the FTC and the DOJ of the notification and report form and other
information and documents required to be filed pursuant to the HSR Act, which have been completed,
(C) the filing with the SEC of such reports, forms, schedules, statements and other documents
(including all exhibits) required to be filed by it under the Exchange Act, the Securities Act,
state securities Laws or “blue-sky” laws as may be required in connection with this Agreement, the
Ancillary



5









 







Agreements and the transactions contemplated hereby and thereby, (D) any filings required
under the rules and regulations of the NYSE and (E) such Permits, orders, authorizations,
registrations, declarations, filings and notices, the failure of which to be obtained or made would
not materially impair the Company’s ability to perform its obligations under this Agreement or the
Ancillary Agreements or consummate the transactions contemplated hereby or thereby. Neither the
execution and delivery of this Agreement, nor the consummation of the transactions contemplated
hereby, either alone or in combination with another event (whether contingent or otherwise) will
(1) result in the payment of any “excess parachute payment” under Section 280G of the Code, (2)
entitle any current or former employee, consultant or director of the Company or any of its
subsidiaries to any payment, (3) increase the amount of compensation or benefits due to any such
employee, consultant or director or (4) accelerate the vesting, funding or time of payment of any
compensation, equity award or other benefit.



     (c) No “Change of Control” (within the meaning of the Company’s 2008 Long Term Incentive and
Share Award Plan or the Company’s 1998 Long Term Incentive and Share Award Plan, each as amended
from time to time) has at any time occurred or been deemed to have occurred for purposes of such
plans or any award granted under such plans, and no award granted under either such plan has become
exercisable or vested on an accelerated basis on account of a Change of Control.



     (d) Notwithstanding any terms and obligations included on the face or back or otherwise
included on any of the notes representing the Company’s outstanding 9 1/8% Senior Notes due 2011
(the “2011 Notes”), the terms and obligations of any such 2011 Notes include only those
terms and obligations included in the 1991 Indenture, as supplemented by the Second Supplemental
Indenture, dated as of December 20, 2011, and the Fourth Supplemental Indenture, dated as of August
23, 2005, and do not include any additional terms or obligations that may be included on the face
or back or otherwise included on any of the 2011 Notes.



     SECTION 2.03 Capital Structure. (a) As of the date of this Agreement, the
authorized capital stock of the Company consists of 160,000,000 shares of Common Stock, of which
57,899,318 shares are issued and outstanding as of July 20, 2009, and 3,000,000 shares of preferred
stock, no par value per share, of which no shares are issued and outstanding as of July 20, 2009.
As of July 20, 2009, there are 2,564,396 shares of Common Stock subject to outstanding options to
acquire Common Stock, 4,456,987 shares of Common Stock deliverable pursuant to outstanding
restricted stock units, 6,965,858 shares of Common Stock issuable upon the exercise of the Series B
Yucaipa Warrants, 6,965,858 shares of Common Stock reserved for issuance upon the exercise of the
Series B Yucaipa Warrants, 686,277 shares of Common Stock issuable upon the exercise of the
ChaseMellon Warrants, 686,277 shares of Common Stock reserved for issuance upon the exercise of the
ChaseMellon Warrants, 11,278,999 shares of Common Stock issuable upon the conversion of the
Convertible Notes, 11,278,999 shares of Common Stock reserved for issuance upon the conversion of
the Convertible Notes and no stock equivalent units linked to Common Stock. Each share of Common
Stock is duly authorized, validly issued, fully paid and nonassessable. The Shares, and the Common
Stock issuable upon conversion of the Investor Shares (the “Underlying Securities”),



6









 







have been duly authorized and reserved, and the Shares will, and upon conversion of the Shares
in accordance with the Convertible Preferred Articles Supplementary, the Underlying Securities,
will (i) be validly issued, fully paid and nonassessable, (ii) not have been issued in violation of
any purchase option, call option, right of first refusal, preemptive right, subscription right or
any similar right under any provision of the Maryland General Corporation Law, the Charter or
By-Laws of the Company or any Contract to which the Company or any of its material subsidiaries is
a party or by which any of its or their respective assets are bound and (iii) be free and clear of
all Encumbrances. Other than the Convertible Notes, the Company has no Voting Debt. Except as set
forth above, in Section 2.03(a) of the Company Disclosure Letter or as expressly contemplated by
this Agreement there are no (A) outstanding obligations, options, warrants, convertible securities,
exchangeable securities, securities or rights that are linked to the value of the Common Stock or
other rights, agreements or commitments relating to the capital stock of the Company or obligating
the Company to issue or sell or otherwise transfer shares of capital stock of the Company or any
securities convertible into or exchangeable for any shares of capital stock of the Company or any
Voting Debt of the Company, (B) outstanding obligations of the Company to repurchase, redeem or
otherwise acquire shares of capital stock of the Company, (C) voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with respect to the voting or
transfer of shares of capital stock of the Company (but only to the Company’s knowledge with
respect to any such agreements to which the Company is not a party) or (D) rights of first refusal,
preemptive rights, subscription rights or any similar rights under any provision of the Maryland
General Corporation Law, the Charter or By-Laws or any Contract to which the Company is a party or
by which any of its assets are bound. No provision of the Charter or the By-Laws would, directly
or indirectly, restrict or impair the ability of the Investors to vote, or otherwise exercise the
rights of a stockholder with respect to, the Shares (or any Underlying Securities) or any other
shares of Common Stock of the Company that may be acquired or controlled by the Investors, except
as expressly set forth in the Convertible Preferred Articles Supplementary. The Company does not
have an outstanding “poison pill” or any similar arrangement in effect giving any person the right
to purchase any equity interest in the Company upon the occurrence of certain events.



     (b) Section 2.03(b) of the Company Disclosure Letter sets forth as of the date hereof a list
of all material subsidiaries of the Company, including each such subsidiary’s name, its
jurisdiction of incorporation or organization and the percentage of its outstanding capital stock
or equity interests owned by the Company or a subsidiary of the Company (as applicable). The
shares of outstanding capital stock or equity interests of the subsidiaries of the Company are duly
authorized, validly issued, fully paid and nonassessable, and are held of record and beneficially
owned by the Company or a subsidiary of the Company (as applicable), free and clear of any
Encumbrances other than Permitted Encumbrances. There is no Voting Debt of any subsidiary of the
Company. There are no (i) outstanding obligations, options, warrants, convertible securities,
exchangeable securities, securities or rights that are linked to the value of the Common Stock or
other rights, agreements or commitments, in each case, relating to the capital stock of the
subsidiaries of the Company or obligating the Company or its subsidiaries to issue or sell or
otherwise transfer shares of the capital stock of the



7









 







subsidiaries of the Company or any securities convertible into or exchangeable for any shares
of capital stock of the subsidiaries of the Company or any Voting Debt of any subsidiary of the
Company, (ii) outstanding obligations of the subsidiaries of the Company to repurchase, redeem or
otherwise acquire shares of their respective capital stock, (iii) voting trusts, stockholder
agreements, proxies or other agreements or understandings in effect with respect to the voting or
transfer of shares of capital stock of the subsidiaries of the Company (but only to the Company’s
knowledge with respect to any such agreements to which the Company is not a party) or (iv) rights
of first refusal, preemptive rights, subscription rights or any similar rights under any provision
of the Maryland General Corporation Law, the governing documents of any material subsidiary of the
Company or any Contract to which any material subsidiary of the Company is a party or by which any
of their respective assets are bound.



     (c) Other than the subsidiaries of the Company, there are no persons in which any of the
Company or its subsidiaries owns any equity, membership, partnership, joint venture or other
similar interest.



     (d) The Company or one of its subsidiaries has the unrestricted right to vote, and (subject
to limitations imposed by applicable Law) to receive dividends and other distributions on, all
capital securities of its subsidiaries as owned by the Company or such subsidiary.



     SECTION 2.04 Real Property. (a) The Company or one of its subsidiaries has good and
marketable title in fee simple, free and clear of material Encumbrances (other than Permitted
Encumbrances), to the real property owned by the Company. Neither the Company nor any of its
subsidiaries has received written notice of any pending condemnation proceedings.



     (b) Each (x) lease or sublease pursuant to which the Company or any of its subsidiaries holds
a leasehold or subleasehold estate or other right to use or occupy any interest in real property
(the “Company Leases”) and (y) existing leases, subleases, licenses or other occupancy
agreements to which the Company or any of its subsidiaries is a party as landlord or lessor
thereunder or by which the Company or any of its subsidiaries is bound as landlord or lessor
thereunder, and all amendments, modifications, extensions and supplements thereto (each, a
“Company Tenant Lease”) (i) constitutes a valid and binding obligation of the Company or
the subsidiary of the Company party thereto; (ii) assuming such lease is a legal, valid and binding
obligation of, and enforceable against, the other parties thereto, is enforceable against the
Company or the subsidiary of the Company party thereto, except as limited by bankruptcy,
insolvency, reorganization, moratorium or other similar Laws affecting the enforcement of
creditors’ rights in general and subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding at Law or in equity); and (iii) to the Company’s
knowledge is a valid and binding obligation of the other parties thereto, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting the enforcement
of creditors’ rights in general and subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding at Law or in equity), except, with respect to
clauses (i) through (iii) above, as



8









 







has not had or would not reasonably be expected to have a Material Adverse Effect. Except as
have not had or would not reasonably be expected to have a Material Adverse Effect, (i) none of the
Company or its subsidiaries is in breach or default under any Company Lease and (ii) to the
Company’s knowledge, none of the landlords or sublandlords under any Company Lease is in material
breach or default of its obligations under such Company Lease. Except as has not had a Material
Adverse Effect, the Company and its subsidiaries enjoy peaceful and undisturbed possession under
each Company Lease.



     (c) The Real Property and the buildings and other improvements, fixtures, equipment and other
property attached, situation or appurtenant thereto, are in good operating condition and repair,
subject to normal wear and tear and normal industry practice with respect to maintenance, except as
has not or would not reasonably be expected to have a Material Adverse Effect. Except as have not
had or would not reasonably be expected to have a Material Adverse Effect, (i) the present use of
the Real Property does not violate any restrictive covenant, municipal by-law or other Law or
agreement that in any way restricts, prevents or interferes in any material respect with the
continued use of the Real Property for which it is used in the business of the Company and its
subsidiaries, other than Permitted Encumbrances (ii) no condemnation, eminent domain or similar
proceeding exists or is pending or, to the Company’s knowledge, is threatened with respect to or
that could affect any Real Property and (iii) all Real Property is supplied with utilities and
other services necessary for the operation thereof generally consistent with past practices and
consistent with the contemplated operation thereof.



     (d) All material fixtures, plants, vehicles, equipment, machinery and other material items of
personal property owned by the Company and its material subsidiaries, used in the operation of the
Company’s and its material subsidiaries’ business or located on any Real Property or attached
thereto, are in good condition and working order, ordinary wear and tear excepted, and are
reasonably suitable for the uses for which intended, free from any defects known to the Company,
except for such defects or lack of good condition or working order which have not had and would not
reasonably be expected to have a Material Adverse Effect.



     SECTION 2.05 Intellectual Property. (a) The Company and its subsidiaries own, or
are validly licensed or otherwise have the right to use, all Intellectual Property that is
necessary for the conduct of the business of the Company and its subsidiaries taken as a whole,
except as has not had or would not reasonably be expected to have a Material Adverse Effect. The
Company and its subsidiaries have not entered into any license agreement with any Third Party with
respect to the Company’s Registered Intellectual Property.



     (b) The business of the Company and its subsidiaries as currently conducted (including the
use of the Intellectual Property) does not infringe, misappropriate, conflict with or otherwise
violate any person’s Intellectual Property and there is no such claim pending or, to the Company’s
knowledge, threatened against any of the Company or its subsidiaries, except where such
infringement, misappropriation,



9









 







conflict, violation or claim has not had and would not reasonably be expected to have a
Material Adverse Effect.



     (c) To the Company’s knowledge, and except as has not had or would not reasonably be expected
to have a Material Adverse Effect, no person is infringing, misappropriating, conflicting with or
otherwise violating any material Intellectual Property owned by any of the Company or its
subsidiaries, and no such claims are pending or threatened against any person by any of the Company
or its subsidiaries.



     (d) All Intellectual Property owned by the Company or its subsidiaries is owned free and
clear of all Encumbrances (other than licenses to persons entered into in the ordinary course of
business generally consistent with past practice of the Company and its subsidiaries), except for
Permitted Encumbrances or where such Encumbrances have not had and would not reasonably be expected
to have a Material Adverse Effect.



     SECTION 2.06 Environmental Matters. (a) The Company and its subsidiaries have
obtained all Permits that are required under any Environmental Law for the operation of the
business of the Company and its subsidiaries as currently being conducted and their current use and
operation of the Real Property, and all such Permits are in full force and effect, other than any
failure to obtain or maintain such Permits in full force and effect which has had and would not
reasonably be expected to have a Material Adverse Effect.



     (b) The Company and its subsidiaries have operated and are operating the business of the
Company and its subsidiaries, and the Real Property and other assets of the Company and its
subsidiaries are in compliance with Environmental Laws, other than any non-compliance which in the
aggregate has not had and would not reasonably be expected to have a Material Adverse Effect.



     (c) Except as has not had and would not reasonably be expected to have a Material Adverse
Effect, (i) there has been no Release of any Hazardous Materials by the Company or any of its
subsidiaries at, on, under or from the Real Property or any other location, (ii) Real Property has
not been used for the deposit of Hazardous Materials and (iii) neither the Company nor any of its
subsidiaries has disposed of, arranged for treatment or disposal of, or arranged for the
transportation for treatment or disposal of, any Hazardous Materials at any Third Party location.



     (d) (i) None of the Company or its subsidiaries has received any written notice, demand
letter, claim or order alleging a violation of, or liability under, any Environmental Law and (ii)
none of the Company or its subsidiaries is party to any pending Action, decree or injunction
alleging liability under or violation of any Environmental Law, except in each case of (i) or (ii)
of this Section 2.06(d), if adversely determined against the Company, would not have or would not
reasonably be expected to have a Material Adverse Effect.



     (e) Except as has not had and would not reasonably be expected to have a Material Adverse
Effect, there are no storage tanks, sumps or other similar vessels,



10









 







asbestos-containing materials or polychlorinated biphenyls located on, at or under any Real
Property or at, on or in any structures, Facilities or equipment at the Real Property.



     SECTION 2.07 Legal Proceedings. There are no Actions pending or, to the Company’s
knowledge, threatened in writing (and, in either case, not withdrawn), against the Company or any
of its subsidiaries, which, if adversely determined, would have or would reasonably be expected to
have a Material Adverse Effect. There are no Actions pending or, to the Company’s knowledge,
threatened in writing (and, in either case, not withdrawn) against the Company or any of its
subsidiaries which, if adversely determined, would materially impair the Company’s ability to
perform its obligations under this Agreement or the Ancillary Agreements or challenge the validity
or enforceability of this Agreement or any Ancillary Agreement or seek to enjoin or prohibit the
consummation of the transactions contemplated hereby or thereby. None of the Company or any of its
subsidiaries is in default with respect to any material Judgment or subject to any Judgment of over
$1,000,000, which has had or would reasonably be expected to have a Material Adverse Effect or
would materially impair the Company’s ability to perform its obligations under this Agreement or
the Ancillary Agreements or consummate the transactions contemplated hereby or thereby.



     SECTION 2.08 Taxes. (a) Except as has not had and would not reasonably be expected
to have a Material Adverse Effect, (i) the Company and each of its subsidiaries have timely filed
with the appropriate taxing authority all material Tax Returns required to be filed, taking into
account valid extensions; (ii) all such Tax Returns are complete and accurate in all material
respects; (iii) all Taxes due and owing by the Company and each of its subsidiaries (whether or not
shown on any Tax Return) have been paid; and (iv) neither the Company nor any of its subsidiaries
has been informed in writing by a Governmental Entity in a jurisdiction where the Company or any of
its subsidiaries does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction.



     (b) The unpaid Taxes of the Company and its subsidiaries did not, as of the dates of the
financial statements contained in the most recent SEC Report filed with the SEC prior to the date
of this Agreement, exceed by a material amount the reserve for Tax liability (excluding any reserve
for deferred Taxes established to reflect timing differences between book and Tax income) included
in the balance sheets contained in such financial statements. Since the date of the financial
statements contained in the most recent SEC Report filed with the SEC prior to the date of this
Agreement, neither the Company nor any of its subsidiaries has incurred any material liability for
Taxes outside the ordinary course of business or otherwise inconsistent with past custom and past
practice of the Company and its subsidiaries in filing their Tax Returns.



     (c) As of the date hereof, no deficiencies for Taxes against the Company or any of its
subsidiaries in excess of $100,000 individually or $1,000,000 in the aggregate have been claimed or
assessed in writing by a Governmental Entity that have not been settled or resolved. There are no
currently ongoing, pending or, to the Company’s knowledge, threatened audits, assessments or other
Actions for or relating to any liability in respect of Taxes of the Company or any of its
subsidiaries. The Company



11









 







has made available to the Investors or representatives of the Investors complete and accurate
copies of all Federal income and material state, local and foreign income, franchise and sales and
use Tax Returns of each of the Company and its subsidiaries and their predecessors for the years
ended on or after February 23, 2008 and complete and accurate copies of all examination reports and
statements of deficiencies assessed against or agreed to by the Company or any of its subsidiaries
or any predecessors since February 23, 2008 with respect to any material Tax. Other than any
waivers or extensions granted in the ordinary course of business after the date of this Agreement
and prior to the Closing Date, neither the Company, its subsidiaries nor any of their respective
predecessors has waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency (other than as a result of a valid extension
of time to file a Tax Return).



     (d) There are no material Encumbrances for Taxes on any assets of the Company or any of its
subsidiaries, other than Encumbrances in respect of property taxes not yet due and payable.



     (e) Other than customary gross-up, tax escalation or similar provisions in financing and
commercial Contracts entered into in the ordinary course of business, there are no Tax sharing
agreements or similar arrangements (including indemnity arrangements) with respect to or involving
the Company or any of its subsidiaries other than agreements solely between the Company or its
subsidiaries, and, after the Closing Date, neither the Company nor any of its subsidiaries shall be
bound by any such Tax sharing agreements or similar arrangements or have any liability thereunder.



     (f) Neither the Company nor any of its subsidiaries has been a member of any affiliated group
filing a consolidated Federal income Tax Return other than a group the common parent of which is
the Company. Except pursuant to customary gross-up, tax escalation or similar provisions in
financing and commercial Contracts entered into in the ordinary course of business, neither the
Company nor any of its subsidiaries has any actual or potential liability for the Taxes of any
person (other than Taxes of the Company and its subsidiaries) under Treasury Regulations Section
1.1502-6 (or any similar provision of state or local Law), as a transferee or successor, by
Contract, or otherwise.



     (g) The Company and each of its subsidiaries have timely withheld and paid all material Taxes
required to have been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.



     (h) Neither the Company nor any of its subsidiaries has entered into any transaction
identified as a “listed transaction” for purposes of Treasury Regulations Section 1.6011-4(b)(2).



     (i) Neither the Company nor any of its subsidiaries will be required to include any material
item of income in, or exclude any material 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 beginning on or



12









 







prior to the Closing Date under Section 481(c) of the Code (or any similar provision of state,
local or foreign Law) or (ii) agreement with a taxing authority relating to Taxes.



     (j) None of the assets of the Company (a) is “tax-exempt use property” (as defined in Section
168(h)(1) of the Code), (b) may be treated as owned by any other person pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954 (as in effect immediately prior to the enactment of
the Tax Reform Act of 1986), (c) is property used predominantly outside the United States within
the meaning of proposed Treasury Regulations Section 1.168-2(g)(5) or (d) is “tax exempt” and
financed property within the meaning of Section 168(g)(5) of the Code.



     (k) Neither the Company nor any of its subsidiaries has distributed the stock of any
corporation in a transaction satisfying the requirements of Section 355 of the Code since December
31, 2006, and neither the stock of the Company nor the stock of any of its subsidiaries has been
distributed in a transaction satisfying the requirements of Section 355 of the Code since December
31, 2006.



     SECTION 2.09 Labor. No Collective Bargaining Agreement currently is being
negotiated. None of the Company or its subsidiaries has any obligation to inform or consult with
any employees or their representatives in respect of the transactions contemplated hereby under the
terms of any Collective Bargaining Agreement. Since February 28, 2008, there has not been any
material work stoppage, slowdown, lockout, employee strike or, to the Company’s knowledge, labor
union organizing activity involving any of the Company or its subsidiaries and, to the Company’s
knowledge, none of the foregoing or any labor dispute or Action that has had or would reasonably be
expected to have a Material Adverse Effect has been threatened. The Company and its subsidiaries
are operating the business of the Company and its subsidiaries in compliance with all Labor Laws
other than non-compliance which has not had and would not reasonably be expected to have a Material
Adverse Effect. As of the date hereof, to the Company’s knowledge, there are no ongoing union
certification drives or pending proceedings for certifying a union with respect to employees of any
of the Company or its subsidiaries.



     SECTION 2.10 Employee Benefit Plans. (a) Each Company Plan and, to the Company’s
knowledge, each Company Multiemployer Plan has been operated and administered in all material
respects in accordance with its terms and the terms of all Collective Bargaining Agreements and any
other labor-related agreements with any labor union or labor organization applicable to employees
of the Company or any of its subsidiaries and the requirements of all applicable Laws, including
ERISA and the Code. As of the date of this Agreement, no Action is pending or, to the Company’s
knowledge, threatened with respect to any Company Plan (other than claims for benefits in the
ordinary course) that would result in any material liability to the Company, its subsidiaries or
any Company Plan fiduciary and, to the Company’s knowledge, no fact or event exists that would give
rise to any such Action. As of the date of this Agreement, to the Company’s knowledge, (i) no
Action is pending or threatened with respect to any Company Multiemployer Plan (other than claims
for benefits in the ordinary course) that



13









 







would result in any material liability to the Company and (ii) no fact or event exists that
would give rise to any such Action.



     (b) No withdrawal liability has been incurred under Title IV of ERISA by the Company or any
of its ERISA Affiliates with respect to any “multiemployer plan” (as defined in Section 3(37) or
4001(a)(3) of ERISA) which is or has been contributed to by the Company or any of its ERISA
Affiliates at any time during the six-year period ending on the date of this Agreement or as to
which the Company or any of its ERISA Affiliates has any liability (the “Company Multiemployer
Plans”), and no such liability would be incurred if the Company or any of its ERISA Affiliates
were to withdraw from any Company Multiemployer Plan in a complete or partial withdrawal. The
Company has not agreed with any person to be responsible for any liability under Title IV of ERISA
with respect to any multiemployer plan within the meaning of Section 3(37) or 4001(a)(3) of ERISA.



     (c) With respect to any Company Plan which is subject to Part 3 of Subtitle B of Title I or
to Title IV of ERISA (a “Company Title IV Plan”): (i) there is no lien under Section 412(n)
of the Code; (ii) no liability (other than liability for premiums) to the Pension Benefit Guaranty
Corporation, (the “PBGC”) has been incurred and all premiums required to be paid to the
PBGC have been paid by or on behalf of such Company Title IV Plan; (iii) the assets of each Company
Title IV Plan equal or exceed the benefit liabilities of such Company Title IV Plan determined on a
termination basis; and (iv) as of the date hereof, the Company has received no actual notice from
the PBGC that an event or condition exists which (A) would constitute grounds for termination of
such Company Title IV Plan by the PBGC or (B) has caused a partial or complete termination of such
Company Title IV Plan.



     (d) All contributions to Company Plans and, to the Company’s knowledge, the Company
Multiemployer Plans required to be made by applicable Law or the terms of the applicable Company
Plan or Company Multiemployer Plan have been timely made. Each Company Plan that is intended to be
qualified under Section 401(a) of the Code has timely received a favorable determination letter
from the United States Internal Revenue Service (“IRS”) which has not been revoked (or, in
either case, the Company has timely applied for same or will do so) and each trust established in
connection with any Company Plan which is intended to be exempt from Federal income taxation under
Section 501(a) of the Code has received a determination letter from the IRS which has not been
revoked that it is so exempt, and, to the Company’s knowledge, no fact or event has occurred since
the date of such determination letter or letters from the IRS that would reasonably be expected to
materially adversely affect the qualified status of any such Company Plan or the exempt status of
any such trust. To the Company’s knowledge, each Company Multiemployer Plan intended to be
qualified under Section 401(a) of the Code is so qualified.



     (e) Except as would not reasonably be expected to result in material liability, neither the
Company nor any of its ERISA Affiliates, and to the Company’s knowledge no other person, has
engaged in any transaction or acted or failed to act in any



14









 







manner that would subject the Company or any of its ERISA Affiliates to any liability for
breach of fiduciary duty under ERISA.



     (f) Except as would not reasonably be expected to result in material liability, neither the
Company nor any of its ERISA Affiliates and, to the Company’s knowledge, no other person has
engaged in any transaction in violation of Section 406(a) or (b) of ERISA or Section 4975 of the
Code for which no exemption exists under Section 408 of ERISA or Section 4975(c) or (d) of the
Code.



     (g) As of the date hereof, (i) all of the stock options issued by the Company that vest on or
after January 1, 2005 were issued with an exercise price no less than the fair market value of the
underlying stock at the actual date of grant or the Business Day immediately preceding the actual
date of grant, (ii) no shares of restricted Common Stock provide for a deferral opportunity beyond
vesting, and (iii) no restricted share units or other compensatory equity awards issued by the
Company constitute “nonqualified deferred compensation” within the meaning of Section 409A(d)(1) of
the Code.



     (h) Except as would not reasonably be expected to result in material liability, the Company
and its subsidiaries have no obligations, whether under Company Plans, Company Multiemployer Plans
or otherwise, to provide medical, health or life insurance or any other welfare-type benefits for
current or future retired or terminated employees of the Company or its subsidiaries or their
spouses or dependents (other than in accordance with Part 6 of Title I of ERISA or Code Section
4980B).



     (i) Each Company Plan that provides for “nonqualified deferred compensation” within the
meaning of Section 409A(d)(1) of the Code, and any award thereunder, in each case that is subject
to Section 409A of the Code, (i) has been operated in compliance in all material respects with
Section 409A of the Code since January 1, 2005, based upon a good faith, reasonable interpretation
of Section 409A of the Code and the Treasury Regulations and other official guidance issued
thereunder, and (ii) has been maintained in compliance with Section 409A of the Code and the final
Treasury Regulations and all subsequent official guidance issued thereunder.



     SECTION 2.11 Compliance with Laws. Each of the Company and its subsidiaries is
operating its business in compliance with all applicable Laws (including any zoning or building
ordinance, code or approval), except to the extent any non-compliance with such Laws has not had
and would not reasonably be expected to have a Material Adverse Effect. To the Company’s
knowledge, neither the Company nor any of its subsidiaries is being investigated with respect to,
or is subject to a pending threat to be charged with or given notice of any material violation of,
any applicable Law. All Permits required to conduct the business of the Company and its
subsidiaries as currently conducted have been obtained by one or more of the Company or its
subsidiaries and all such Permits are in full force and effect and the business of the Company and
its subsidiaries is being operated in compliance therewith, except for such Permits the failure of
which to possess or be in full force and effect or to be complied with has not had and



15









 







would not reasonably be expected to have a Material Adverse Effect (except that this sentence
shall not apply to any Permits which are covered by Section 2.06).



     SECTION 2.12 SEC Reports and Company Financial Statements.
(a) The Company has timely filed all forms, reports, schedules, statements and other
documents (including all exhibits) required to be filed by it with the SEC since February 23, 2008
(the “SEC Reports”). The SEC Reports (i) were prepared in all material respects in
accordance with the requirements of the Exchange Act or the Securities Act, as the case may be, and
the rules and regulations of the SEC thereunder, and (ii) did not at the time they were filed (or,
in the case of a registration statement, as of its most recent effective date) 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 made therein, in the light of the circumstances under
which they were made, not misleading. No subsidiary of the Company is a registrant with the SEC.



     (b) Each of the consolidated financial statements (including, in each case, any notes
thereto) included or incorporated by reference in the SEC Reports complied as to form in all
material respects with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, was prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes thereto) and fairly
presented 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 noted therein.



     (c) Except as set forth on or reserved against in the consolidated balance sheet of the
Company and its consolidated subsidiaries as of February 28, 2009 included in the “Fiscal 2008
Annual Report to Stockholders” attached as an exhibit to the Company’s Form 10-K for the year ended
February 28, 2009 including the notes thereto, none of the Company or any of its consolidated
subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise), except for liabilities or obligations (i) incurred since February 28,
2009 in the ordinary course of business and consistent with past practice, or (ii) that are less
than $5,000,000 in the aggregate.



     (d) Neither the Company nor any of its subsidiaries is a party to, or has any commitment to
become a party to, any joint venture, off-balance sheet partnership or any similar Contract or
arrangement (including any Contract relating to any transaction or relationship between or among
the Company and any of its subsidiaries, on the one hand, and any unconsolidated affiliate of the
Company or any of its subsidiaries, including any structured finance, special purpose or limited
purpose entity or person, on the other hand, or any “off-balance sheet arrangements” (as defined in
Item 303(a) of Regulation S-K of the SEC)), where the result, purpose or effect of such Contract is
to avoid disclosure of any material transaction involving, or material liabilities of, the Company
or any of its subsidiaries in the Company’s or such subsidiary’s audited financial statements or
other SEC Reports.




16












 





          (e) The audit committee of the Board of Directors of the Company (the “Board of
Directors”) has established “whistleblower” procedures that meet the requirements of Exchange
Act Rule 10A-3. Neither the Company nor any subsidiary has received any “complaints” (within the
meaning of Exchange Act Rule 10A-3) in respect of any accounting, internal accounting controls or
auditing matters. To the Company’s knowledge, no complaint seeking relief under Section 806 of SOX
has been filed with the United States Secretary of Labor and no employee has threatened to file any
such complaint.




          (f) The Company has made all certifications and statements required by Sections 302 and 906
of SOX and the related rules and regulations promulgated thereunder with respect to the SEC
Reports. The Company and its subsidiaries maintain a system of “disclosure controls and
procedures” (as defined in Rule 13a-15(e) of the Exchange Act) that is designed to ensure that
information required to be disclosed by the Company in reports that it files or submits under the
Exchange Act is, in all material respects, recorded, processed, summarized and reported within the
time periods specified in the SEC’s rules and forms, including controls and procedures designed to
ensure that such information is accumulated and communicated to the Company’s management as
appropriate to allow timely decisions regarding required disclosure. Since February 23, 2008, the
Company and its subsidiaries have carried out evaluations of the effectiveness of their disclosure
controls and procedures as required by Rule 13a-15 of the Exchange Act.




          (g) The Company and its subsidiaries maintain systems of “internal control over financial
reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that comply in all material respects
with the requirements of the Exchange Act and have been designed by, or under the supervision of,
their respective principal executive and principal financial officers, or persons performing
similar functions, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with GAAP. Except
as would not have a Material Adverse Effect, the Company and its subsidiaries maintain internal
accounting controls sufficient to provide reasonable assurance that (i) transactions are executed
in accordance with management’s general or specific authorizations; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to assets is permitted only in accordance with management’s
general or specific authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with respect to any
differences. The Company has disclosed, based on its most recent evaluation prior to the date of
this Agreement, to the Company’s outside auditors and the audit committee of the Board of Directors
(A) any significant deficiencies and material weaknesses in the design or operation of “internal
control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that are
reasonably likely to adversely affect the Company’s ability to record, process, summarize and
report financial information and (B) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company’s internal controls over financial
reporting.




17









 





          (h) The Company is in material compliance in all material respects with applicable
requirements of SOX and applicable rules and regulations promulgated by the SEC thereunder. To the
Company’s knowledge, there is no reason that its outside auditors and its chief executive officer
and chief financial officer will not be able to give the certifications and attestations required
pursuant to the rules and regulations adopted pursuant to Section 404 of SOX, without
qualification, when next due.




          (i) Except as disclosed in the Company’s Form 10-K for the year ended February 28, 2009, none
of the officers, directors, employees or related persons (as defined in Regulation S-K Item 404) of
the Company is presently a party to any transaction with the Company or any of its subsidiaries
that would be required to be reported on Form 10-K by Item 13 thereof pursuant to Regulation S-K
Item 404 (other than for ordinary course services as employees, officers or directors), including
any contract, agreement or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise requiring payments to or
from any such officer, director, employee or related person or, to the Company’s knowledge, any
corporation, partnership, trust or other entity in which any such officer, director, employee or
related person has a substantial interest or is an officer, director, trustee or partner.




          (j) Except as disclosed in the Company’s Form 10-K for the year ended February 28, 2009 and
pursuant to the Ancillary Agreements, neither Tengelmann nor any of its officers, directors,
employees or affiliates is presently a party to any transaction with the Company or any of its
material subsidiaries, including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal property to or from, or
otherwise requiring payments to or from Tengelmann or any of its officers, directors, employees or
affiliates or, to the Company’s knowledge, any corporation, partnership, trust or other entity in
which Tengelmann or any of its officers, directors, employees or affiliates has a substantial
interest or is an officer, director, trustee or partner.




          (k) Except as disclosed in the Company’s Form 10-K for the year ended February 28, 2009,
neither the Company nor any of its subsidiaries has any outstanding Indebtedness, other than
intercompany loans (among wholly owned subsidiaries) and other than Indebtedness incurred in the
ordinary course of business and consistent with past practice since February 28, 2009 in an
aggregate principal amount which does not exceed $5,000,000. Neither the Company nor any of its
material subsidiaries is, immediately prior to this Agreement, or will be, at the time of the
Closing after giving effect thereto, in Default in the payment of any Indebtedness or in breach or
Default under any Contract evidencing or relating to its material Indebtedness, including the
resolutions adopted by the Pricing Committee of the Board of Directors on August 4, 1999, relating
to the Company’s 9 3/8% Senior Quarterly Interest Bonds due 2039, and the exhibits thereto, or
under any mortgage, deed of trust, security agreement or lease to which it is a party.




          SECTION 2.13 Absence of Certain Changes. Since February 28, 2009 through the date
hereof, there has not occurred any change, event or circumstance that




18









 




has had or would be reasonably expected to have a Material Adverse Effect. Except as
expressly contemplated by this Agreement or the Ancillary Agreements, since February 28, 2009
through the date hereof, the Company and its subsidiaries have conducted their business in the
ordinary course generally consistent with past practice in all material respects, and none of the
Company or its subsidiaries has:




          (a) amended its Charter, By-Laws or other organizational documents;




          (b) adopted a plan or agreement of liquidation, dissolution, restructuring, merger,
consolidation, recapitalization or other reorganization;




          (c) (i) issued, sold, transferred or otherwise disposed of any shares of its capital stock,
Voting Debt of the Company or other voting securities or any securities convertible into or
exchangeable for any of the foregoing, (ii) granted or issued any options, warrants, securities or
rights that are linked to the value of the Common Stock, or other rights to purchase or obtain any
shares of its capital stock or any of the foregoing or any “phantom” stock, “phantom” stock rights,
stock appreciation rights or stock-based performance units, (iii) split, combined, subdivided or
reclassified any shares of its capital stock, (iv) declared, set aside or paid any dividend or
other distribution with respect to any shares of its capital stock or (v) redeemed, purchased or
otherwise acquired any shares of its capital stock or any rights, warrants or options to acquire
any such shares or effected any reduction in capital, except (with respect to clauses (i) through
(v) above) for: (A) issuances of capital stock of the Company’s subsidiaries to the Company or a
wholly owned subsidiary of the Company, (B) issuances of shares of Common Stock upon exercise of
employee stock options or upon vesting of restricted stock units or restricted stock or
redemptions, purchases or other acquisitions of capital stock in connection with net exercises or
withholding with respect to the foregoing, (C) grants made pursuant to Company Plans (D) dividends
or other distributions by any subsidiary of the Company to the Company or a wholly owned subsidiary
of the Company and (E) issuances pursuant to any share lending agreement, hedging agreement, and
any other documents related thereto;




          (d) issued any note, bond or other debt security or right to acquire any debt security,
incurred or guaranteed any Indebtedness or entered into any “keep well” or other agreement to
maintain the financial condition of another person or other arrangement having the economic effect
of any of the foregoing, other than (i) trade or standby letters of credit in the ordinary course
of business; (ii) in connection with new store openings or other actions in the ordinary course of
business; (iii) pursuant to any existing credit agreement and other existing Contracts regarding
other Indebtedness; (iv) issuances, incurrences or guarantees by the Company to any wholly owned
subsidiary of the Company or by a subsidiary to the Company or any other wholly owned subsidiary of
the Company; (v) incurrences or guarantees of store leases; (vi) other guarantees required under
any agreements or commitments existing as of the date of this Agreement; (vii) in connection with
any equipment leases and capital leases; (viii) in connection with any insurance premium financing
in the ordinary course of business generally consistent with past practice; or (ix) guarantees of
any Indebtedness permitted by the foregoing clauses (i) through (viii);




19









 





          (e) except as required under a Company Plan or Collective Bargaining Agreement or in the
ordinary course of business generally consistent with past practice, (i) increased or accelerated
the benefits under any Company Plan or Collective Bargaining Agreement, (ii) increased the
compensation or benefits payable to any current or former director, officer, employee or consultant
of the Company or its subsidiaries, (iii) granted any rights to severance, change in control or
termination pay to, or entered into any employment, severance or change in control agreement or
arrangement with, any current or former director, officer, employee or consultant of the Company or
its subsidiaries, or (iv) taken any affirmative action to amend or waive any performance or vesting
criteria or accelerate vesting, exercisability or funding under any Company Plan;




          (f) entered into or consummated any transaction involving the acquisition (including, by
merger, consolidation or acquisition of the business, stock or all or substantially all of the
assets or other business combination) of any other person for consideration to such person in
excess of $20,000,000 in the aggregate (other than purchases of inventory or acquisitions of real
property, fixtures and equipment for the opening of any Facility in the ordinary course of business
generally consistent with past practice);




          (g) settled any Action or threatened any Action involving a payment by the Company or any of
its subsidiaries in excess of $1,000,000;




          (h) changed any of its material accounting policies or practices, except as required as a
result of a change in GAAP or the rules and regulations of the SEC;




          (i) (i) made, changed or revoked any material election in respect of Taxes, (ii) adopted or
changed any material accounting method in respect of Taxes, (iii) entered into any Tax allocation
agreement, Tax-sharing agreement, Tax indemnity agreement or closing agreement, (iv) settled or
compromised any material claim, notice, audit report or assessment in respect of Taxes or (v)
surrendered any right to claim a material refund of Taxes; or




          (j) agreed or committed by Contract or otherwise to do any of the foregoing.




          SECTION 2.14 Insurance. Each of the Company and its material subsidiaries maintains,
with reputable insurers or through self-insurance, insurance in such amounts, including deductible
arrangements, and of such a character as is customary for companies engaged in the same or similar
business. All policies of title, fire, liability, casualty, business interruption, workers’
compensation and other forms of insurance including directors and officers insurance held by the
Company and its subsidiaries as of the date hereof, are in full force and effect in accordance with
their terms. Neither the Company nor any of its subsidiaries is in Default under any provisions of
any such policy of insurance and neither the Company nor any of its subsidiaries has received
notice of cancellation of any such insurance except as has not had and would not reasonably be
expected to have a Material Adverse Effect.




20









 





          SECTION 2.15 Private Placement. Assuming that the representations of the Investors
set forth in Articles III and V are true and correct, the offer, sale, and issuance of the Shares
in conformity with the terms of this Agreement are exempt from the registration requirements of
Section 5 of the Securities Act, and applicable state securities laws.




          SECTION 2.16 Form S-3 Eligibility. The Company meets the eligibility requirements of
General Instruction I to Form S-3 promulgated under the Securities Act.




          SECTION 2.17 Listing and Maintenance Requirements. The Company has not, in the 12
months preceding the date hereof, received notice (written or oral) from any Trading Market on
which any of its securities is or has been listed or quoted to the effect that the Company is not
in compliance with the listing or maintenance requirements of such Trading Market. The Company is
in compliance with all such listing and maintenance requirements.




          SECTION 2.18 Registration Rights. The Company has not granted or agreed to grant,
and is not under any obligation to provide, any rights (including “piggy-back” registration rights)
to register under the Securities Act any of its presently outstanding securities or any of its
securities that may be issued subsequently, except for those contained in the Amended and Restated
Stockholder Agreement and the Amended and Restated Tengelmann Stockholder Agreement.




          SECTION 2.19 No Restriction on the Ability to Pay Cash Dividends. Except for the ABL
Credit Agreement, neither the Company nor any of its material subsidiaries is a party to any
contract, agreement, arrangement or other understanding, oral or written, express or implied, and
is not subject to any provisions in its Charter or By-Laws or other governing documents or
resolutions of the Board of Directors, that could restrict, limit, prohibit or prevent the
Company’s ability to pay dividends in full in cash on the Shares in the amounts contemplated by the
Convertible Preferred Articles Supplementary.




          SECTION 2.20 Inventories. Except as would not have a Material Adverse Effect, all
items of inventory reflected on the latest balance sheet included in the Company’s SEC Reports (i)
were acquired in the ordinary course of business generally consistent with past practice and (ii)
were usable and saleable in the ordinary course of business generally consistent with past
practice, except for normal shrinkage, spoilage and obsolescence.




          SECTION 2.21 Contracts. (a) Except as have not had or would not reasonably be
expected to have a Material Adverse Effect, (i) each Company Contract, assuming such Company
Contract is a legal, valid and binding obligation of and enforceable against the other parties
thereto in accordance with its terms, constitutes a valid and binding obligation of the Company or
the subsidiary of the Company party thereto and is enforceable against the Company or such
subsidiary, except as limited by bankruptcy, insolvency, reorganization, moratorium or other
similar Laws affecting the enforcement of creditors’ rights in general and subject to general
principles of equity




21









 




(regardless of whether such enforceability is considered in a proceeding at law or in equity)
and (ii) each Company Contract, to the Company’s knowledge, is a valid, binding and enforceable
obligation of the other parties thereto, except as limited by bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting the enforcement of creditors’ rights in
general and subject to general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity).




          (b) Except as have not had or would not reasonably be expected to have a Material Adverse
Effect, none of the Company or its subsidiaries and, to the Company’s knowledge, no other party to
a Company Contract (other than any Collective Bargaining Agreement) is in breach or Default under
any Company Contract (other than any Collective Bargaining Agreement). This subsection shall not
apply to any Contract evidencing Indebtedness, which is covered by Section 2.12(k), or any
Collective Bargaining Agreement, which is covered by Section 2.02(b).




ARTICLE III




Representations and Warranties of the Investors




          Each Investor and, as applicable, the Investor’s Representative, and solely with respect to
Section 3.02(a) and 3.05, the Existing Investors, severally but not jointly, hereby represents and
warrants to the Company, as of the date of this Agreement, as follows:




          SECTION 3.01 Corporate Status. Such Investor and the Investors’ Representative is
duly organized, validly existing and in good standing under the Laws of the jurisdiction of its
formation and has all requisite power and authority to carry on its business as it is now being
conducted.




          SECTION 3.02 Authorization; Noncontravention. (a) Authorization. Such
Investor, such Existing Investor and the Investors’ Representative have all necessary power and
authority to execute and deliver this Agreement and the Amended and Restated Stockholder Agreement,
to perform its obligations hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby, including the authorization by the Investors and the Existing Investors of the
Investors’ Representative to take actions on their behalf as set forth in Section 5.05 of this
Agreement and Section 2.06 of the Amended and Restated Stockholder Agreement. The execution,
delivery and performance of this Agreement and the Amended and Restated Stockholder Agreement and
the consummation by such Investor, the Existing Investors and the Investors’ Representative of the
transactions contemplated hereby and thereby, including the authorization by the Investors and the
Existing Investors of the Investors’ Representative to take actions on their behalf as set forth in
Section 5.05 of this Agreement and Section 2.06 of the Amended and Restated Stockholder Agreement,
have been duly and validly authorized by all necessary corporate or other action. This Agreement
has been duly executed and delivered by such Investor, the Existing Investors and the Investors’
Representative and (assuming due authorization, execution and




22









 




delivery by the Company) constitutes, and the Amended and Restated Stockholder Agreement, when
executed and delivered by each of the Investors, the Existing Investors and the Investors’
Representative (assuming due authorization, execution and delivery by the Company and any other
parties thereto), will constitute, a valid and binding obligation of such Investor, the Existing
Investors and the Investors’ Representative, enforceable against such Investor, the Existing
Investors and the Investors’ Representative in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other
similar Laws relating to or affecting creditors’ rights generally or by general equitable
principles (regardless of whether such enforceability is considered in a proceeding in equity or at
Law).




          (b) No Conflict. The execution, delivery and performance by such Investor, the
Existing Investors and the Investors’ Representative of this Agreement and the Amended and Restated
Stockholder Agreement do not, and the consummation of the Offering and the other transactions
contemplated hereby and thereby and compliance with the provisions of this Agreement and the
Amended and Restated Stockholder Agreement will not, conflict with, or result in any Default under,
or give rise to a right of termination, cancellation or acceleration of any obligation or to the
loss of a benefit under, or result in the amendment of any term or provision of or the creation of
any Encumbrance upon any of the assets of such Investor, the Existing Investors or the Investors’
Representative under any provision of (i) the certificate of incorporation or bylaws or any
relevant organizational documents of such Investor, such Existing Investor or the Investors’
Representative, (ii) any material Contract (with a party other than the Company) to which any of
the Investors, the Existing Investors or the Investors’ Representative is a party or by which any
of the Investors’, the Existing Investors’ or the Investors’ Representative’s assets are bound or
(iii) any Law or Judgment, in each case applicable to any of the Investors, the Existing Investors
or the Investors’ Representative or their assets, other than, in the case of clauses (ii) or (iii),
any such conflicts, Defaults, rights, losses, amendments or Encumbrances that would not reasonably
be expected to materially impair or delay the ability of such Investor, such Existing Investor or
the Investors’ Representative to perform its obligations (if any) under this Agreement or the
Amended and Restated Stockholder Agreement or carry out the transactions contemplated hereby or
thereby in accordance with the terms herein or therein. No material Permit, order or authorization
of, or registration, declaration or filing with, or notice to, any Governmental Entity is required
to be obtained or made by or with respect to any of the Investors, the Existing Investors or the
Investors’ Representative in connection with the execution, delivery and performance of this
Agreement, or the Amended and Restated Stockholder Agreement by such Investor, such Existing
Investor or the Investors’ Representative or the consummation by such Investor, such Existing
Investor or the Investors’ Representative of the Offering or the other transactions contemplated by
this Agreement or the Amended and Restated Stockholder Agreement, except for compliance with and
filings under the Exchange Act, the Securities Act, state securities Laws or “blue-sky” laws and
the rules and regulations of the NYSE.




          SECTION 3.03 Securities Act. The Shares purchased by such Investor pursuant to this
Agreement are being acquired for investment only and not with a view to any public distribution
thereof, and such Investor shall not offer to sell or otherwise




23









 




dispose of the Shares or the Underlying Securities so acquired by it in violation of any of
the registration requirements of the Securities Act.




          SECTION 3.04 Available Funds. Such Investor has, or will have on or prior to the
Closing, sufficient funds in its possession to permit it to acquire and pay for the Investor Shares
to be purchased by it and to perform its obligations under this Agreement.




          SECTION 3.05 Ownership of Common Stock. As of the date of this Agreement, the
Investors, the Existing Investors and their affiliates, taken together, are the beneficial owners,
as defined in Rule 13d-3 promulgated under the Exchange Act, of no more than 2,592,610 shares of
Common Stock, provided that they also hold Series B Yucaipa Warrants to acquire 6,965,859 shares of
Common Stock.




ARTICLE IV




Covenants




          SECTION 4.01 Confidentiality. The Investors acknowledge that the information being
provided to it in connection with the Offering and the consummation of the other transactions
contemplated hereby is subject to the terms of a confidentiality agreement between the Investors’
Representative and the Company dated as of February 9, 2009 (the “Confidentiality
Agreement”), the terms of which are incorporated herein by reference. Effective upon, and only
upon, the Closing, the Confidentiality Agreement shall terminate and be superseded in all respects
by the Amended and Restated Stockholder Agreement.




          SECTION 4.02 Reasonable Best Efforts. (a) On the terms and subject to the
conditions and limitations of this Agreement, including the provisions immediately below, each
party shall use its reasonable best efforts to cause the Closing to occur as promptly as
practicable.




          (b) If any objections are asserted with respect to the Offering or the transactions
contemplated hereby under any Law or if any suit is instituted (or threatened to be instituted) by
any applicable Governmental Entity or any private party challenging any of the transactions
contemplated hereby as violative of any Law or which would otherwise prevent, materially impede or
materially delay the consummation of the transactions contemplated hereby, each party hereto shall
promptly notify each of the other parties hereto and shall use its reasonable best efforts to
resolve any such objections or suits which, in any case if not resolved, would reasonably be
expected to prevent, materially impede or materially delay the consummation of the Offering or the
other transactions contemplated hereby; provided that neither the Company nor any of the
Investors shall be required to sell, hold separate or otherwise dispose of any of their respective
assets or assets of their respective subsidiaries, or conduct its business or the business of any
of its subsidiaries, in a manner which would resolve such objections or suits.




24









 





          (c) Nothing in this Section 4.02 shall require the Investors to agree to any change to the
terms of this Agreement, any Ancillary Agreements, the Company By-Law Amendment, the Senior Secured
Notes or the Senior Secured Notes Offering, except, in the case of the Senior Secured Notes and the
Senior Secured Notes Offering only, for such changes that would not (absent a waiver) cause the
closing condition in Section 6.01(d) hereof to fail to be satisfied. In the event the obligations
set forth in this Section 4.02 require the Investors to (i) make any payments of any money or incur
any liability for fees, expenses or otherwise to any Third Party (other than ordinary course fees
to advisors that would be incurred in connection with this Agreement absent the obligations in this
Section 4.02) or (ii) resolve objections or suits, litigate or dispute any matter with a Third
Party (other than Tengelmann or its affiliates), the Company shall reimburse the Investors for all
out-of-pocket costs and expenses (including legal fees) associated therewith within 10 Business
Days of receiving a reasonably detailed invoice from the Investors’ Representative.




          SECTION 4.03 Fees and Expenses. (a) Upon the occurrence of the Closing, the Company
shall reimburse the Investors for all reasonable Third Party out-of-pocket costs and expenses
incurred by the Investors or on the Investors’ behalf in connection with this Agreement, the
Ancillary Agreements, the Offering and the transactions contemplated by this Agreement and the
Ancillary Agreements, including reasonable fees and expenses of accountants and counsel of the
Investors; provided, however, that such amounts, not including the $135,000 paid by
the Company to the Investors on or about July 2009, shall not exceed $1,250,000.




          (b) On the Closing Date, the Company shall pay the Investors a placement fee equal to
$2,625,000.




          SECTION 4.04 NYSE. Promptly following the Closing, the Company shall apply to cause
the Underlying Securities with respect to the Investor Shares to be approved for listing on the
NYSE.




          SECTION 4.05 Use of Proceeds. The net proceeds from the Offering, the Tengelmann
Initial Shares and the Senior Secured Notes Offering shall be used for general corporate purposes.




          SECTION 4.06 Conduct of Business. Except for matters set forth in Section 4.06 of
the Company Disclosure Letter, otherwise contemplated by this Agreement (including the Senior Notes
Offering) or the Ancillary Agreements or as required by applicable Law, without the prior written
consent of the Investors, from the date of this Agreement to the Closing Date, the Company shall
not (i) conduct its business other than in the ordinary course in all material respects and in
compliance in all material respects with applicable Law, (ii) take any action (or cause or permit
its subsidiaries to take any action) that would otherwise require the approval of the Investors and
the Existing Investors under Section 2.05 of the Amended and Restated Stockholder Agreement (were
it in effect at the time) or (iii) take any action that is intended or would reasonably be expected
to result in any condition in Article VI (other than 6.01(d) or 6.02(h)) not being satisfied.




25









 





ARTICLE V




Additional Agreements




          SECTION 5.01 Publicity. The Company and the Investors shall, and the Investors shall
cause the Investors’ Representative to, communicate with each other and cooperate with each other
prior to any public disclosure of the transactions contemplated by this Agreement. The Company,
the Investors and the Investors’ Representative agree that no public release or announcement
concerning the transactions contemplated hereby or by the Ancillary Agreements shall be issued by
or as a result of the actions of any of them without the prior consent of the other parties hereto,
except as such release or announcement may be required by Law or the rules and regulations of the
NYSE, in which case the party required to make the release or announcement shall consult with the
other parties hereto about, and allow the other parties hereto reasonable time (taking into account
the circumstances) to comment on, such release or announcement in advance of such issuance.




          SECTION 5.02 Transfer Restrictions. The Investors acknowledge and agree that the
Shares and the Underlying Securities (a) have not been registered under the Securities Act or under
any state securities laws, (b) will be, when issued, restricted securities under the Securities Act
and may not be offered or sold except pursuant to an effective registration statement or an
available exemption from registration under the Securities Act and (c) shall be subject to the
restrictions on transfer set forth in the Amended and Restated Stockholders Agreement.




          SECTION 5.03 Purchase for Investment. Each Investor (i) is acquiring the Shares
pursuant to an exemption from registration under the Securities Act solely for investment with no
present intention to distribute them to any person in violation of the Securities Act or any
applicable U.S. state securities laws, (ii) has such knowledge and experience in financial and
business matters and in investments of this type that it is capable of evaluating the merits and
risks of the Offering and of making an informed investment decision, has conducted a review of the
business and affairs of the Company that it considers sufficient and reasonable for purposes of
purchasing the Investor Shares and has been provided an opportunity to ask questions of and receive
answers from representatives of the Company concerning the terms and conditions of this Agreement,
the Ancillary Agreements and the purchase of the Investor Shares, (iii) is able to bear the
economic risk of the Offering and at the present time is able to afford a complete loss of such
investment and (iv) is an “institutional accredited investor” (as that term is defined by Rule 501
under the Securities Act).




          SECTION 5.04 Legend. The Investors agree that the Shares and Underlying Securities
will bear a legend substantially to the following effect and, in the case of the Underlying
Securities, with such modifications as may reasonably be required:





“THE SECURITIES REPRESENTED BY THIS INSTRUMENT AND THE SECURITIES ISSUABLE UPON CONVERSION
OF SECURITIES



26









 







REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR
OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT OR SUCH LAWS AND IN ACCORDANCE WITH THE TRANSFER RESTRICTIONS
SET FORTH IN THE AGREEMENTS REFERRED TO BELOW (AS SUCH AGREEMENTS MAY BE AMENDED FROM TIME
TO TIME). THIS INSTRUMENT IS ISSUED PURSUANT TO AND SUBJECT TO THE RESTRICTIONS ON
TRANSFER AND OTHER PROVISIONS OF AN INVESTMENT AGREEMENT, DATED AS OF JULY 23, 2009, BY AND
AMONG THE ISSUER OF THIS INSTRUMENT AND THE INVESTORS AND THE INVESTORS’ REPRESENTATIVE
REFERRED TO THEREIN AND AN AMENDED AND RESTATED STOCKHOLDER AGREEMENT, DATED AS OF JULY      ,
2009, BY AND AMONG THE ISSUER OF THIS INSTRUMENT AND THE INVESTORS AND THE INVESTORS’
REPRESENTATIVE REFERRED TO THEREIN. THE SECURITIES REPRESENTED BY THIS INSTRUMENT AND THE
SECURITIES ISSUABLE UPON CONVERSION OF SECURITIES REPRESENTED BY THIS INSTRUMENT MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE WITH SAID AGREEMENTS. ANY SALE OR OTHER
TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENTS WILL BE VOID. THE FOREGOING SUMMARY DOES
NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SAID AGREEMENTS, COPIES OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS. SUCH REQUEST MUST BE MADE TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL
OFFICE.




THE COMPANY IS AUTHORIZED TO ISSUE DIFFERENT CLASSES AND SERIES OF STOCK. THE DESIGNATIONS
AND ANY PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS
AS TO DIVIDENDS, QUALIFICATIONS, AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF
EACH CLASS AND SERIES OF STOCK AND THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES
FOR EACH CLASS AND SERIES OF STOCK (AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO
DETERMINE THE RELATIVE RIGHTS AND PREFERENCES OF FUTURE CLASSES AND SERIES OF STOCK) WILL
BE FURNISHED WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS. SUCH REQUEST MUST BE MADE
TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL OFFICE.”



          SECTION 5.05 Investors’ Representative. The parties hereto acknowledge and agree
that Yucaipa American Alliance Fund II, LLC shall be the designated representative of the
Investors, or the Investors’ Representative, with the




27









 




authority to make all decisions and determinations and to take all actions (including giving
consents and waivers or agreeing to any amendments to this Agreement or to the termination hereof)
required or permitted hereunder on behalf of the Investors, and any such action, decision or
determination so made or taken shall be deemed the action, decision or determination of the
Investors, and any notice, document, certificate or information required to be given, whether in
writing or otherwise, to any Investor shall be deemed so given if given to the Investors’
Representative and the Company shall be fully protected against liability in relying on the actions
of the Investors’ Representative as being authorized by the Investors.




          SECTION 5.06 Waiver. The Company hereby agrees to waive any provision in the
Stockholder Agreement that would be required to be waived in order for the parties hereto to enter
into and perform their obligations and exercise their rights under this Agreement, the Ancillary
Agreements and the Company By-Laws Amendment and to consummate the transactions contemplated hereby
and thereby.




ARTICLE VI




Conditions Precedent




          SECTION 6.01 Conditions to Each Party’s Obligation. The obligation of the Investors
to purchase and pay for the Investor Shares and the obligation of Company to issue such Investor
Shares to the Investors is subject to the satisfaction or waiver on or prior to the Closing Date of
the following conditions:




               (a) No Injunctions or Restraints. No Law or injunction enacted, entered,
promulgated, enforced or issued by any Governmental Entity preventing the consummation of the
Offering or the transactions contemplated by the Ancillary Agreements shall be in effect.



               (b) Amended and Restated Stockholder Agreement. The Company, the Existing Investors,
the Investors and the Investors’ Representative shall have duly authorized, executed and delivered
the Amended and Restated Stockholder Agreement.



               (c) Tengelmann Investment. Tengelmann and the Company shall have entered into the
Amended and Restated Tengelmann Stockholder Agreement and the closing under the Tengelmann
Investment Agreement shall occur concurrently with, and be subject to, the Closing hereunder and
each of the Amended and Restated Tengelmann Stockholder Agreement and the Tengelmann Investment
Agreement shall be in the form delivered to the Investors on the date hereof.



               (d) Senior Secured Notes Offering. The Senior Secured Notes Offering in an aggregate
principal amount of at least $225,000,000 shall close prior to or concurrently with the Offering,
and the terms and conditions of the Senior Secured Notes shall not be materially less favorable in
the aggregate, to the Company or to the Investors,



28









 







as holders of the Convertible Preferred Stock, than the terms and conditions set forth in
Section 6.01 of the Company Disclosure Letter.



          SECTION 6.02 Conditions to Obligation of the Investors. The obligation of the
Investors to purchase and pay for the Investor Shares is subject to the satisfaction (or waiver by
the Investors) on or prior to the Closing Date of the following conditions:




          (a) Representations and Warranties. (i) The representations and warranties of the
Company contained in this Agreement (other than in Sections 2.02(a) and 2.03(a), which Sections
shall be the subject of Section 6.02(a)(ii)) shall be true and correct, without giving effect to
any “materiality” or “Material Adverse Effect” qualifications therein, as of the date of this
Agreement, except to the extent that any failures of such representations and warranties to be so
true and correct, individually or in the aggregate, have not had a Material Adverse Effect and (ii)
the representations and warranties of the Company set forth in Sections 2.02(a) and 2.03(a) shall
be true and correct in all material respects, as of the date of this Agreement, except to the
extent such representations and warranties shall have been expressly made as of an earlier date, in
which case such representations and warranties shall have been true and correct in all material
respects as of such earlier date.




          (b) Performance of Covenants of the Company. The Company shall have performed or
complied in all material respects with all covenants contained in this Agreement to be performed or
complied with by the Company prior to or at the Closing.




          (c) Company Closing Certificate. The Investors shall have received a certificate
signed by the chief executive officer or the chief financial officer of the Company on behalf of
the Company, dated as of the Closing Date, to the effect that the conditions set forth in Sections
6.02(a) and 6.02(b) have been satisfied (the “Company Closing Certificate”).




          (d) Opinion of Counsel. The Investors shall have received (i) an opinion dated as of
the Closing Date of counsel to the Company, substantially in the form attached hereto as Exhibit C
and (ii) an opinion dated as of the Closing Date of Maryland counsel to the Company, substantially
in the form attached hereto as Exhibit D.




          (e) Articles Supplementary. The Company shall have filed the Convertible Preferred
Articles Supplementary with the State Department of Assessments and Taxation of the State of
Maryland and the State Department of Assessments and Taxation of the State of Maryland shall have
accepted the Convertible Preferred Articles Supplementary for record.




          (f) Board of Directors. The Board of Directors shall have taken all actions
necessary and appropriate to permit Frederick F. Brace and Terry Wallock, to be elected to the
Board effective immediately upon the delivery of a written consent to such effect to the holders of
the Investor Shares following the Closing; provided that if the Governance Committee of the Board
of Directors reasonably determines that neither of them qualify as an “Independent Director” under
NYSE Rule 303A.02 (or any successor




29









 




provision thereto), then the Board of Directors shall take all actions necessary to qualify
another individual designated by the Investors as an “Independent Director” under NYSE Rule 303A.02
(or any successor provision thereto) so that immediately after the Closing two individuals
designated by the Investors have been elected to the Board of Directors.




          (g) Company By-Laws Amendment. The Company shall have adopted the Company By-Laws
Amendment.




          (h) Senior Secured Notes Offering. The Senior Secured Notes Offering in an aggregate
principal amount of at least $225,000,000 shall close prior to or concurrently with the Offering,
and (in addition to and without limitation of the closing condition in Section 6.01(d)), the terms
and conditions of such Senior Secured Notes described in Section 6.02 of the Company Disclosure
Letter shall not be changed without Investors prior written consent (which may be withheld in the
Investors’ sole discretion).




          SECTION 6.03 Conditions to Obligation of the Company. The obligation of the Company
to sell the Investor Shares is subject to the satisfaction (or waiver by the Company) on or prior
to the Closing Date of the following conditions:




          (a) Representations and Warranties. The representations and warranties of the
Investors, the Existing Investors and the Investors’ Representative made in this Agreement and the
Ancillary Agreements shall be true and correct in all material respects as of the date of this
Agreement, except to the extent such representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall be true and correct in all material
respects as of such earlier date.




          (b) Performance of Covenants of the Investors. The Investors and the Investors’
Representative shall have performed or complied in all material respects with all covenants
contained in this Agreement to be performed or complied with by the Investors or the Investors’
Representative prior to or at the Closing.




          (c) Investor Closing Certificates. The Company shall have received from each
Investor a certificate, signed by the Investors’ Representative on behalf of such Investor dated as
of the Closing Date, to the effect that the conditions set forth in Sections 6.03(a) and 6.03(b)
have been satisfied (the “Investor Closing Certificates”).




          SECTION 6.04 Satisfaction of Sections 6.01(d) and 6.01(h). If the Company provides
one Business Day advance written notice of the pricing of the Senior Secured Notes Offering, the
Investors’ Representative shall cooperate in good faith with the Company on the pricing date,
including to make available representatives authorized to evaluate whether the “description of the
notes” from the offering memorandum for the Senior Secured Notes Offering satisfies the conditions
set forth in Sections 6.01(d) and 6.01(h). If on the pricing date, the Investors’ Representative
delivers a written notice agreeing that the conditions in Sections 6.01(d) and 6.01(h) have been
satisfied, then such conditions shall irrevocably be deemed to be satisfied upon the Closing of the
Offering so long as the terms of the Senior Secured Notes at Closing of the Offering are the same
as the “description of the notes” from the offering memorandum.




30









 





          SECTION 6.05 Frustration of Closing Condition. No party to this Agreement may rely
on the failure of any condition set forth in this Article VI to be satisfied if such failure was
caused by such party’s failure to cooperate or to use its reasonable best efforts to cause the
Closing to occur, as required by Section 4.02.




ARTICLE VII




Indemnification




          SECTION 7.01 Indemnification. (a) Except as set forth below, the representations
and warranties of the parties contained in this Agreement (including the Company Disclosure Letter)
shall not survive the Closing Date. The representations and warranties contained in the first
sentence of Section 2.13 and in Sections 2.02(b), 2.12, 2.15, 2.16, 2.17, 2.18, 2.19 and 3.02(b)
shall survive until the first anniversary of the Closing Date. The representations and warranties
contained in Sections 2.02(a), 2.03 and 3.02(a) shall survive indefinitely.




          (b) The Company hereby agrees to indemnify, pay and hold each Investor, and each of the
respective officers, directors, employees and affiliates of each Investor, and each of the
respective direct and indirect beneficial owners of each Investor harmless, to the fullest extent
permitted by Law, from and against any and all Losses which may be imposed on, incurred by or
asserted against such Indemnified Party, in any manner relating to or arising out of (i) the breach
of any representation or warranty set forth in the first sentence of Section 2.13 and in Sections
2.02, 2.03, 2.12, 2.15, 2.16, 2.17, 2.18 and 2.19 of this Agreement, as of the date hereof or as of
the Closing Date, in each case, except with respect to Section 2.12(a)(ii) and the first sentence
of Section 2.13, without giving effect to any limitation or qualification as to “materiality,”
“material,” (including references to “material subsidiary” or “material subsidiaries”), “Material
Adverse Effect” or similar qualifiers set forth in such representation or warranty for purposes of
determining whether there is a breach and the Losses resulting from, arising out of or relating to
such breach, or (ii) the breach, non-compliance or non-performance of any covenant, agreement or
obligation of the Company contained in this Agreement at any time (the “Company Indemnified
Liabilities”). The Company acknowledges and agrees that for purposes of its indemnification
and other obligations under this Article VII, it will be deemed to have given the representations
and warranties listed in clause (i) above both as of the date of this Agreement and as of the
Closing Date and this Article VII will apply to any breaches at Closing as if such representations
and warranties were given and made as of Closing.




          (c) Each Investor severally but not jointly hereby agrees to indemnify, pay and hold the
Company and its officers, directors, employees and affiliates harmless to the fullest extent
permitted by Law, from and against any and all Losses which may be imposed on, incurred by, or
asserted against such Indemnified Party, in any manner relating to or arising out of the breach of
any representation or warranty set forth in Section 3.02 of this Agreement, without giving effect
to any limitation or qualification as to “materiality,” “material,” “Material Adverse Effect” or
similar qualifiers set forth in




31









 




such representation or warranty for purposes of determining whether there is a breach and the
Losses resulting from, arising out of or relating to such breach (the “Investor Indemnified
Liabilities”, and together with the Company Indemnified Liabilities, the “Indemnified
Liabilities”).




          (d) A party hereto seeking indemnification under this Article VII (the “Indemnified
Party”) with respect to any action, lawsuit, proceeding, investigation or other claim brought
against it by a Third Party (a “Third-Party Claim”) shall give prompt written notice to the
party from whom indemnification is sought (the “Indemnitor”) of such Third-Party Claim that
might give rise to Indemnified Liabilities setting forth a description of those elements of such
Third-Party Claim of which such Indemnified Party has knowledge; provided that any delay or
failure to give such notice shall not affect the obligations of the Indemnitor unless (and then
solely to the extent) such Indemnitor is materially prejudiced by such delay or failure. The
Indemnitor shall have the right at any time during which such Third-Party Claim is pending to
select counsel to defend and control the defense thereof and settle any Third-Party Claim for which
they are responsible for indemnification hereunder (provided that the Indemnitor will not
settle any such Third-Party Claim without (i) the appropriate Indemnified Party’s prior written
consent, which consent shall not be unreasonably withheld or (ii) obtaining an unconditional
release of the appropriate Indemnified Party from all claims arising out of or in any way relating
to the circumstances involving such Third-Party Claim) so long as in any such event the Indemnitor
shall have stated in a writing delivered to the Indemnified Party that, as between the Indemnitor
and the Indemnified Party, the Indemnitor is responsible to the Indemnified Party with respect to
such Third-Party Claim to the extent and subject to the limitations set forth herein;
provided that the Indemnitor shall not be entitled to control the defense of any
Third-Party Claim in the event that in the reasonable opinion of counsel for the Indemnified Party
there are one or more material defenses available to the Indemnified Party which are not available
to the Indemnitor or that a conflict of interest is likely to exist if the same counsel were to
represent the Indemnitor and the Indemnified Party; provided further that with respect to
any Third-Party Claim as to which the Indemnified Party is controlling the defense, the Indemnitor
will not be liable to any Indemnified Party for any settlement of any Third-Party Claim pursuant to
this Section that is effected without its prior written consent. All reasonable fees and expenses
of the Indemnified Party (including reasonable fees and expenses to the extent incurred in
connection with investigating or preparing to defend a matter not inconsistent with this Article
VII) shall be paid to the Indemnified Party, as incurred, within 20 calendar days of written notice
thereof to the Indemnitor (regardless of whether it is ultimately determined that the Indemnified
Party is not entitled to indemnification hereunder; provided that the Indemnitor may
require the Indemnified Party to undertake to reimburse all such fees and expenses to the extent it
is finally judicially determined that the Indemnified Party is not entitled to indemnification
hereunder). To the extent that the undertaking to indemnify, pay and hold harmless set forth herein
may be unenforceable because it is violative of any Law or public policy, the Indemnitor shall
contribute the maximum portion which it is permitted to pay and satisfy under applicable Law to the
payment and satisfaction of all Indemnified Liabilities incurred by the Indemnified Parties or any
of them. The obligations of the parties set forth in this Article VII with regard to the breach or
inaccuracy of the representations and




32









 




warranties in this Agreement shall survive until the applicable representation or warranty
ceases to survive pursuant to Section 7.01 of this Agreement and, with respect to any claim for
Indemnified Liabilities made prior to such time that the applicable representation or warranty
ceases to survive, until the final resolution thereof.




          (e) Notwithstanding anything to the contrary contained in this Agreement: (i) an Indemnitor
shall not be liable for any claim for indemnification pursuant to this Section 7.01 with respect to
any breach, non-compliance or non-performance of any representation, warranty, covenant, agreement
or obligation, unless and until the aggregate amount of indemnifiable Losses which may be recovered
from the Indemnitor equals or exceeds on a cumulative basis an amount equal to $2.5 million, after
which the Indemnitor shall be liable for the full amount of all such Losses from and including the
first dollar of all such Losses and (ii) with respect to any breach of any representation, warranty
or covenant, the maximum amount of indemnifiable Losses which may be recovered from an Indemnitor
arising out of or resulting from the causes set forth in Section 7.01 shall be an amount equal to
the Purchase Price.




ARTICLE VIII




Termination




     SECTION 8.01 Termination. (a) Notwithstanding anything to the contrary in this
Agreement, this Agreement may be terminated and the Offering and the other transactions
contemplated by this Agreement abandoned at any time prior to the Closing upon written notice
(other than in the case of Section 8.01(a)(i) below) from the terminating party to the
non-terminating party specifying the subsection of this Section 8.01 to which such termination is
effected:




     (i) by mutual written consent of the Company and the Investors;




     (ii) by the Company, if any of the conditions set forth in Section 6.01 or
6.03 shall have become incapable of fulfillment, and shall not have been waived by
the Company;




     (iii) by the Investors, if any of the conditions set forth in Section 6.01 or
Section 6.02 shall have become incapable of fulfillment, and shall not have been
waived by the Investors;




     (iv) by the Company or the Investors, if the Tengelmann Investment Agreement
is terminated; or




     (v) by the Company or the Investors, if the Closing does not occur on or
prior to August 14, 2009;


provided, however, that the right to terminate this Agreement under the foregoing
clauses (ii), (iii) and (v) of this Section 8.01(a) shall not be available to any party whose
action or


33









 






failure to act in violation of this Agreement has been a principal cause of, or resulted in, the
event or circumstance giving rise to the right to terminate this Agreement.




          (b) If the transactions contemplated by this Agreement are terminated as provided herein:





     (i) the Investors shall, and shall cause the Investors’ Representative to,
return all documents and other material received from the Company relating to the
transactions contemplated hereby, whether so obtained before or after the execution
hereof, to the Company; and




     (ii) all confidential information received by the Investors or the Investors’
Representative with respect to the business of the Company and its subsidiaries
shall be treated in accordance with the Confidentiality Agreement, which shall
remain in full force and effect notwithstanding the termination of this Agreement.



          SECTION 8.02 Effect of Termination. (a) If this Agreement is terminated and the
transactions contemplated hereby are abandoned as described in Section 8.01, this Agreement shall
become null and void and of no further force and effect, except for the provisions of (i) Section
4.01 relating to the obligation of the Investors to keep confidential certain information and data
obtained by them, (ii) Section 8.01 and this Section 8.02 and (iii) Sections 9.06, 9.07, 9.08,
9.09, 9.10 and 9.11 as applicable to the interpretation and enforcement of clauses (i) and (ii)
above and the Sections referenced therein. Further, nothing in this Section 8.02 shall be deemed
to release any party from any liability for any willful and material breach by such party of the
terms and provisions of this Agreement.




          (b) If this Agreement is terminated pursuant to Section 8.01(a)(ii) (except as a result of a
material breach by the Investors), Section 8.01(a)(iii), Section 8.01(iv) or Section 8.01(v), then
the Company shall pay and reimburse the Investors for all reasonable Third Party out-of-pocket
costs and expenses incurred by the Investors or on the Investors’ behalf in connection with this
Agreement, the Ancillary Agreements, the Offering and the transactions contemplated by this
Agreement and the Ancillary Agreements; provided, however, that such amounts shall
not exceed $1,250,000. Payment of such fees and expenses shall be made by the Company to the
Investors (by wire transfer of immediately available funds to an account designated by the
Investors) not later than two Business Days after delivery to the Company by the Investors of a
notice of demand for payment.




ARTICLE IX




General Provisions




          SECTION 9.01 Amendments and Waivers. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. Except as otherwise provided
in this Agreement, any failure of any party to





34












 




comply with any obligation, covenant, agreement or condition herein may be waived by the party
entitled to the benefits thereof only by a written instrument signed by the party granting such
waiver, but such waiver shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.




          SECTION 9.02 Assignment. This Agreement and the rights and obligations hereunder
shall not be assignable or transferable by any party without the prior written consent of the other
parties hereto. Notwithstanding the foregoing, (a) each Investor may assign its right to purchase
the Investor Shares to a controlled affiliate of such Investor or The Yucaipa Companies, LLC;
provided that the representations and warranties of such Investor made in this Agreement
and the Ancillary Agreements shall be true and correct in all material respects as if given by such
controlled affiliate or The Yucaipa Companies, LLC and such controlled affiliate or The Yucaipa
Companies, LLC shall become party to this Agreement and the Amended and Restated Stockholder
Agreement by execution of a joinder hereto or thereto, and each such controlled affiliate or The
Yucaipa Companies, LLC shall constitute an “Investor” for purposes hereunder as if it were an
“Investor” as of the date hereof, and (b) each Investor may assign its rights hereunder by way of
security; provided, however, that no assignment shall limit or affect the
assignor’s obligations hereunder. Any attempted assignment in violation of this Section 9.02 shall
be void.




          SECTION 9.03 No Third-Party Beneficiaries. This Agreement is for the sole benefit of
the parties hereto and their permitted assigns and nothing herein expressed or implied shall give
or be construed to give to any person, other than the parties hereto and such permitted assigns,
any legal or equitable rights hereunder, except that each Indemnified Party is an intended
beneficiary of Section 7.01 and may enforce the provisions of such Sections directly against the
parties with obligations thereunder.




          SECTION 9.04 Notices. All notices or other communications required or permitted to
be given hereunder shall be in writing and shall be delivered by hand or sent by facsimile or sent,
postage prepaid, by registered, certified or express mail or overnight courier service and shall be
deemed given when received, as follows:




	 	 	 	 	 	 	 
	 	 	if to the Investors, the Existing Investors or the Investors’ Representative;
	 
	 	 	 	 	 	 
	 	 	 	 	Yucaipa American Alliance Fund II, LLC
	 	 	 	 	9130 W. Sunset Boulevard
	 	 	 	 	Los Angeles, California 90069
	 	 	 	 	Fax: (310) 789-1791
	 

	 	 	 	Email:
	 	legal@yucaipaco.com






35









 






	 	 	 	 	 	 	 
	 	 	with a copy to (which shall not constitute notice to any Investor, Existing Investor or the Investors’ Representative):
	 
	 	 	 	 	 	 
	 	 	 	 	Latham & Watkins LLP
	 	 	 	 	355 South Grand Avenue
	 	 	 	 	Los Angeles, California 90071
	 

	 	 	 	Attention:
	 	Robert O’Shea, Esq.; and
	 
	 	 	 	 	 	 
	 	 	if to the Company;
	 
	 	 	 	 	 	 
	 	 	 	 	The Great Atlantic & Pacific Tea Company, Inc.
	 	 	 	 	Two Paragon Drive
	 	 	 	 	Montvale, New Jersey 07645
	 

	 	 	 	Attention:
	 	Allan Richards, Esq.
	 
	 	 	 	 	 	 
	 	 	with copies to (which shall not constitute notice to the Company):
	 
	 	 	 	 	 	 
	 	 	 	 	Akin Gump Strauss Hauer & Feld LLP
	 	 	 	 	One Bryant Park
	 	 	 	 	New York, New York 10036
	 

	 	 	 	Attention:
	 	Patrick J. Dooley, Esq.,
	 
	 	 	 	 	 	 
	 	 	 	 	Cahill Gordon & Reindel LLP
	 	 	 	 	80 Pine Street
	 	 	 	 	New York, New York 10005
	 

	 	 	 	Attention:
	 	Kenneth W. Orce, Esq.
	 

	 	 	 	 	 	John Schuster, Esq.
	 
	 	 	 	 	 	 
	 	 	 	 	and
	 
	 	 	 	 	 	 
	 	 	 	 	Cravath, Swaine & Moore LLP
	 	 	 	 	825 Eighth Avenue
	 	 	 	 	New York, New York 10019
	 

	 	 	 	Attention:
	 	Sarkis Jebejian, Esq.
	 

	 	 	 	 	 	LizabethAnn Eisen, Esq.






          SECTION 9.05 Interpretation; Exhibits and Schedules; Certain Definitions. The
headings contained in this Agreement, in any Exhibit or Schedule hereto and in the table of
contents to this Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. The term “or” is not exclusive. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. Any capitalized terms used in any Schedule or Exhibit
but not otherwise defined therein shall have the meaning as defined in this Agreement. When a
reference is made in this Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated.




36









 





          For all purposes hereof:




          “ABL Credit Agreement” means the Company’s five-year amended and restated asset-based
senior secured revolving credit agreement, dated as of December 27, 2007 among the Company, the
other borrowers and the lenders party thereto, Bank of America, N.A., as administrative agent and
collateral agent, and Banc of America Securities LLC, as lead arranger (as amended prior to the
date hereof).




          “Action” means any action, cause of action, claim, prosecution, investigation, suit,
litigation, grievance, arbitration or other proceeding, whether civil, criminal or administrative,
at Law or in equity, by or before any Governmental Entity.




          “affiliate” of any person means another person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common control with, such first
person. A person shall be deemed to control another person if such first person possesses,
directly or indirectly, the power to direct, or cause the direction of, the management and policies
of such other person, whether through the ownership of voting securities, by contract or otherwise.




          “By-Laws” means the By-Laws of the Company, as amended and restated on January 17,
2008.




          “Business Day” means any day, other than a Saturday, Sunday or a day on which banks or
national securities exchanges located in New York shall be authorized by Law to close.




          “Capital Lease Obligations” means the obligations of the Company and its subsidiaries
on a consolidated basis to pay rent or other amounts under a lease of (or other agreement conveying
the right to use) real and/or personal property which obligations are required to be classified and
accounted for as a capital lease on a consolidated balance sheet of the Company and its
subsidiaries under GAAP (including Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board, as amended) and, for purposes of this Agreement, the amount
of such obligations shall be the capitalized amount of such obligations, determined in accordance
with GAAP (including such Statement No. 13).




          “Charter” means the Articles of Amendment and Restatement of the Articles of
Incorporation of the Company accepted for record by the State Department of Assessments and
Taxation of the State of Maryland on July 1, 2008.




          “ChaseMellon Warrants” means the warrants issued by Pathmark Stores, Inc. pursuant to
the Warrant Agreement dated as of September 19, 2000 between Pathmark Stores, Inc. and ChaseMellon
Shareholder Services, LLC, and assumed by the Company.




          “Code” means the Internal Revenue Code, as amended, and the rules and regulations
promulgated thereunder.




37









 





          “Collective Bargaining Agreement” means any collective bargaining agreement or any
other labor-related agreement with any labor union or labor organization to which the Company or
any of its subsidiaries is a party.




          “Company By-Laws Amendment” means the amendments to the By-Laws as adopted by 66.67%
of the directors then serving on the Board of Directors, to implement the provisions set forth in
Sections 2.01, 2.05 and 8.01 of the Amended and Restated Stockholder Agreement and Sections 2.01,
2.04 and 8.01 of the Amended and Restated Tengelmann Stockholder Agreement, to provide that the
Maryland Control Share Acquisition Act (Section 3-701, et seq. of the MGCL) shall not apply to the
Investors or Tengelmann or any of their respective affiliates and any other amendments to the
By-Laws required to implement the transactions contemplated hereby or by the Ancillary Agreements.




          “Company Contract” means, collectively, the following Contracts to which the Company
or any of its subsidiaries is a party or by which any of its or their respective assets are bound:




     (i) any Contract evidencing Indebtedness over $5,000,000;



     (ii) any Collective Bargaining Agreement;



     (iii) any partnership or joint venture Contract;



     (iv) any “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of
the SEC);



     (v) any Contract which contains any non-compete or exclusivity provisions with respect to any
line of business or geographic area with respect to the Company or its subsidiaries, or which
restricts the conduct of any line of business by the Company or its subsidiaries or any geographic
area in which the Company or any of its subsidiaries may conduct business, in each case in any
material respect;



     (vi) any Contract providing for capital expenditures or the acquisition or construction of
fixed assets which requires payments by any of the Company or its subsidiaries in excess of
$3,000,000 in any year;



     (vii) any Contract for the sale or other transfer of Owned Real Property or other material
tangible assets having a fair market value in excess of $3,000,000 that has not yet been
consummated, other than sales of inventory in the ordinary course of business generally consistent
with past practice;



     (viii) any Contract with an affiliate of the Company or any officer, director, employee or
related persons (as defined in Regulation S-K Item 404) of the Company;



     (ix) any distribution, supply, vendor, inventory purchase, sales agency or advertising
Contract (other than purchase orders entered into in the ordinary course of business generally
consistent with past practice) involving annual expenditures by any of



38









 







the Company or its subsidiaries in excess of $5,000,000 which is not cancelable (without giving
rise to any penalty or additional liability or cost) within one year;



     (x) (A) any other Contract (excluding Company Leases), not otherwise covered by clauses (i)
through (x) of this definition of “Company Contract”, that requires payments by the Company or its
subsidiaries in excess of $5,000,000 during any one year and (B) is not cancelable on 90 days, or
less notice; and



     (xi) any written commitment (including any letter of intent or memorandum of understanding) to
enter into any agreement of the type described in clauses (i) through (x) of this definition of
“Company Contract”.



          “Company Plans” means all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and all bonus,
incentive, stock option, stock purchase, restricted stock, phantom stock or other stock-based
compensation, deferred compensation, medical, life insurance, disability, fringe benefit,
supplemental executive retirement, severance or other compensation or benefit plans, programs,
policies, practices, trusts or arrangements, and all employment, termination, severance, change in
control, compensation or other Contracts or agreements, to which the Company or any of its
subsidiaries or ERISA Affiliates is a party, or which are sponsored, maintained or contributed to
by the Company or any of its subsidiaries or ERISA Affiliates or as to which the Company or any of
its subsidiaries or ERISA Affiliates has any liability and any material Contracts, arrangements,
agreements, policies, practices or understandings between the Company or any of its ERISA
Affiliates and any current or former employee, director or consultant of the Company or of any of
its subsidiaries, including any Contracts, arrangements or understandings relating to a change in
control of the Company; provided, however, that the term “Company Plans” shall
exclude any plan that is a multiemployer plan as defined in
Section 3(37) or 4001(a)(3) of ERISA.




          “Contract” means any contract, agreement, commitment, lease, purchase order, license,
mortgage, indenture, supplemental indenture, line of credit, note, bond, loan, credit agreement,
capital lease, sale/leaseback arrangement, concession agreement, franchise agreement or other
instrument, including all amendments, supplements, exhibits and attachments thereto.




          “Convertible Notes” means the Company’s 5.125% Convertible Senior Notes due 2011 and
the 6.75% Convertible Senior Notes due 2012.




          “Copyrights” means all rights in a work of authorship and all copyrights (including
all registrations and applications to register the same).




          “Default” means in violation of, or in default under (or, with or without the giving
of notice or lapse of time, or both, would be in default) according to the terms of the relevant
document or agreement.




          “DOJ” means the United States Department of Justice.




39









 





          “Encumbrance” means any lien, encumbrance, security interest, pledge, mortgage,
hypothecation, charge, restriction on transfer of title, adverse claim, title retention agreement
of any nature or kind, or other encumbrance, except for any restrictions arising under any
applicable securities Laws or pursuant to the Amended and Restated Stockholder Agreement or the
Amended and Restated Tengelmann Stockholder Agreement.




          “Environment” means ambient air, indoor air, surface water, groundwater and surface
and subsurface strata and natural resources such as wetlands, flora and fauna.




          “Environmental Law” means any Law and the common law relating to (i) pollution or the
protection of the Environment, (ii) the protection of human health and safety as it pertains to
Hazardous Materials or (iii) the generation, handling, use, presence, treatment, transport,
storage, disposal or Release of any Hazardous Materials.




          “ERISA Affiliate” means any trade or business, whether or not incorporated, which
together with the Company would be deemed a “single employer” within the meaning of Section 414(b),
(c) or (m) of the Code or Section 4001(b)(1) of ERISA.




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




          “Facilities” means any store, office, plant or warehouse owned or leased by the
Company or any of its subsidiaries.




          “FTC” means the United States Federal Trade Commission.




          “GAAP” means generally accepted accounting principles in the United States of America
as in effect from time to time.




          “Governmental Entity” means any domestic or foreign, transnational, national, Federal,
state, municipal or local government, or any other domestic or foreign governmental, regulatory or
administrative authority, or any agency, board, department, commission, court, tribunal or
instrumentality thereof.




          “Hazardous Materials” means any pollutant, contaminant, waste, chemical, compound,
substance or material, including any petroleum or petroleum product or by-product,
asbestos-containing material, urea formaldehyde foam insulation, and mold, regulated under any
Environmental Law.




          “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.




          “including” means including, without limitation.




          “Indebtedness” means, with respect to any person, without duplication: (i) (A)
indebtedness for borrowed money, (B) all obligations of such person evidenced by




40









 




bonds, debentures, notes or similar instruments, (C) all obligations of such person under
interest rate or currency hedging transactions (valued at the termination value thereof), (D) all
letters of credit issued for the account of such person and (E) obligations of such person to pay
rent or other amounts under any lease of real property or personal property, which obligations are
required to be classified as capital leases in accordance with GAAP; (ii) indebtedness for borrowed
money of any other person guaranteed, directly or indirectly, in any manner by such person; and
(iii) indebtedness of the type described in clause (i) above secured by any Encumbrance upon
property owned by such person, even though such person has not in any manner become liable for the
payment of such indebtedness; provided, however, that Indebtedness shall not be
deemed to include (i) any accounts payable or trade payables incurred in the ordinary course of
business of such person, or (ii) any intercompany indebtedness between any person and any wholly
owned subsidiary of such person or between any wholly owned subsidiaries of such person.




          “Intellectual Property” means all Trademarks, Patents, Copyrights, Trade Secrets,
service marks, service mark rights, computer programs, moral rights and the benefits of any waivers
of moral rights and any other proprietary intellectual property rights.




          “Judgment” means any applicable judgment, order or decree of any Governmental Entity.




          “knowledge of the Company” or “to the Company’s knowledge” means the actual
knowledge of the particular fact in question by the individuals set forth in Section 9.05 of the
Company Disclosure Letter.




          “Labor Laws” means any applicable Law relating to employment standards, employee
rights, health and safety, labor relations, workplace safety and insurance or pay equity.




          “Laws” means any applicable statute, code, rule, regulation, ordinance, Judgment, or
other pronouncement of any Governmental Entity.




          “Losses” means all liabilities, costs, expenses, obligations, losses, damages
(including diminution of value, lost profits, consequential damages and third-party punitive
damages but excluding special damages, incidental damages and punitive damages not payable to third
parties), penalties, actions, judgments, suits, claims and disbursements of any kind or nature,
liabilities for Taxes, fees or expenses (including without limitation, legal fees).




          “Material Adverse Effect” means any change, event or circumstance that, individually
or in the aggregate with all other changes, events and circumstances, has had a material adverse
effect on the business, results of operations or financial condition of the Company and its
subsidiaries, taken as a whole, other than any change, event or circumstance arising out of: (a)
general economic (including changes in prevailing interest rates, credit availability and
liquidity, currency exchange rates, and price levels or trading volumes in the United States or
foreign securities markets), legal, regulatory or




41









 




political conditions in the United States of America or geographic regions in which the
Company and its subsidiaries operate; (b) conditions generally affecting the industries in which
the Company and its subsidiaries operate; (c) the announcement, pendency or consummation of the
Offering or the other transactions contemplated hereby or by the Ancillary Agreements; (d) any
change in the market price or trading volume of the Common Stock in and of itself (but not any
change, event or circumstance that may be underlying such decrease to the extent that such change,
event or circumstance would otherwise constitute a Material Adverse Effect); (e) any changes in the
securities markets generally, or in the credit markets, any downgrades in the credit markets, or
adverse credit events resulting in deterioration in the credit markets generally or in respect of
the customers of the Company; (f) the commencement or escalation of a war or armed hostilities or
the occurrence of acts of terrorism or sabotage; (g) earthquakes, hurricanes or other natural
disasters; (h) compliance with the requirements of changes in Law, GAAP or other accounting
requirements or any interpretation thereof; (i) any failure by the Company to meet published
revenue or earnings projections (but not any change, event or circumstance that may be underlying
such failure to the extent that such change, event or circumstance would otherwise constitute a
Material Adverse Effect); (j) any adverse effect on the Company under Section 382 of the Code
resulting from an “ownership change” of the Company as defined in Section 382(g) of the Code or (k)
any legal claims or other proceedings made by any of the Company’s stockholders or debtholders
arising out of or related to the Offering.




          “NYSE” means the New York Stock Exchange.




          “Patents” means all patents, patent rights and patent applications, including
divisions, continuations, continuations-in-part, reissues, re-examinations and all extensions
thereof.




          “Permits” means, collectively, all applicable consents, approvals, permits, orders,
authorizations, licenses and registrations from Governmental Entities.




          “Permitted Encumbrances” means: (i) mechanics’, carriers’, workers’, repairers’,
materialmen’s, warehousemen’s, construction and other Encumbrances arising or incurred in the
ordinary course of business and not yet due and payable or being contested in good faith by
appropriate proceedings; (ii) Encumbrances for Taxes, utilities and other governmental charges
that, in each case, are not yet due or payable, are being contested in good faith by appropriate
proceedings or may thereafter be paid without giving rise to any material penalty or material
additional cost or liability; (iii) matters of record or registered Encumbrances affecting title to
any owned or leased real property of a person and its subsidiaries; (iv) requirements and
restrictions of zoning, building and other applicable Laws and municipal by-laws, and development,
site plan, subdivision or other agreements with municipalities that do not individually or in the
aggregate materially and adversely affect the use of the owned or leased real property of a person
and its subsidiaries affected thereby as currently used in the business of such person and its
subsidiaries; (v) statutory Encumbrances of landlords for amounts not yet due and payable; (vi)
Encumbrances arising under conditional sales Contracts and equipment leases with third parties
entered into in the ordinary course of business generally




42









 




consistent with past practice; (vii) defects, irregularities or imperfections of title and
other Encumbrances which, individually or in the aggregate, do not materially impair the continued
use (in a manner generally consistent with current use in the business of the person and its
subsidiaries) of the asset or property to which they relate; and (viii) with respect to the Company
and its subsidiaries, Encumbrances arising under the ABL Credit Agreement.




          “person” means any individual, firm, corporation, partnership, limited liability
company, trust, joint venture, Governmental Entity or other entity.




          “Real Property” means, collectively, the Owned Real Properties, the Company Leases and
the Company Tenant Leases.




          “Registered Intellectual Property” means all (i) registered trademarks and service
marks and applications therefor, (ii) registered copyrights and applications therefor, (iii) issued
patents and patent applications and (iv) domain names, in each case, that are owned by the Company
or any of its subsidiaries and are material to the conduct of the business of the Company and its
subsidiaries.




          “Release” means any spilling, leaking, pumping, emitting, emptying, discharging,
injecting, escaping, leaching, migrating, dumping or disposing of Hazardous Materials (including
the abandonment or discarding of barrels, containers or other closed receptacles containing
Hazardous Materials) into or through the Environment or into or out of any real property, including
the movement of Hazardous Materials through or in the air, soil, surface water, groundwater or
property.




          “SEC” means the Securities and Exchange Commission.




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




          “Series B Yucaipa Warrants” means the 6,965,858 warrants, exercisable at $32.40,
issued by the Company on December 3, 2007.




          “SOX” means the Sarbanes-Oxley Act of 2002.




          “subsidiary” of any person means, on any date, any person (i) the accounts of which
would be consolidated with and into those of the first person in such person’s consolidated
financial statements if such financial statement were prepared in accordance with GAAP or (ii) of
which (A) securities or other ownership interests representing more than 50% of the equity or (B)
an amount of the voting securities, other voting ownership or voting partnership interests of which
is sufficient to elect at least a majority of its board of directors or other governing body (or,
if there are no such voting interests, 50% or more of the equity interests of which) is owned,
directly or indirectly, controlled or held by such first person or by one or more subsidiaries of
such first person.




          “Tax” means any foreign, Federal, state or local income, sales and use, excise,
franchise, real and personal property, gross receipt, capital stock, production,




43









 




business and occupation, disability, estimated, employment, payroll, severance or withholding
tax or other tax, duty, fee, impost, levy, assessment or charge imposed by any taxing authority,
and any interest or penalties and other additions to tax related thereto.




          “Tax Returns” means any return, report, declaration, information return or other
document required to be filed with any Tax authority with respect to Taxes, including any
amendments thereof.




          “Third Party” means any person other than the Company, the Investors, the Investors’
Representative or any of their respective affiliates.




          “Trade Secrets” means all proprietary, confidential information, formulas, processes,
data, know-how, devices or compilations of information used in a business that confer a competitive
advantage over those in similar businesses who do not possess them or know how to use them.




          “Trademarks” means all trademarks, trademark rights, trade names, trade name rights,
brands, logos, trade dress, business names and Internet domain names, together with the goodwill
associated with any of the foregoing and all registrations and applications for registration of the
foregoing.




          “Trading Market” means whichever of the New York Stock Exchange, the American Stock
Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or
OTC Bulletin Board on which the relevant security of the Company is listed or quoted for trading on
the date in question.




          “Voting Debt” means bonds, debentures, notes or other debt securities having the right
to vote (or convertible into, or exchangeable for, securities having the right to vote) generally
in the election of directors of the Company or other matters on which holders of the Common Stock
may vote.




          “Voting Stock” of any person means securities having the right to vote generally in
any election of directors or comparable governing persons of any such person.




          SECTION 9.06 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and shall become
effective when one or more such counterparts have been signed by each of the parties hereto and
delivered to the other parties hereto.




          SECTION 9.07 Entire Agreement. This Agreement, the Ancillary Agreements and the
Confidentiality Agreement, along with the Company Disclosure Letter, the Schedules and the Exhibits
thereto, contain the entire agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersede all prior agreements and understandings relating to such
subject matter. None of the parties shall be liable or bound to any other party in any manner by
any representations, warranties or covenants relating to such subject matter except as




44









 




specifically set forth herein or in the Ancillary Agreements or the Confidentiality Agreement.




          SECTION 9.08 Severability. If any provision of this Agreement (or any portion
thereof) or the application of any such provision (or any portion thereof) to any person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision
hereof (or the remaining portion thereof) or the application of such provision to any other persons
or circumstances.




          SECTION 9.09 Consent to Jurisdiction. Each party irrevocably submits to the
exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County and (b)
the United States District Court for the Southern District of New York, for the purposes of any
suit, action or other proceeding arising out of this Agreement, any Ancillary Agreement or any
transaction contemplated hereby or thereby. Each party agrees to commence any such action, suit or
proceeding either in the United States District Court for the Southern District of New York or, if
such suit, action or other proceeding may not be brought in such court for jurisdictional reasons,
in the Supreme Court of the State of New York, New York County. Each party further agrees that
service of any process, summons, notice or document by U.S. registered mail to such party’s
respective address set forth above shall be effective service of process for any action, suit or
proceeding in New York with respect to any matters to which it has submitted to jurisdiction in
this Section 9.09. Each party irrevocably and unconditionally waives any objection to the laying
of venue of any action, suit or proceeding arising out of this Agreement, any Ancillary Agreement
or the transactions contemplated hereby and thereby in (i) the Supreme Court of the State of New
York, New York County, or (ii) the United States District Court for the Southern District of New
York, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead
or claim in any such court that any such action, suit or proceeding brought in any such court has
been brought in an inconvenient forum.




          SECTION 9.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.




          SECTION 9.11 Waiver of Jury Trial. Each party hereby waives, to the fullest extent
permitted by applicable Law, any right it may have to a trial by jury in respect to any litigation
directly or indirectly arising out of, under or in connection with this Agreement, any Ancillary
Agreement or any transaction contemplated hereby or thereby. Each party (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 the foregoing waiver and
(b) acknowledges that it and the other parties hereto have been induced to enter into this
Agreement and the Ancillary Agreements, as applicable, by, among other things, the mutual waivers
and certifications in this Section 9.11.




45









 





          SECTION 9.12 No Personal Liability of Partners, Directors, Officers, Owners, Etc. No
director, officer, employee, incorporator, stockholder, managing member, member, general partner,
limited partner, principal or other agent of any of the Investors shall have any liability for any
obligations of the Investors under this Agreement or for any claim based on, in respect of, or by
reason of, the obligations of the Investors hereunder. The Company waives and releases all such
liability. This waiver and release is a material inducement to the Investors’ entry into this
Agreement.




          SECTION 9.13 Rights of Holders. Each party to this Agreement shall have the absolute
right to exercise or refrain from exercising any right or rights that such party may have by reason
of this Agreement, including, without limitation, the right to consent to the waiver or
modification of any obligation under this Agreement, and such party shall not incur any liability
to any other party or other holder of any securities of the Company as a result of exercising or
refraining from exercising any such right or rights.




          SECTION 9.14 Adjustment in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock (or other securities
or rights convertible into or entitling the holder thereof to receive directly or indirectly shares
of Common Stock), combination or other similar recapitalization or event occurring after the date
hereof, each reference in this Agreement and the Ancillary Agreements to a number of shares or a
price per share shall be amended to appropriately account for such event.




[Signature page to follow.]





46












 





          IN WITNESS WHEREOF, the Investors, the Company, the Existing Investors (solely for the
purposes of Section 3.02 and 3.05 of this Agreement) and the Investors’ Representative (solely for
the purposes of Section 5.05 of this Agreement) have duly executed this Agreement as of the date
first written above.




	 	 	 	 	 	 	 	 	 
	 	 	 	 	YUCAIPA AMERICAN ALLIANCE FUND II, LP
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	By: Yucaipa American Alliance Fund II, LLC
	 	 	 	 	Its: General Partner
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	by	 	/s/ Robert P. Bermingham
	 	 	 	 	 	 	 
	 	 	 	 	 	 	Name: Robert P. Bermingham
	 	 	 	 	 	 	Title: Vice President
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	YUCAIPA AMERICAN ALLIANCE (PARALLEL) FUND II, LP
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	By: Yucaipa American Alliance Fund II, LLC
	 	 	 	 	Its: General Partner
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	by	 	/s/ Robert P. Bermingham
	 	 	 	 	 	 	 
	 	 	 	 	 	 	Name: Robert P. Bermingham
	 	 	 	 	 	 	Title: Vice President
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.,
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	by	 	/s/ Christopher McGarry
	 	 	 	 	 	 	 
	 	 	 	 	 	 	Name: Christopher McGarry
	 	 	 	 	 	 	Title: VP — Legal Services






 









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Solely for the Purposes of Section 3.02 and 3.05 of this Agreement
	 
	 	 	 	 	 	 	 	 
	 	 	YUCAIPA CORPORATE INITIATIVES FUND I, LP
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	By: Yucaipa Corporate Initiatives Fund I, LLC
	 	 	 	 	Its: General Partner
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	by	 	     /s/ Robert P. Bermingham
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Robert P. Bermingham
	 

	 	 	 	 	 	Title:
	 	Vice President
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	YUCAIPA AMERICAN ALLIANCE FUND I, LP
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	By: Yucaipa American Alliance Fund I, LLC
	 	 	 	 	Its: General Partner
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	by	 	     /s/ Robert P. Bermingham
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Robert P. Bermingham
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Title:
	 	Vice President
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	YUCAIPA AMERICAN ALLIANCE (PARALLEL) FUND I, LP
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	By: Yucaipa American Alliance Fund I, LLC
	 	 	 	 	Its: General Partner
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	by	 	     /s/ Robert P. Bermingham
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Robert P. Bermingham
	 

	 	 	 	 	 	Title:
	 	Vice President






 









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	Solely for the Purposes of Section 5.05 of this Agreement
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	Yucaipa American Alliance Fund II, LLC,
	 	 	 	 	as Investors’ Representative,
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	by	 	/s/ Robert P. Bermingham
	 	 	 	 	 	 	 
	 	 	 	 	 	 	Name: Robert P. Bermingham
	 	 	 	 	 	 	Title: Vice President






 









 





EXHIBIT A




Convertible Preferred Stock Articles Supplementary




 









 





EXHIBIT B




Amended and Restated Stockholder Agreement




 









 





Exhibit C




Opinion of Counsel




 









 





Exhibit D




Opinion of Maryland Counsel




 









 





Schedule 1




Wire Information