AGREEMENT AND PLAN OF MERGER
by and among
LAUNDRY HOLDING CO.,
LAUNDRY MERGER SUB CO.
and
LINENS 'N THINGS, INC.

Dated as of November 8, 2005

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November 8, 2005, by and among Laundry Holding Co., a Delaware corporation ("Parent") Laundry Merger Sub Co., a Delaware corporation and a direct wholly owned subsidiary of Parent ("Merger Sub"), and Linens 'n Things, Inc., a Delaware corporation (the "Company").

W I T N E S S E T H:

WHEREAS, the Board of Directors of the Company has unanimously (i) determine that it is in the best interests of the Company and the stockholders of the Company, and declared it advisable, to enter into this Agreement with Parent an Merger Sub providing for the merger (the "Merger") of Merger Sub with and int the Company, in accordance with the General Corporation Law of the State o Delaware (the "DGCL") and upon the terms and subject to the conditions set fort herein, (ii) approved this Agreement in accordance with the DGCL, upon the term and subject to the conditions set forth herein, and (iii) resolved to recommend adoption of this Agreement by the stockholders of the Company; and

WHEREAS, the Board of Directors of Parent and the Board of Directors of Merger Sub have unanimously approved, and the Board of Directors of Merger Sub has declared it advisable for Merger Sub to enter into, this Agreement providing for the Merger in accordance with the DGCL, upon the terms and subject to the conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows:

ARTICLE I

THE MERGER

Section 1.1 The Merger. On the terms and subject to the conditions set forth in this Agreement, and in accordance with the DGCL, Merger Sub will be merged with and into the Company at the Effective Time (as defined below), the separate corporate existence of Merger Sub will thereupon cease and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation") and a wholly owned subsidiary of Parent.

Section 1.2 Closing. The closing of the Merger (the "Closing") will take place at a time and on a date to be specified by the parties, which is to be no later than the second Business Day after satisfaction or waiver (to the extent permitted by applicable Law) of the conditions set forth in Article VI (excluding conditions that, by their terms, cannot be satisfied until the Closing Date, but subject to the fulfillment or, to the extent permitted by applicable Law, waiver of those conditions), unless another time or date is agreed to by the parties to this Agreement. The Closing will be held at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178, or such other location to which the parties to this Agreement agree in writing. The date on which the Closing actually occurs is hereinafter referred to as the "Closing Date." "Business Day" means any day other than Saturday, Sunday or any day on which banking and savings and loan institutions in New York, New York are authorized or required by Law to be closed.

Section 1.3 Effective Time. On the Closing Date, the parties shall cause the Merger to be consummated by filing a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware, in such form as is required by, and executed in accordance with, the relevant provisions of the DGCL and the terms of this Agreement, and the parties shall make all other filings or recordings required under the DGCL in connection with the Merger. The Merger will become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware on the Closing Date, or at such subsequent date or time as the Company and Parent agree and specify in the Certificate of Merger. The date and time the Merger becomes effective is hereinafter referred to as the "Effective Time".

Section 1.4 Effects of the Merger. The Merger will have the effects set forth in the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Merger Sub will be vested in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation.

Section 1.5 Certificate of Incorporation and By-laws. At the Effective Time, the certificate of incorporation of the Company shall be amended so as to read in its entirety in the form annexed hereto as Exhibit A and, as so amended, shall be the certificate of incorporation of the Surviving Corporation, until thereafter amended in accordance with its terms and applicable Law. At the Effective Time, the by-laws of the Company shall be amended so as to read in its entirety in the form annexed hereto as Exhibit B and, as so amended, shall be the by-laws of the Surviving Corporation, until thereafter amended in accordance with their terms, the certificate of incorporation of the Surviving Corporation and applicable Law.

Section 1.6 Directors and Officers.

The directors of the Company immediately prior to the Effective Time shall submit their resignations to be effective as of the Effective Time. Immediately after the Effective Time, Parent shall take the necessary actions to cause the directors of Merger Sub immediately prior to the Effective Time to be the directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and by-laws of the Surviving Corporation. The officers of the Surviving Corporation shall be appointed by the directors of the Surviving Corporation, each to hold office until the earlier of his or her resignation or removal.

ARTICLE II

EFFECT OF THE MERGER ON CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS

Section 2.1 Effect on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any of the following securities:

(a) Each share of Common Stock, par value $0.01 per share, of the Company (the "Company Common Stock") issued and outstanding immediately prior to the Effective Time (other than any shares of Company Common Stock ("Shares") to be cancelled pursuant to Section 2.1(b) (any Shares to be so cancelled, "Excluded Shares") and any Dissenting Shares (as defined in Section 2.4)) shall be converted into the right to receive $28.00 in cash, without interest (the "Per Share Merger Consideration").

(b) Each Share held in the treasury of the Company, or owned by Parent, Merger Sub or owned by any wholly owned direct or indirect Subsidiary of the Company, Parent or Merger Sub, in each case immediately prior to the Effective Time, shall be cancelled without any conversion thereof and no consideration shall be paid with respect thereto.

(c) Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation.

Section 2.2 Treatment of Options and Other Equity Awards. Prior to the Effective Time, the Company shall take all action necessary with respect to the Company's (i) 1996 Incentive Compensation Plan, (ii) 1996 Non-Employee Director Stock Plan, (iii) 2000 Stock Award and Incentive Plan, (iv) Broad-Based Equity Plan, (v) 2004 Stock Award and Incentive Plan and (vi) New Hire Authorization (collectively, the "Stock Plans") such that:

(a) As of the Effective Time, each option (an "Option") granted by the Company to purchase shares of Company Common Stock that is outstanding as of immediately prior to the Effective Time, shall become fully vested and exercisable (whether or not then vested or subject to any performance condition that has not been satisfied). At the Effective Time, each Option not theretofore exercised shall be converted into the right to receive, upon the exercise thereof and payment of the applicable exercise price, an amount of cash, without interest, equal to the Per Share Merger Consideration multiplied by each share of Company Common Stock subject to such Option so exercised. Unless so exercised, each outstanding Option so converted shall, immediately following such conversion be cancelled and, if the Per Share Merger Consideration exceeds the exercise price per share of Company Common Stock under such Option, in exchange therefor, each holder thereof shall be entitled to receive, in cash, the product of (x) the total number of shares of Company Common Stock subject to such Option multiplied by (y) such excess (with the aggregate amount of such payment to the holder to be rounded to the nearest cent), less applicable Taxes, if any, required to be withheld with respect to such payment.

(b) As of the Effective Time, each outstanding share of Company Common Stock granted under any of the Stock Plans that are subject to restrictions (each, a share of "Restricted Stock"), which have not lapsed immediately prior to the Effective Time shall become fully vested and, subject to Section 2.4, converted into the right to receive the Per Share Merger Consideration under Section 2.1(a).

(c) As of the Effective Time, each outstanding right to receive Company Common Stock pursuant to a stock unit award or deferred stock award under any of the Stock Plans (each a "Stock Unit") that is outstanding as of immediately prior to the Effective Time, whether or not vested, shall be cancelled and the holder thereof shall be entitled to receive an amount in cash, without interest, equal to the Per Share Merger Consideration, less applicable Taxes, if any, required to be withheld with respect to such payment.

(d) Prior to the Effective Time, the Company shall take or cause to be taken all actions necessary to effectuate the foregoing treatment in this Section 2.2 to the extent such treatment is not expressly provided for by the terms of the applicable Stock Plans and related award agreements.

(e) The Company shall take such actions as are reasonably requested by Parent to ensure, as of immediately after the Effective Time, that no rights to acquire equity in the Company granted under Stock Plans exist or remain outstanding.

Section 2.3 Adjustment of Merger Consideration. Notwithstanding anything in this Agreement to the contrary, if, between the date of this Agreement and the Effective Time, the issued and outstanding Shares shall have been changed into a different number of shares or a different class by reason of any stock split, reverse stock split, stock dividend, reclassification, redenomination, recapitalization, split-up, combination, exchange of shares or other similar transaction, the Per Share Merger Consideration and any other dependent items shall be appropriately adjusted to provide to the holders of Company Common Stock the same economic effect as contemplated by this Agreement prior to such action and as so adjusted shall, from and after the date of such event, be the Per Share Merger Consideration or other dependent item, subject to further adjustment in accordance with this sentence.

Section 2.4 Dissenting Shares.

(a) Shares that are issued and outstanding immediately prior to the Effective Time and which are held by holders of Shares who have not voted in favor of or consented to the Merger and who have properly demanded and perfected their rights to be paid the fair value of such Shares in accordance with Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into the right to receive the Per Share Merger Consideration, and the holders thereof shall be entitled to only such rights as are granted by Section 262 of the DGCL; provided, however, that if any such stockholder of the Company shall fail to perfect or shall effectively waive, withdraw or lose such stockholder's rights under Section 262 of the DGCL, such stockholder's Shares in respect of which the stockholder would otherwise be entitled to receive fair value under Section 262 of the DGCL shall thereupon be deemed to have been converted, at the Effective Time, into the right to receive the Per Share Merger Consideration without any interest thereon in accordance with the terms of Section 2.5.

(b) The Company shall give Parent (i) prompt notice of any notice received by the Company of intent to demand the fair value of any Shares, withdrawals of such notices and any other instruments served pursuant to Section 262 of the DGCL and received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to the exercise of appraisal rights under Section 262 of the DGCL. The Company shall not, except with the prior written consent of Parent or as otherwise required by an order, decree, ruling or injunction of a court of competent jurisdiction, make any payment with respect to any such exercise of appraisal rights or offer to settle or settle any such rights.

Section 2.5 Payment and Exchange of Certificates.

(a) Following the date of this Agreement and in any event not less than three Business Days prior to the mailing of the Proxy Statement to the stockholders of the Company, Parent or Merger Sub shall designate a bank or trust company reasonably acceptable to the Company to act as Paying Agent in connection with the Merger (the "Paying Agent"). At or prior to the Effective Time, Parent will provide to, or cause the Surviving Corporation to provide to, and shall deposit in trust with, the Paying Agent, in accordance with an agreement to be entered into between the Paying Agent and Parent reasonably satisfactory in form and substance to Parent, the aggregate consideration to which stockholders of the Company become entitled under this Article II. Until used for that purpose, the funds shall be invested by the Paying Agent, as directed by Parent or the Surviving Corporation, in obligations of or guaranteed by the United States of America or obligations of an agency of the United States of America which are backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors Services Inc. or Standard & Poor's Corporation, or in deposit accounts, certificates of deposit or banker's acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks, each of which has capital, surplus and undivided profits aggregating more than $500 million (based on the most recent financial statements of the banks which are then publicly available at the SEC or otherwise); provided that no such investment or losses thereon shall affect the Per Share Merger Consideration payable to former stockholders of the Company, and, in the event that the net amount of such investments or losses result in such funds being less than the aggregate amount required to be paid to former holders of Shares not known to be Dissenting Shares, Parent shall promptly provide, or shall cause the Surviving Corporation to promptly provide, additional funds to the Paying Agent in the net amount of any such losses. Any interest resulting from such investments shall be promptly paid to Parent.

(b) Promptly after the Effective Time, the Surviving Corporation shall cause the Paying Agent to mail to each person who was a record holder of Company Common Stock immediately prior to the Effective Time, whose shares were converted pursuant to this Article II into the right to receive the Per Share Merger Consideration, (i) a form of letter of transmittal for use in effecting the surrender of stock certificates which immediately prior to the Effective Time represented Company Common Stock (each, a "Certificate") in order to receive payment of the Per Share Merger Consideration (which shall specify that delivery shall be effected, and risk of loss and title to the Certificate shall pass, only upon actual delivery of the Certificates to the Paying Agent, and shall otherwise be in customary form) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for payment of the Per Share Merger Consideration. When the Paying Agent receives a Certificate, together with a properly completed and executed letter of transmittal and any other required documents, the Paying Agent shall pay to the holder of the Shares formerly represented by the Certificate, or as otherwise directed in the letter of transmittal, the Per Share Merger Consideration with regard to each Share formerly represented by such Certificate, less any required Tax withholdings in accordance with Section 2.5(c) below, and the Certificate shall be cancelled. No interest shall be paid or accrued on the Per Share Merger Consideration payable upon the surrender of Certificates. If payment is to be made to a Person other than the Person in whose name a surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered must be properly endorsed or otherwise be in proper form for transfer, and the Person who surrenders the Certificate must provide funds for payment of any transfer or other Taxes required by reason of the payment to a Person other than the registered holder of the surrendered Certificate or establish to the satisfaction of the Surviving Corporation that the Tax has been paid or is not applicable. After the Effective Time, a Certificate shall represent only the right to receive the Per Share Merger Consideration in respect of the Shares formerly represented by such Certificate, without any interest thereon.

(c) The Paying Agent may withhold from the sum payable to any Person as a result of the Merger, and pay to the appropriate Taxing Authorities, any amounts which the Paying Agent or the Surviving Corporation may be required (or may reasonably believe it is required) to withhold under the Code, or any provision of state, local or foreign Tax Law. Any sum which is withheld and paid to a Taxing Authority as permitted by this Section 2.5 will be deemed to have been paid to the Person with regard to whom it is withheld.

(d) In the event that any Certificate shall have been lost, stolen or destroyed, upon the holder's compliance with the replacement requirements established by the Paying Agent, including, if necessary, the posting by the holder of a bond in customary amount as indemnity against any claim that may be made against it with respect to the Certificate, the Paying Agent shall deliver in exchange for the lost, stolen or destroyed Certificate the applicable Per Share Merger Consideration payable in respect of the Shares formerly represented by the Certificate pursuant to this Article II.

(e) At any time which is more than 180 days after the Effective Time, Parent shall be entitled to require the Paying Agent to deliver to it any funds which had been deposited with the Paying Agent and have not been disbursed in accordance with this Article II (including, without limitation, interest and other income received by the Paying Agent in respect of the funds made available to it), and after the funds have been delivered to Parent, Persons entitled to payment in accordance with this Article II shall be entitled to look solely to Parent (subject to abandoned property, escheat or other similar Laws) for payment of the Per Share Merger Consideration upon surrender of the Certificates held by them, without any interest thereon. Any Per Share Merger Consideration remaining unclaimed as of a date which is immediately prior to such time as such amounts would otherwise escheat to or become property of any government entity shall, to the extent permitted by applicable Law, become the property of Parent free and clear of any Liens, claims or interest of any Person previously entitled thereto. Neither the Surviving Corporation, Parent nor the Paying Agent will be liable to any Person entitled to payment under this Article II for any consideration which is delivered to a public official pursuant to any abandoned property, escheat or similar Law. Any portion of the funds deposited with the Paying Agent pursuant to Section 2.5(a) as consideration for Shares that become Dissenting Shares shall be delivered to Parent on demand.

(f) At the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of Shares that were outstanding prior to the Effective Time. After the Effective Time, Certificates presented to the Surviving Corporation for transfer shall be cancelled and exchanged for the Per Share Merger Consideration in respect of the Shares formerly represented thereby.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent and Merger Sub:

Section 3.01 Organization, Standing and Corporate Power. The Company and each of its subsidiaries is a corporation or other legal entity duly organized, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under the laws of the jurisdiction in which it is organized and has the requisite corporate or other power, as the case may be, and authority to carry on its business as now being conducted. The Company and each of its subsidiaries is duly qualified or licensed to do business in each jurisdiction in which the nature of its business or the ownership, leasing or operation of its properties makes such qualification or licensing necessary, except for those jurisdictions where the failure to be so qualified or licensed would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect. The Company has made available to Parent prior to the execution of this Agreement complete and correct copies of its certificate of incorporation and by-laws and the analogous constitutive and governing documents of the Company Subsidiaries, each as amended to the date of this Agreement, and as so made available are in full force and effect, and no other such documents are binding upon the Company or any Company Subsidiary. Neither the Company nor any Company Subsidiary is in violation of any of the provisions of any such document.

Section 3.02 Subsidiaries. All outstanding shares of capital stock of, or other equity interests in, each subsidiary of the Company (collectively, the "Company Subsidiaries" and, together with the Company, the "Company Entities") (i) have been validly issued and are fully paid and nonassessable and (ii) are free and clear of all Liens other than Permitted Liens. Except as set forth in Section 3.2 of the disclosure letter delivered by the Company to Parent prior to the execution of this Agreement (the "Company Disclosure Letter"), all outstanding shares of capital stock (or equivalent equity interests of entities other than corporations) of each of the Company Subsidiaries are beneficially owned, directly or indirectly, by the Company. Section 3.2 of the Company Disclosure Letter sets forth a true and complete list of each Company Subsidiary and its jurisdiction of incorporation or organization. Except for the Company Subsidiaries, the Company does not own any capital stock of or other equity interest in, or any interest convertible into or exercisable or exchangeable for any capital stock of or other equity interest in, any other Person.

Section 3.3 Capital Structure.

(a) As of November 7, 2005, the authorized capital stock of the Company consisted of 135,000,000 shares of Company Common Stock and 1,000,000 shares of the Company preferred stock, $0.01 par value ("Company Preferred Stock"). As of November 7, 2005, there were 45,383,816 shares of Company Common Stock issued and outstanding, no shares of Company Preferred Stock outstanding and 262,238 shares of Company Common Stock held in the Company's treasury. As of the date of this Agreement, no shares of Company Common Stock or Company Preferred Stock are reserved for issuance, except for shares of Company Common Stock reserved for issuance upon the exercise of outstanding Options and vesting or other termination of restrictions on Stock Units granted pursuant to the Stock Plans. All of the issued and outstanding shares of Company Common Stock are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. No Company Subsidiary owns any shares of Company Common Stock.

(b) Except as set forth in Section 3.3(b) of the Company Disclosure Letter and referred to in Section 3.3(a), as of the date of this Agreement, (1) there are not issued, reserved for issuance or outstanding (i) any shares of capital stock or other voting securities of the Company, (ii) any securities convertible into or exchangeable or exercisable for shares of capital stock or voting securities of the Company or any Company Subsidiary, or (iii) any warrants, calls, options or other rights to acquire from the Company or any Company Subsidiary any capital stock, voting securities or securities convertible into or exchangeable or exercisable for capital stock or voting securities of the Company or any Company Subsidiary and (2) there are no outstanding obligations of the Company or any Company Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, any capital stock, voting securities or securities convertible into or exchangeable or exercisable for capital stock or voting securities of the Company or any Company Subsidiary. Except for the Stock Units granted pursuant to the Stock Plans (which Stock Units are set forth in Section 3.3(b) of the Company Disclosure Letter) and except for any obligations the Company may have to acquire Stock Unit shares upon vesting to satisfy tax withholding obligations related thereto, there are no outstanding contractual obligations of the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any Company Common Stock or other capital stock, voting securities or securities convertible into or exercisable or exchangeable for capital stock or voting securities of the Company or any Company Subsidiary or affiliate or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in any Company Subsidiary or any other person, nor has the Company or any Company Subsidiary granted or agreed to grant to any person any stock appreciation rights or similar equity-based rights. Except as permitted by this Agreement, following the Merger neither the Company nor any Company Subsidiary nor the Surviving Corporation will have any obligation to issue, transfer or sell any shares of its capital stock or other equity interest pursuant to any employee benefit plan or otherwise.

(c) Section 3.3 of the Company Disclosure Letter sets forth a true and complete list of all Options that are issued and outstanding as of the date hereof, including with respect to each such Option the holder thereof, the number of Shares for which such Option is exercisable, the grant date, expiration date, exercise price and the Stock Plan pursuant to which such Option was issued.

(d) There are no voting trusts or other agreements or understandings to which the Company or any Company Subsidiary is a party with respect to the voting of the capital stock of or other equity interest in the Company or any Company Subsidiary.

(e) CVS Corporation is no longer a "Principal Stockholder" and the "CVS Group" owns less than 5% of the "Voting Power", with each such term being used as defined in the certificate of incorporation of the Company.

Section 3.4 Authority. The Company has all requisite corporate power and authority to enter into this Agreement and, subject to the Stockholder Approval, to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, subject, in the case of the Merger, to receipt of the Stockholder Approval. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar Laws generally affecting the rights of creditors and subject to general equity principles. The Board of Directors of the Company has unanimously, by resolutions duly adopted at a meeting duly called and held, (i) duly and validly approved and declared advisable this Agreement, (ii) determined that the transactions contemplated by this Agreement are advisable and in the best interests of the Company and its stockholders and (iii) resolved to recommend to such stockholders that they vote in favor of the adoption and approval of this Agreement and the Merger and the other transactions contemplated hereby.

Section 3.5 Non-Contravention; Consents and Approvals. Except as set forth in Section 3.5 of the Company Disclosure Letter:

(a) The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, (i) conflict with the certificate of incorporation or by-laws or analogous constitutive or governing documents (the "Charter Documents") of any of the Company Entities, (ii) result in any breach, violation or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or creation or acceleration of any obligation or right of a third party or loss of a benefit under, or result in the creation of any Lien upon any of the properties or assets of any of the Company Entities under, any loan or credit agreement, note, bond, mortgage, indenture, Lease or other agreement, instrument, permit, concession, franchise, license or other authorization applicable to any of the Company Entities or their respective properties or assets or (iii) subject to the governmental filings and other matters referred to in Section 3.5(b), conflict with or violate any judgment, order, decree or Law applicable to any of the Company Entities or their respective properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, breaches, violations, defaults, rights, losses or Liens that, individually or in the aggregate, would not reasonably be expected to have or result in a Material Adverse Effect and that would not prevent or materially delay consummation of the Merger.

(b) No consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any federal, state or local or foreign government, any court, administrative, regulatory or other governmental agency, commission or authority or any non-governmental United States or foreign self-regulatory agency, commission or authority or any arbitral tribunal (each, a "Governmental Entity") or any third party is required by the Company in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby, except for: (i) the filing with the Securities and Exchange Commission (the "SEC") of (A) a proxy statement relating to the Stockholders Meeting (such proxy statement, as amended or supplemented from time to time, the "Proxy Statement") and (B) such reports under Section 13(a), 13(d), 15(d) or 16(a) or such other applicable sections of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in connection with this Agreement and the transactions contemplated hereby; (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware; (iii) the filing of a premerger notification and report form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") or filing under any other applicable foreign competition or investment law, including without limitation notification under the Competition Act, R.S.C. 1985, c. C-34, as amended (the "Competition Act (Canada)") or Investment Canada Act, R.S. 1985, c. 28 (1st Supp.), as amended (the "Investment Canada Act"); (iv) notifications to the NYSE; and (v) such consents, approvals, orders or authorizations the failure of which to be made or obtained, individually or in the aggregate, would not reasonably be expected to have or result in a Material Adverse Effect and that would not prevent or materially delay consummation of the Merger.

Section 3.6 SEC Reports and Financial Statements; Comparable Net Sales.

(a) The Company has filed or otherwise transmitted all forms, reports, statements, certifications and other documents (including all exhibits, supplements and amendments thereto) required to be filed by it with the SEC since December 31, 2002 (collectively, with any amendments thereto, the "SEC Reports"), each of which, including any financial statements or schedules included therein, as finally amended prior to the date hereof, has complied as to form in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the "Securities Act") and the Exchange Act, each as in effect on the date so filed. None of the SEC Reports contained, when filed as finally amended prior to the date hereof, any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Except as set forth in Section 3.6(a) of the Company Disclosure Letter, as of the date hereof, there are no outstanding or unresolved comments in comment letters received from the SEC staff with respect to any of the SEC Reports. Except as set forth in Section 3.6(a) of the Company Disclosure Letter, each of (i) the consolidated balance sheets included in the SEC Reports (including the related notes and schedules) were prepared from and in accordance with the books and records of the Company and the Company Subsidiaries and in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods covered and fairly present, in all material respects, the consolidated financial position of the Company and the Company Subsidiaries at the respective dates thereof and (ii) the related consolidated statements of earnings, cash flows and stockholders' equity included in the SEC Reports (including any related notes and schedules) were prepared from and in accordance with the books and records of the Company and the Company Subsidiaries and in accordance with GAAP applied on a consistent basis throughout the periods covered and fairly present, in all material respects, the results of operations and cash flows of the Company and the Company Subsidiaries for the periods indicated (subject, in the case of the unaudited quarterly financial statements referenced in each of clauses (i) and (ii), to normal recurring year-end audit adjustments and the absence of full footnote disclosure).

(b) Section 3.6(b) of the Company Disclosure Letter sets forth the Company's comparable net sales (including the calculation methodology for such comparable net sales) for the fiscal years ending January 1, 2005, January 3, 2004 and January 1, 2003, each of which was the basis for the comparable net sales percentage changes reported in the Company's Annual Report on Form 10-K for such fiscal year.

Section 3.7 No Undisclosed Liabilities. Neither the Company nor any of the Company Subsidiaries has any Liabilities of a nature required by GAAP to be reflected in a consolidated balance sheet or the notes thereto, except Liabilities that (i) are accrued or reserved against in the consolidated balance sheet of the Company and each Company subsidiary as of July 2, 2005 included in the SEC Reports (the "Most Recent Balance Sheet") or are set forth in the notes thereto, (ii) were incurred in the ordinary course of business consistent with past practice since the date of the Most Recent Balance Sheet, (iii) are incurred pursuant to the transactions contemplated by this Agreement, or (iv) would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. As used herein, "Liabilities" means any and all liabilities, indebtedness, losses, damages, obligations, claims, demands, judgments or settlements of any nature or kind, in each case whether due or to become due, accrued, absolute, contingent or otherwise.

Section 3.8 Material Contracts. Except as set forth in Section 3.8 of the Company Disclosure Letter, except as set forth as an exhibit pursuant to Item 601(b)(10) of Regulation S-K of the SEC to the Company's SEC Reports filed prior to the date of this Agreement and except for the Leases (including any guarantees of the Leases):

(a) As of the date hereof, neither the Company nor any Company Subsidiary is a party to or bound by any: (i) contract that would be required to be, but has not been, filed by the Company as a material contract pursuant to Item 601(b)(10) of Regulation S-K of the SEC; (ii) except as contemplated by this Agreement, written contract containing covenants of the Company or any Company Subsidiary not to compete in any line of business, industry or geographical area; (iii) written contract which creates a partnership or joint venture or similar arrangement; (iv) indenture, credit agreement, loan agreement, security agreement, guarantee, note, mortgage or other evidence of indebtedness or agreement providing for indebtedness in excess of $5,000,000, or any guaranty thereof; (v) contract or a related series of contracts (other than this Agreement) for the sale of any of its assets after the date hereof with proceeds of such sale or net book value of such assets in excess of $10,000,000; (vi) any contract that has a remaining term as of the date of this Agreement of two years or more and by its terms provides for aggregate payments over the remaining term of such contract of $2,500,000 or more; (vii) any contract which cannot be terminated on 90 days' notice without payment of any penalty or other stated obligation (excluding the particular goods or services covered by the contract) on the part of the Company or any Company Subsidiary of more than $2,000,000; or (viii) any other contract (other than this Agreement and purchase orders for the purchase of inventory consistent with past practice and in the ordinary course of business) under which the Company and the Company Subsidiaries have made payments in excess of $25,000,000 within the last three years. Each contract described in clauses (i)-(viii) is referred to herein as a "Material Contract".

(b) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) neither the Company nor any Company Subsidiary is in breach of or default under any Material Contract, (ii) neither the Company nor any Company Subsidiary has received any written notice or claim of default under any Material Contract or any written notice of an intention to terminate, not renew or challenge the validity or enforceability of any Material Contract (including as a result of the execution and performance of this Agreement), (iii) each of the Material Contracts is in full force and effect, and is the valid, binding and enforceable obligation of the Company and the Company Subsidiaries and, to the knowledge of the Company, each of the other parties thereto, and (iv) the Company and the Company Subsidiaries and, to the knowledge of the Company, each of the other parties thereto, have performed all respective obligations required to be performed by them to date under the Material Contracts and are not (with or without the lapse of time or the giving of notice, or both) in breach or default thereunder. The Company has made available to Parent true and complete copies of each Material Contract, including all amendments thereto.

Section 3.9 Compliance with Applicable Laws. Except as set forth in Section 3.9 of the Company Disclosure Letter:

(a) The Company and the Company Subsidiaries are not (and have not been since December 31, 2004) in violation of any Law, and have not received any written notice of any violation of Law, in each case except for any violation or possible violation that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Company and the Company Subsidiaries have, and are (and have been since December 31, 2004) in compliance with, all permits, licenses, authorizations, exemptions, orders, consents, approvals and franchises from Governmental Entities (each, a "Permit") required to conduct their respective businesses as now being conducted, except for any such Permit, the absence of, or the non-compliance, with which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b) Since the enactment of the Sarbanes-Oxley Act of 2002, the Company has been and is in compliance in all material respects with (i) the applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder (the "Sarbanes-Oxley Act") and (ii) the applicable listing and corporate governance rules and regulations of the NYSE.

(c) The Company has designed, established and maintained disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act) as required by Rule 13a-15(a) under the Exchange Act to ensure, among other things, that material information relating to the Company, including the Company Subsidiaries, is made known to the chief executive officer and the chief financial officer of the Company by others within those entities.

(d) The Company has disclosed, based on its most recent evaluation prior to the date hereof, to the Company's auditors and the audit committee of the Board of Directors of the Company (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information and (ii) any fraud or allegation of 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. The Company and each Company Subsidiary currently maintains a system of internal accounting controls sufficient to comply with all legal requirements applicable to financial reporting by the Company and its Subsidiaries.

(e) As of the date hereof, to the knowledge of the Company, the Company has not identified any material weaknesses in the design or operation of internal controls over financial reporting which has not been remedied in all material respects. To the Company's knowledge, there is no reason to believe that its 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 the Sarbanes-Oxley Act when next due.

(f) Since the enactment of the Sarbanes-Oxley Act, neither the Company nor any Company Subsidiary has made any loan to, extended or maintained credit, or arranged for or maintained an extension of credit to or for any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of the Company.

(g) None of the Company Subsidiaries is, or has at any time been, subject to the reporting requirements of Sections 13(a) or 15(d) under the Exchange Act.

Section 3.10 Employment Agreements and Benefit Plans.

Except as set forth in Section 3.10 of the Company Disclosure Letter:

(a) Section 3.10(a) of the Company Disclosure Letter sets forth a true and complete list of (i) each United States bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, disability, death benefit, hospitalization, medical insurance, life insurance, welfare, severance or other employee benefit plan, agreement, arrangement or understanding maintained by the Company or any Company Subsidiary or to which the Company or any Company Subsidiary contributes or is obligated to contribute or with respect to which the Company or any Company Subsidiary has any liability, including each multiemployer plan (a "Multiemployer Plan") (as defined in Section 4001(a)(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (collectively, the "Benefit Plans") and (ii) each employment, consulting or change of control agreement providing benefits to any current or former employee, officer or director of the Company or any Company Subsidiary, to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary is bound (collectively, the "Employment Agreements"). The Company has made available to Parent a true and correct copy of each Benefit Plan and Employment Agreement. For purposes of this Agreement, the term "Foreign Plan" refers to each plan, agreement, arrangement or understanding that is subject to or governed by the Laws of any jurisdiction other than the United States other than any such plan, the establishment or maintenance of which is mandated by applicable Law, and that would have been treated as a Benefit Plan had it been a United States plan, agreement, arrangement or understanding. Section 3.10(a) of the Company Disclosure Letter sets forth a true and correct list of the Foreign Plans. With respect to each Benefit Plan, Employment Agreement and Foreign Plan (collectively, the ("Employment Agreements and Plans"), no event has occurred and there exists no condition or set of circumstances in connection with which the Company or any Company Subsidiary would reasonably be expected to be subject to any liability that, individually or in the aggregate, would reasonably be expected to have or result in a Material Adverse Effect.

(b) No Benefit Plan is a (i) "defined benefit plan" within the meaning of section 414(j) of the Code, or (ii) a Multiemployer Plan. No Foreign Plan is, or has been in the preceding five years, a "defined benefit plan" within the meaning of applicable Canadian federal or provincial pension standards.

(c) Each Benefit Plan (other than a Multiemployer Plan) is in compliance with, and has been administered in accordance with, its terms, all applicable Laws, including ERISA and the Code, and the terms of all applicable collective bargaining agreements, except for any failures to administer any Benefit Plan that, individually or in the aggregate, would not reasonably be expected to have or result in a Material Adverse Effect. Each Benefit Plan (other than a Multiemployer Plan) that is intended to be qualified under Section 401(a), 401(k) or 4975(e)(7) of the Code has received a favorable determination letter from the IRS as to its qualified status and no fact or event has occurred which is reasonably likely to affect adversely the qualified status of any such Benefit Plan or the exempt status of any related trust, except for any occurrence that, individually or in the aggregate, would not reasonably be expected to have or result in a Material Adverse Effect. All trusts providing funding for Benefit Plans that are intended to comply with Section 501(c)(9) of the Code are exempt from federal income taxation and, together with any other welfare benefit funds (as defined in Section 419(e)(1) of the Code) maintained in connection with any of the Benefit Plans, have been operated and administered in compliance with all applicable requirements, except where a failure to comply with such requirements would not reasonably be expected to have or result in a Material Adverse Effect. Each Foreign Plan is in compliance with, and has been administered in accordance with, its terms and applicable Laws, except for any failures so to administer any Foreign Plan that, individually or in the aggregate, would not reasonably be expected to have or result in a Material Adverse Effect.

(d) No Benefit Plan (other than a Multiemployer Plan) or Foreign Plan provides medical or life insurance benefits (whether or not insured) with respect to current or former employees or officers or directors after retirement or other termination of service, other than any such coverage required by Law, and the Company and the Company Subsidiaries have reserved all rights necessary to amend or terminate each of the Benefit Plans without the consent of any other person.

(e) The consummation of the transactions contemplated by this Agreement (including obtaining Stockholder Approval) will not, either alone or in combination with another event, entitle any current or former employee, officer or director of the Company or the Company Subsidiaries to severance pay, unemployment compensation or any other payment or benefit or the acceleration, vesting or funding (through grantor trust or otherwise) of any benefit.

(f) Neither the Company nor any Company Subsidiary is a party to any agreement, contract or arrangement (including this Agreement) that would reasonably be likely to result, separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code as a result of the consummation of the transactions contemplated by this Agreement, including obtaining Stockholder Approval (either alone or in combination with other events). None of the Employment Agreements and Plans provides for the reimbursement of excise taxes under Section 4999 of the Code or any income taxes under the Code.

(g) With respect to each Benefit Plan (other than a Multiemployer Plan) and each Foreign Plan, the Company has delivered or made available to Parent a true and complete copy of: (i) each writing constituting a part of such Benefit Plan, including all Benefit Plan documents and trust agreements; (ii) the three most recent Annual Reports (Form 5500 Series) and accompanying schedules, if any; (iii) the most recent annual financial report, if any; (iv) the most recent actuarial report, if any; (v) the most recent summary plan description and any summaries of material modification, if any, and (vi) the most recent determination letter from the Internal Revenue Service, if any.

(h) There are no pending or, to the knowledge of the Company, threatened claims (other than claims for benefits in the ordinary course), lawsuits or arbitrations that have been asserted or instituted against the Benefit Plans or Foreign Plans, any fiduciaries thereof with respect to their duties to the Benefit Plans or Foreign Plans or the assets of any of the trusts under any of the Benefit Plans or Foreign Plans.

(i) No direct, contingent or secondary liability has been incurred or is expected to be incurred by the Company or any Company Subsidiary under Title IV of ERISA to any party with respect to any Benefit Plan or Multiemployer Plan, or with respect to any other plan presently or heretofore maintained or contributed to by any Person who is, or at any time was, a member of a controlled group (within the meaning of Section 412(n)(6)(B) of the Code) that includes, or at any time included the Company or any Affiliate thereof, or any predecessor of the foregoing (an "ERISA Affiliate"), other than for premiums payable to the PBGC under Title IV of ERISA.

(j) Neither the Company, any Company Subsidiary nor any ERISA Affiliate has incurred any liability for any tax imposed under Chapter 43 of the Code or civil liability under Section 502(i) or (1) of ERISA, and no tax has been incurred under Section 511 of the Code with respect to any Benefit Plan (or trust or other funding vehicle pursuant thereto).

Section 3.11 Taxes.

Except as set forth in Section 3.11 of the Company Disclosure Letter:

(a) the Company and each Company Subsidiary has filed all Tax Returns required to be filed, and all such returns are complete and accurate, other than such Tax Returns, the failure of which to file or the inaccuracy of which has not had or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(b) the Most Recent Balance Sheet reflects an adequate reserve in accordance with GAAP (the "Tax Reserve") for all Taxes for which the Company or any Company Subsidiary may be liable for all taxable periods and portions thereof through the date thereof;

(c) the Company and each Company Subsidiary has paid all Taxes due, except for Taxes as to which the Tax Reserve is adequate;

(d) there are no Liens for Taxes upon the assets of the Company or any of the Company Subsidiaries, other than Liens for Taxes not yet due or Liens for Taxes as to which the Tax Reserve is adequate;

(e) neither the Company nor any of the Company Subsidiaries has any liability for Taxes of any person (other than the Company and the Company Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any comparable provision of Law) or as a transferee or successor, by contract, or otherwise, except for Taxes as to which the Tax Reserve is adequate;

(f) neither the Company nor any Company Subsidiary is a party to any agreement relating to the allocation or sharing of Taxes;

(g) no deficiencies for any Taxes have been proposed, asserted or assessed against the Company or any Company Subsidiary that have not been paid, except for deficiencies as to which the Tax Reserve is adequate, and there is no audit, examination, deficiency, refund litigation, proposed adjustment or matter in controversy with respect to any Taxes due and owing by the Company or any Company Subsidiary;

(h) the Company and each Company Subsidiary has withheld and paid all material Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party, except for Taxes as to which the Tax Reserve is adequate;

(i) since December 2, 1996 (the "Spin-Off Date") neither the Company nor any Company Subsidiary has distributed stock of another person or has had its stock distributed by another person, in a transaction that was purported or intended to be governed in whole or in part by Section 355 or Section 361 of the Code;

(j) neither the Company nor any Company Subsidiary has participated in any "reportable transaction" within the meaning of Treasury Regulation Section 1.6011-4(b) or a "potentially abusive tax shelter" within the meaning (prior to its amendment by the American Jobs Creation Act of 2004) of Section 6112(b) of the Code;

(k) the consolidated federal income Tax Returns of the Company have been examined and such examinations have been completed with respect to all taxable years through and including 2000;

(l) neither the Company nor any Company Subsidiary has (i) entered into a closing agreement or other similar agreement with a taxing authority relating to Taxes of the Company or any Company Subsidiary with respect to a taxable period for which the statute of limitations is still open, or (ii) except with respect to extensions attributable to the statute of limitations in connection with sales and use Taxes and state income Taxes, in either case for which the corresponding Tax Reserve is adequate, granted any consent to extend any statute of limitations with respect to, or any extension of a period for the assessment of, any Tax, in either case, that is still outstanding; and

(m) since the Spin-Off Date neither the Company nor any Company Subsidiary is or has ever been a member of any affiliated, combined, consolidated, unitary or similar Tax group that included any member other than the Company or a Company Subsidiary.

Section 3.12 Environmental Matters.

(a) Except where failure to hold or noncompliance, individually or in the aggregate, would not reasonably be expected to have or result in a Material Adverse Effect, the Company Entities hold all Environmental Permits required under applicable Environmental Laws and are and have been for the past five years in compliance with all applicable Environmental Laws and Environmental Permits.

(b) There are no Environmental Claims pending against the Company or any Company Subsidiary, except for matters that, individually or in the aggregate, would not reasonably be expected to have or result in a Material Adverse Effect.

(c) The Company has made available to Parent all material information, including such studies, reports, correspondence, notices of violation, requests for information, audits, analyses and test results in the possession, custody or control of the Company Entities or any legal advisors thereto relating to (i) the Company Entities' present compliance or noncompliance within the past five years with Environmental Laws and Environmental Permits, and (ii) Environmental Conditions on, under or about any of the properties owned, leased or operated by any of the Company Entities for which any of the Company Entities may be responsible or liable as a result of a written Environmental Claim, which, in the case of both clause (i) and clause (ii) above, would reasonably be expected to have or result in a Material Adverse Effect.

(d) Within the past five years, none of the Company or the Company Subsidiaries has received from any Governmental Entity or other third party any written notice that any of them or any of their predecessors is or may be a potentially responsible party in respect of, or may otherwise bear liability for, any actual or threatened Release of any Hazardous Substance at any site or facility that is or has been listed on the National Priorities List, the Comprehensive Environmental Response, Compensation and Liability Information System, the National Corrective Action Priority System or any similar or analogous list, schedule, inventory or database, except where the potential liability would not reasonably be expected to have or result in a Material Adverse Effect.

(e) None of the Company or the Company Subsidiaries has assumed, undertaken or otherwise become subject to any liability of any other person relating to or arising from Environmental Laws, except for such liabilities that would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect.

(f) Except as set forth in Section 3.12 of the Company Disclosure Letter, there has been no release or threatened release of Hazardous Substances that would be reasonably expected to cause Liability to the Company or any Company Subsidiary under applicable Environmental Laws at any current or former property owned or operated by the Company or any Company Subsidiary or any predecessor thereof or any off-site facility to which the Company or any Company Subsidiary or any predecessor thereto shipped Hazardous Substances for treatment, storage, handling or disposal, except where the potential Liability would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect.

(g) Consummation of the Merger will not require approval by any Governmental Entity under New Jersey's Industrial Site Recovery Act.

(h) Notwithstanding any other representations and warranties in this Agreement, the representations and warranties in this Section 3.12 are the only representations and warranties in this Agreement with respect to Environmental Laws or Hazardous Substances.

(i) As used in this Agreement:

(i) the term "Environment" means soil, surface waters, ground water, land, stream sediment, surface and subsurface strata, ambient air, indoor air or indoor air quality;

(ii) the term "Environmental Claim" means any written demand, suit, action, proceeding, order, investigation or notice to any of the Company Entities by any person alleging any potential liability under any Environmental Law;

(iii) the term "Environmental Laws" means all Laws relating to pollution or protection of the Environment; emissions, discharges, Releases or threatened Releases of Hazardous Substances; threats to human health or ecological resources arising from exposure to Hazardous Substances; or the manufacture, generation, processing, distribution, use, sale, treatment, receipt, storage, disposal, transport or handling of Hazardous Substances; "Environmental Laws" also include those portions of Laws relating to workplace health and safety that address any of the matters set forth above;

(iv) the term "Hazardous Substance" means any chemical, substance or waste that is regulated under any Environmental Law as toxic, hazardous or radioactive or as a pollutant or a contaminant and any substance that is or contains asbestos which may become friable, urea formaldehyde foam insulation, polychlorinated biphenyls ("PCBs"), mold, petroleum or petroleum products, including without limitation crude oil and any fractions thereof, natural gas, synthetic gas and any mixture thereof, leaded paints or radon gas;

(v) the term "Release" means any releasing, disposing, discharging, injecting, spilling, leaking, pumping, pouring, leaching, dumping, emitting, escaping, emptying, migrating, placing or otherwise entering into the Environment (including the abandonment or discarding of barrels, containers, and other closed receptacles containing any Hazardous Substances);

(vi) the term "Environmental Condition" means any contamination, damage, injury or other condition related to Hazardous Substances and includes any present or former Hazardous Substance treatment, storage, or disposal or recycling units, underground storage tanks, wastewater treatment or management systems, wetlands, sumps, lagoons, impoundments, landfills, ponds, incinerators, wells, materials containing asbestos which may become friable, lead paint or PCB-containing materials; and

(vii) the term "Environmental Permit" means all Permits required by any Governmental Entity in connection with any Environmental Law, including without limitation all consent orders and binding agreements issued or entered into by any Governmental Entity, and the timely submission of applications for Permits, as required under Environmental Laws.

Section 3.13 Labor Matters.

Except as set forth in Section 3.13 of the Company Disclosure Letter:

(a) neither the Company nor any Company Subsidiary is a party to or bound by any contract, collective bargaining agreement or works council agreement with any labor or similar organization;

(b) there are no pending organizational activities or demands in writing for recognition or certification by a labor organization seeking to represent employees of the Company or any Company Subsidiary;

(c) there is no pending labor dispute, strike or work stoppage against the Company or Company Subsidiaries;

(d) there are no charges, appeals or Actions against the Company or any Company Subsidiary pending before or by the Equal Employment Opportunity Commission, the Department of Labor, Occupational Safety and Health Administration, the National Labor Relations Board or any other comparable Governmental Entity which are material to the Company and the Company Subsidiaries taken as a whole;

(e) except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, neither the Company nor any Company Subsidiary has received notice during the past year of the intent of any Governmental Entity responsible for the enforcement of labor, employment, occupational health and safety or workplace safety and insurance/workers compensation laws to conduct an investigation of or affecting the Company or a Company Subsidiary;

(f) there are no outstanding material assessments, penalties, fines, liens, charges, surcharges, or other amounts due or owing by the Company or Company Subsidiaries pursuant to any workplace safety and insurance Laws which are material to the Company and the Subsidiaries taken as a whole;

(g) neither the Company nor any Company Subsidiary has been reassessed in any material respect under such Laws during the past year;

(h) there are no claims which are reasonably likely to materially affect the accident cost experience of the Company or any Company Subsidiary; and

(i) except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, the Company and the Company Subsidiaries are in compliance in all material respects with all applicable Laws relating to employment and employment practices, occupational health and safety, pay equity, wages, hours and terms and conditions of employment.

Section 3.14 Intellectual Property.

(a) Except as would not reasonably be expected to have, individually or in the aggregate,a Material Adverse Effect, the Company and the Company Subsidiaries own all right, title, and interest in, or have the right to use, pursuant to a license or otherwise, in each case, free and clear of all Liens except Permitted Liens, all Intellectual Property required to operate their respective businesses as presently conducted (the "Company Intellectual Property"). Section 3.14 of the Company Disclosure Letter lists all registrations and applications for Company Intellectual Property owned by the Company and the Company Subsidiaries, and all such registrations and applications are subsisting and unexpired. As of the date hereof, except as set forth in Section 3.14 of the Company Disclosure Letter and except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) neither the Company nor any Company Subsidiary has received any written notice of any claims or threatened Actions alleging a violation, misappropriation or infringement of the Intellectual Property of any other Person, except for any of the foregoing that have since been finally resolved; (ii) the operation of the business of the Company and each Company Subsidiary as currently conducted, and the Company Intellectual Property, do not violate, misappropriate or infringe the Intellectual Property of any other Person; (iii) no other Person has violated, misappropriated or infringed the Company Intellectual Property owned by the Company or any Company Subsidiary; (iv) there are no Actions pending or, to the Company's knowledge, threatened in writing, challenging the ownership, enforceability, validity or use of any Company Intellectual Property owned by the Company or any Company Subsidiary; and (v) the Company and the Company Subsidiaries take and have taken commercially reasonable actions to maintain and preserve their material Company Intellectual Property.

(b) As used herein, "Intellectual Property" means all United States or foreign intellectual property, including (i) inventions, patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, divisions, revisions, extensions and reexaminations thereof, (ii) trademarks, service marks, logos, trade names, corporate names, domain names, trade dress, including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith, (iii) copyrights and copyrightable works and all applications, registrations and renewals in connection therewith, (iv) trade secrets and confidential business information, whether or not subject to statutory registration (including research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, methods, schematics, technology, technical data, designs, drawings, flowcharts, block diagrams, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals), (v) computer software (including source code, databases and related documentation), (vi) other proprietary rights whether now known or hereafter recognized in any jurisdiction, (vii) copies and tangible embodiments of all of the foregoing, as well as related documentation in whatever form or medium, and (viii) the right to sue for infringement and past payment, if any, in connection with any of the foregoing.

Section 3.15 Absence of Certain Changes or Events. Except as set forth in Section 3.15 of the Company Disclosure Letter, and except for liabilities incurred in connection with this Agreement or the transactions contemplated hereby, since July 2, 2005:

(a) the Company has conducted its operations in all material respects in the ordinary course consistent with past practice;

(b) there has not been a Material Adverse Effect, or any change, effect, event, occurrence or state of facts that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;

(c) the Company has not (A) declared, set aside or paid any dividends on, or made any other distributions in respect of, any of its capital stock other than dividends and distributions by a direct or indirect wholly owned Company Subsidiary to its parent, (B) split, combined or reclassified any of its capital stock, or (C) except as required pursuant to agreements entered into with respect to the Stock Plans, purchased, redeemed or otherwise acquired any shares of capital stock of the Company or any of the Company Subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities;

(d) the Company has not issued or authorized the issuance of, delivered or sold any shares of its capital stock (or any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock), any other voting securities or any securities convertible into or exercisable or exchangeable for, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, other than (A) as required pursuant to Employment Agreements and Plans in effect on the date of this Agreement and set forth in the Company Disclosure Letter and (B) the issuance of shares of Company Common Stock upon the exercise of the Options set forth on Section 3.3 of the Company Disclosure Letter under the Stock Plans or in connection with other awards or issuances of Common Stock under the Stock Plans, in any such case, outstanding as of the date of this Agreement and in accordance with their terms as in effect on the date of this Agreement;

(e) the Company has not amended its Charter Documents;

(f) the Company has not incurred any long-term or short-term indebtedness for borrowed money other than pursuant to its credit agreements in effect at the time, or indebtedness incurred in the ordinary course of business consistent with past practice under uncommitted lines of credit;

(g) the Company has not changed the accounting principles used by it unless required by GAAP (or, if applicable with respect to foreign subsidiaries, the relevant foreign generally accepted accounting principles) or any Governmental Entity;

(h) the Company has not acquired by merging or consolidating with, by purchasing any equity interest in or a substantial portion of the assets of, or by any other manner, any significant business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquired any assets that are material, individually or in the aggregate, to the Company Entities, taken as a whole, except for (A) the purchase of assets from suppliers or vendors in the ordinary course of business consistent with past practice and (B) items reflected in the capital plan of the Company previously made available to Parent;

(i) the Company has not made any loans, advances or capital contributions to, or investments in, any other person, except for (A) loans, advances, capital contributions or investments between any wholly owned Company Subsidiary and the Company or another wholly owned Company Subsidiary, (B) employee advances for expenses in the ordinary course of business consistent with past practice, (C) ordinary course proprietary credit card transactions consistent with past practice or (D) loans or advances which are immaterial in amount, both individually and in the aggregate;

(j) the Company has not (A) filed any material Tax Return or claim for refund with any taxing authority; (B) made, revoked or changed a material Tax election with respect to the Company or any Company Subsidiary; (C) changed a material method of reporting income or deductions for Tax purposes with respect to the Company or any Company Subsidiary; (D) consented to extend the period of limitations for the payment or assessment of any Tax with respect to the Company or any Company Subsidiary; or (E) settled or compromised any material Tax liability or refund of the Company or any Company Subsidiary; and

(k) the Company has not made, authorized or entered into any commitment with respect to any capital expenditure, other than as provided for in the capital plan of the Company attached in Section 3.15 of the Company Disclosure Letter.

Section 3.16 Voting Requirements. The affirmative vote at the Stockholders Meeting of at least a majority of the votes entitled to be cast by the holders of outstanding shares of Company Common Stock is the only vote of the holders of any class or series of the Company's capital stock necessary to adopt and approve this Agreement and the Merger and the other transactions contemplated hereby (collectively, the "Stockholder Approval").

Section 3.17 State Takeover Statutes. The Board of Directors of the Company has taken all necessary action so that no "fair price," "moratorium," "control share acquisition," "business combination" or other anti-takeover Law (each, a "Takeover Statute") (with the exception of Section 203 of the DGCL) is applicable to this Agreement, the Merger or the other transactions contemplated by this Agreement. Subject to the accuracy of the representations and warranties of Parent and Merger Sub set forth in Section 4.8, the action of the Board of Directors of the Company in approving this Agreement, the Merger and the other transactions contemplated hereby is sufficient to render inapplicable to this Agreement, the Merger and the other transactions contemplated hereby the restrictions on "business combinations" (as defined in Section 203 of the DGCL) as set forth in Section 203 of the DGCL.

Section 3.18 Opinion of Financial Advisor. The Company has received a written opinion (or oral opinion to be confirmed in writing) of Credit Suisse First Boston LLC (the "Company Financial Advisor"), dated as of the date hereof, that, as of the date of such opinion, the Per Share Merger Consideration is fair, from a financial point of view, to the holders of Company Common Stock. A true and complete copy of the Company Financial Advisor's written opinion has been, or promptly, and in any event within two Business Days, will be, provided to Parent solely for informational purposes.

Section 3.19 Brokers. Except as set forth in Section 3.19 of the Company Disclosure Letter, and except for the Company Financial Advisor and Lehman Brothers Inc., no broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company.

Section 3.20 Absence of Litigation. Except as set forth in Section 3.20 of the Company Disclosure Letter, there is no litigation, suit, claim, action, proceeding, hearing, petition, grievance, complaint or investigation (each, an "Action") pending or, to the knowledge of the Company, threatened against the Company or any Company Subsidiary, or any property or asset of the Company or any Company Subsidiary, before any Governmental Entity or arbitrator other than any such Action that (i) does not involve, in any individual case, a claim for monetary damages in excess of $2,500,000, (ii) would not prohibit or materially restrict the Company and any Company Subsidiary from operating their business as they have historically, and (iii) would not (A) prevent or materially delay the Company from performing its obligations under this Agreement in any material respect or (B) reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. As of the date of this Agreement, to the knowledge of the Company, no executive officer or director of the Company or any Company Subsidiary is a defendant in any Action in connection with his or her status as an executive officer or director of the Company or any Company Subsidiary. As of the date of this Agreement, neither the Company nor any Company Subsidiary nor any property or asset of the Company or any Company Subsidiary is subject to (i) any order of, consent decree, settlement agreement or other similar written agreement with, or, to the knowledge of the Company, continuing investigation by, any Governmental Authority, or (ii) any order, writ, judgment, injunction, decree, determination or award of any Governmental Entity, except (in the case of (i) or (ii) for those that would not (A) prevent or materially delay the Company from performing its obligations under this Agreement in any material respect or (B) reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. There are no SEC legal actions, audits, inquiries or investigations, other governmental actions, audits, inquiries or investigations by other Governmental Entities or material internal investigations pending or, to the knowledge of the Company, threatened, in each case regarding any accounting practices of the Company or any Company Subsidiary or any malfeasance by any executive officer of the Company.

Section 3.21 Suppliers and Vendors. Set forth on Section 3.21 of the Company Disclosure Letter is a true and complete list of the 20 largest suppliers and vendors, by amounts expended over the twelve months immediately preceding (and including) the most recently completed month preceding the date of this Agreement, of the Company and the Company Subsidiaries. Except as set forth in Section 3.21 of the Company Disclosure Letter, as of the date of this Agreement there is no actual or, to the knowledge of the Company, threatened termination or cancellation in the business relationship between the Company and the Company Subsidiaries, on one hand, and such suppliers and vendors on the other, that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 3.22 Proxy Statement. None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in the Proxy Statement will, at the date it is first mailed to the stockholders of the Company and at the time of the Stockholders Meeting or at the date of any amendment thereof or supplement thereto, contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading. The Proxy Statement will, at the date it is first mailed to stockholders and at the time of the Stockholders Meeting, comply in all material respects with the requirements of the Exchange Act and the rules and regulations promulgated thereunder. Notwithstanding the foregoing, the Company makes no representations or warranty with respect to any information supplied by Parent or Merger Sub or any of their respective representatives specifically for inclusion or incorporation by reference in the Proxy Statement.

Section 3.23 Insurance. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (a) all material insurance policies of the Company and the Company Subsidiaries are in full force and effect and provide insurance in such amounts and against such risks the management of the Company reasonably has determined to be prudent, taking into account the industries in which the Company and the Company Subsidiaries operate, (b) neither the Company nor any of the Company Subsidiaries is in breach or default, and neither the Company nor any of the Company Subsidiaries has taken any action or failed to take any action which, with or without notice or lapse of time or both, would constitute such a breach or default, or permit termination or modification of, any of such insurance policies, (c) to the knowledge of the Company no insurer or any such policy has been declared insolvent or placed in receivership, conservatorship or liquidation, and (d) no notice of cancellation or termination has been received with respect to any such policy. To the knowledge of the Company, there are no claims that have been denied, rejected, questioned or disputed by any insurer or as to which any insurer has reserved its rights under an insurance policy that would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 3.24 Real Property.

(a) Section 3.24(a) of the Company Disclosure Letter contains a true, correct and complete list of all real property owned by the Company or the Company Subsidiaries (together with all improvements thereon and all easements, rights of way, appurtenances, zoning, water, timber, gas, mineral and similar rights relating thereto, the "Owned Real Property"). Except as set forth in Section 3.24(a) of the Company Disclosure Letter, (i) the Company or the applicable Company Subsidiary owns good and marketable title to the Owned Real Property in fee subject to no Liens except Permitted Liens, and (ii) neither the Company nor any Company Subsidiary has leased all or any significant portion of any Owned Real Property.

(b) Section 3.24(b) of the Company Disclosure Letter lists all Leases (including without limitation all material modifications or amendments thereto). Except as set forth in Section 3.24(b) of the Company Disclosure Letter, with respect to each Lease: (i) the Company or a Company Subsidiary is the tenant named under the Lease, (ii) neither the Company nor any Company Subsidiary has assigned, sublet or encumbered any interest in such Lease and, to the knowledge of the Company, there are no Liens thereon, and (iii) the Lease and related documents listed in Section 3.24(b) of the Company Disclosure Letter represent the only material agreements between the parties thereto with respect to the subject matter thereof.

(c) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) neither the Company nor any Company Subsidiary has received any written notice or claim of default under any Lease or any written notice of an intention to terminate or challenge the validity or enforceability of any Lease (including as a result of the execution and performance of this Agreement), (ii) each of the Leases is in full force and effect, and is the valid, binding and enforceable obligation of the Company and the Company Subsidiaries and, to the knowledge of the Company, each of the other parties thereto, (iii) the Company and the Company Subsidiaries and, to the knowledge of the Company, each of the other parties thereto, have performed all respective obligations required to be performed by them to date under the Leases and are not (with or without the lapse of time or the giving of notice, or both) in breach or default thereunder, (iv) no landlord or tenant under any Lease has exercised any option or right to cancel or terminate such Lease or shorten or lengthen the term thereof, lease additional premises, reduce, relocate or expand the premises or purchase any property, and (v) except for restrictions that (A) are applicable only to the store covered by the Lease and (B) do not materially adversely affect the business of the store to which they apply, no Lease contains any covenant of the Company or any Company subsidiary not to compete in any line of business, industry or geographical area. The Company has made available to Parent true and complete copies of each Lease, including all amendments thereto and documents respecting the exercise or waiver of a material right thereunder, except for those Leases identified in Section 3.24(b) of the Company Disclosure Letter as Leases for which documentation is or may be incomplete, as to which the Company has made available to Parent an accurate summary of the material terms of such Leases.

(d) Section 3.24(d) of the Company Disclosure Letter sets forth a true and complete list of all agreements between the Company or any of its Subsidiaries and any broker or finder and the Company property relating to such broker or finder. Except in accordance with such agreements, neither the Company nor any Company Subsidiary owes or will owe any material brokerage commissions or finders fees with respect to any Lease or any renewal or extension thereof or the exercise of any right or option thereunder, and none of such commissions or fees payable pursuant to such agreements would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 3.25 Assets. The Company and each Company Subsidiary has good and marketable title to, or valid leasehold interests in, all of its material properties and assets (other than the Owned Real Property and Leases, as to which the sole representations and warranties concerning title are set forth in Section 3.24), free and clear of all Liens other than Permitted Liens.

Section 3.26 Affiliate Transactions. Except as disclosed in the Company's SEC Reports filed prior to the date of this Agreement or set forth in Section 3.26 of the Company Disclosure Letter, no executive officer or director of the Company or any Company Subsidiary or any person who beneficially owns 5% or more of the Company Common Stock (or any of such person's immediate family members or affiliates) is a party to any contract with or binding upon the Company or any Company Subsidiary or any of their respective properties or assets or has any material interest in any material property owned by the Company or any Company Subsidiary or has engaged in any material transaction with any of the foregoing within the last twelve months, in each case, that is of the type that would be required to be disclosed under Item 404 of Regulation S-K under the Securities Act.

Section 3.27 No Other Representations or Warranties.

(a) Except for the representations and warranties contained in this Article III, Parent acknowledges that neither the Company nor any other Person on behalf of the Company makes any other express or implied representation or warranty with respect to the Company with respect to any other information provided to Parent. Except in the case of fraud or willful misrepresentation, neither the Company nor any other Person will have or be subject to any liability or indemnification obligation to Parent or any other Person resulting from the distribution to Parent, or use by Parent of, any such information, including any information, documents, projections, forecasts or other material made available to Parent in certain "data rooms", confidential information memoranda or management presentations in expectation of the transactions contemplated by this Agreement.

(b) In connection with investigation by Parent of the Company and the Company Subsidiaries, Parent has received or may receive from the Company and/or the Company Subsidiaries certain projections, forward-looking statements and other forecasts and certain future business plan information.

Parent acknowledges that there are uncertainties inherent in attempting to make such, projections, statements, and other forecasts and future plans, that Parent is familiar with such uncertainties, that Parent is taking full responsibility for making its own evaluation of the adequacy and accuracy of all, projections, forward-looking statements and other forecasts and future plans so furnished to it (including the reasonableness of the assumptions underlying such projections, statements, forecasts or future plans), and that, except as set forth in this Article III, absent fraud or willful misrepresentation, Parent shall have no claim against anyone with respect thereto. Accordingly, Parent acknowledges that the Company makes no representation or warranty with respect to such projections, forward-looking statements, forecasts or future plans (including the reasonableness of the assumptions underlying such projections, statements, forecasts or future plans).

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Except as set forth in the disclosure letter delivered by Parent and Merger Sub to the Company prior to the execution of this Agreement (the "Parent Disclosure Letter"), each of Parent and Merger Sub hereby jointly and severally represents and warrants to the Company:

Section 4.1 Organization and Standing. Each of Parent and Merger Sub is a corporation duly organized, validly existing and in good standing (with respect to jurisdictions that recognize such concept) under the laws of the jurisdiction in which it is organized.

Section 4.2 Authority.

(a) Each of Parent and Merger Sub has all requisite corporate power and authority, as applicable, to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub, respectively (subject to the adoption of this Agreement by Parent as the sole stockholder of Merger Sub by written consent in lieu of a meeting, which adoption will occur promptly after the execution and delivery of this Agreement).

(b) This Agreement has been duly executed and delivered by each of Parent and Merger Sub and, assuming the due authorization, execution and delivery by the Company, constitutes the legal, valid and binding obligation of Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance with its terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar Laws generally affecting the rights of creditors and subject to general equity principles.

Section 4.3 Non-Contravention; Consents and Approvals.

(a) The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, (i) conflict with the Charter Documents of Parent or any subsidiary of Parent (collectively, the "Parent Subsidiaries" and, together with Parent, the "Parent Entities"), (ii) result in any breach, violation or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or creation or acceleration of any obligation or right of a third party or loss of a benefit under, or result in the creation of any Lien upon any of the properties or assets of any of the Parent Entities under, any loan or credit agreement, note, bond, mortgage, indenture or other agreement, instrument, permit, concession, franchise, license or other authorization applicable to any of the Parent Entities or their respective properties or assets, or (iii) subject to the governmental filings and other matters referred to in Section 4.3(b), conflict with or violate any judgment, order, decree or Law applicable to any of the Parent Entities or their respective properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, breaches, violations, defaults, rights, losses or Liens that, individually or in the aggregate, would not prevent or materially delay consummation of the Merger.

(b) No consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with, any Governmental Entity or any third party is required by Parent or Merger Sub in connection with the execution and delivery of this Agreement by either of them or the consummation by either of them of the transactions contemplated hereby, except for: (i) the filing with the SEC of the Proxy Statement; (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware; (iii) the filing of a premerger notification and report form by Parent under the HSR Act or filing under any other applicable foreign competition or investment Law; and (iv) such consents, approvals, orders or authorizations the failure of which to be made or obtained, individually or in the aggregate, would not prevent or materially delay consummation of the Merger.

Section 4.4 Financing. Parent has delivered to the Company true and complete copies of the Debt Commitment Letter, dated as of the date hereof, by and among UBS Loan Finance LLC ("UBS Loan"), UBS Securities LLC ("UBS Securities"), Bear, Stearns & Co., Inc. ("Bear"), Bear Stearns Corporate Lending, Inc. ("Bear Lending"), Parent and Merger Sub (the "ABL Letter") and the Debt Commitment Letter, dated as of the date hereof, by and among UBS Loan, UBS Securities, Bear, Bear Lending, Parent and Merger Sub (the "Bridge Letter" and collectively with the ABL Letter, the "Debt Commitment Letters") and the commitment letter, dated as of the date hereof, between Merger Sub and Apollo Management V, L.P., the commitment letter, dated as of the date hereof, between Merger Sub and Silver Point Capital Fund Investments LLC and the commitment letter, dated as of the date hereof, between Merger Sub and NRDC Real Estate Advisors I LLC (collectively, the "Equity Commitment Letters" and, together with the Debt Commitment Letters, the "Commitment Letters"; the financing to be provided thereunder is referred to herein as the "Financing"). The aggregate proceeds of the Financing are in an amount sufficient to consummate the transactions contemplated hereby, including to pay the aggregate Per Share Merger Consideration, to pay the amounts required under Section 2.2, and to pay all related fees and expenses. As of the date hereof, none of the Financing Agreements has been withdrawn, and there are no conditions precedent or other contingencies related to the funding of the full amount of the Financing, other than those set forth in the Commitment Letters.

Section 4.5 Information Supplied. None of the information supplied or to be supplied by Parent or Merger Sub specifically for inclusion or incorporation by reference in the Proxy Statement will, at the date it is first mailed to the Company's stockholders or at the time of the Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

Section 4.6 Brokers. No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent or Merger Subsidiary for which the Company could have any liability if the Closing does not occur.

Section 4.7 Merger Sub. Merger Sub is a duly incorporated, validly existing direct, wholly owned Delaware subsidiary of Parent, was formed for the purpose of engaging in the transactions contemplated by this Agreement, does not have any subsidiaries and has not undertaken any business or other activities other than in connection with entering into this Agreement and engaging in the transactions contemplated hereby.

Section 4.8 Company Stock. Except as set forth in Section 4.8 of the Parent Disclosure Letter, neither Parent nor Merger Sub is, and at no time during the last three years has been, an "interested stockholder" of the Company as defined in Section 203 of the DGCL. Neither Parent nor Merger Sub owns (directly or indirectly, beneficially or of record) is a party to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of, in each case, any shares of capital stock of the Company (other than as contemplated by this Agreement).

ARTICLE V

COVENANTS OF THE PARTIES

Section 5.01 Conduct of Business.

(a) Conduct of Business by the Company. Except as set forth in Section 5.1(a) of the Company Disclosure Letter, except as otherwise specifically required by this Agreement or except as consented to in writing by Parent or Merger Sub, during the period from the date of this Agreement to the Effective Time (the "Interim Period"), the Company shall, and shall cause the Company Subsidiaries to, carry on their respective businesses in the ordinary course consistent with past practice. Without limiting the generality of the foregoing, except as set forth on Section 5.1(a) of the Company Disclosure Letter, except as otherwise specifically required by this Agreement or except as consented to in writing by Parent or Merger Sub, during the Interim Period, the Company shall not and shall not permit any Company Subsidiary to:

(i) (A) other than dividends and distributions by a direct or indirect wholly owned Company Subsidiary to its parent, declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (B) split, combine or reclassify any of its capital stock or take any other action that would require an adjustment of the Per Share Merger Consideration pursuant to Section 2.3, or (C) except as required pursuant to agreements entered into with respect to the Stock Plans that are in effect on the date of this Agreement, purchase, redeem or otherwise acquire any shares of capital stock of the Company or any of the Company Subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities;

(ii) issue or authorize the issuance of, deliver or sell any shares of its capital stock (or any other securities in respect of, in lieu of, or in substitution for, shares of its capital stock), any other voting securities or any securities convertible into or exercisable or exchangeable for, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, other than (A) as required pursuant to Employment Agreements and Plans in effect on the date of this Agreement and set forth in the Company Disclosure Letter, or (B) the issuance of shares of Company Common Stock upon the exercise of the Options set forth on Section 3.3 of the Company Disclosure Letter under the Stock Plans or in connection with other awards or issuances of Common Stock under the Stock Plans, in any such case, outstanding as of the date of this Agreement and in accordance with their terms as in effect on the date of this Agreement;

(iii) amend its Charter Documents;

(iv) except as consented to in writing by Parent or Merger Sub, which consent shall not be unreasonably withheld or delayed, other than sales of inventory in the ordinary course of business consistent with past practice, sell, lease, license, mortgage or otherwise encumber or subject to any Lien (other than Permitted Liens) or otherwise dispose of any of its material properties or material assets;

(v) incur any long-term indebtedness (whether evidenced by a note or other instrument, pursuant to a financing lease, sale-leaseback transaction, or otherwise) or incur any short-term indebtedness other than indebtedness incurred in the ordinary course of business consistent with past practice under lines of credit existing on the date of this Agreement;

(vi) except as consented to in writing by Parent or Merger Sub which consent shall not be unreasonably withheld or delayed, (A) grant any increase in the compensation or benefits payable or to become payable by the Company or any Company Subsidiary to any current or former director or consultant of the Company or any Company Subsidiary; (B) grant any increase in the compensation or benefits payable or to become payable by the Company or any Company Subsidiary to any officer or employee of the Company or any Company Subsidiary, other than compensation increases for non-officers in the ordinary course of business consistent with past practice; (C) adopt, enter into, amend or otherwise increase, reprice or accelerate the payment or vesting of the amounts, benefits or rights payable or accrued or to become payable or accrued under any of the Employment Agreements and Plans; (D) enter into or amend any employment, bonus, severance, change in control, retention agreement or any similar agreement or any collective bargaining agreement or grant any severance, bonus, termination, or retention pay to any officer, director, consultant or employee of the Company or any Company Subsidiaries; or (E) pay or award any pension, retirement, allowance or other non-equity incentive awards, or other employee or director benefit not required by any of the outstanding Employment Agreements and Plans;

(vii) change the accounting principles used by it unless required by GAAP (or, if applicable with respect to foreign subsidiaries, the relevant foreign generally accepted accounting principles) or any Governmental Entity;

(viii) (A) file any material Tax Return or claim for refund with any taxing authority without prior consultation with Parent; (B) make, revoke or change a material Tax election with respect to the Company or any Company Subsidiary; (C) change a material method of reporting income or deductions for Tax purposes with respect to the Company or any Company Subsidiary; (D) consent to extend the period of limitations for the payment or assessment of any Tax with respect to the Company or any Company Subsidiary; or (E) settle or compromise any material Tax liability or refund of the Company or any Company Subsidiary;

(ix) acquire by merging or consolidating with, by purchasing any equity interest in or a substantial portion of the assets of, or by any other manner, any significant business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire any assets that are material, individually or in the aggregate, to the Company Entities, taken as a whole, except for (A) the purchase of assets from suppliers or vendors in the ordinary course of business consistent with past practice and (B) items reflected in the capital plan of the Company previously made available to Parent;

(x) except as consented to in writing by Parent or Merger Sub, which consent shall not be unreasonably withheld or delayed, satisfy, discharge, waive or settle any material claims or Liabilities, including any Action, other than in the ordinary course of business consistent with past practice;

(xi) make any loans, advances or capital contributions to, or investments in, any other person, except for (A) loans, advances, capital contributions or investments between any wholly owned Company Subsidiary and the Company or another wholly owned Company Subsidiary, (B) employee advances for expenses in the ordinary course of business consistent with past practice, or (C) ordinary course proprietary credit card transactions consistent with past practice;

(xii) except as consented to in writing by Parent or Merger Sub, which consent shall not be unreasonably withheld or delayed, (A) enter into any contract that would be a Material Contract if in effect on the date of this Agreement, (B) enter into any Lease that is not contemplated by the Company's current budget, a true and complete copy of which is attached in Schedule 3.15 to Section 3.15 of the Company Disclosure Letter (the "Budget"), or (C) renew any Lease unless and until fewer than 60 days remain in the period for exercise of the applicable renewal right;

(xiii) (A) terminate, modify, amend or exercise any right or option under any Material Contract or Lease on the date of this Agreement except as permitted under clause (xii)(C) above, (B) waive, release, relinquish or assign any right or claim of material value to the Company, or (C) cancel or forgive any material indebtedness owed to the Company or any Company Subsidiary;

(xiv) fail to maintain in full force and effect or fail to use commercially reasonable efforts to replace or renew material insurance policies existing as of the date hereof and covering the Company and the Company Subsidiaries and their respective properties, assets and businesses;

(xv) make, authorize or enter into any commitment with respect to any capital expenditure, other than as provided for in the Budget;

(xvi) (i) take any action that would reasonably be likely to prevent or materially delay satisfaction of the conditions contained in Article VI or the consummation of the Merger, or (ii) take any action that has or would reasonably be expected to have a Material Adverse Effect; or

(xvii) authorize, commit or agree to take any of the foregoing actions.

(b) Conduct of Business by Merger Sub. During the Interim Period, Merger Sub shall not engage in any activities of any nature except as provided in or contemplated by this Agreement.

(c) Advice of Changes. Each of the Company, Parent and Merger Sub