SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
GARDEN RIDGE CORPORATION
(Name of Registrant as Specified in its Charter)
_____________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
GARDEN RIDGE CORPORATION
19411 Atrium Place, Suite 170
Houston, Texas 77084
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 3, 1997
To the Stockholders of
Garden Ridge Corporation:
Notice is hereby given that the Annual Meeting of Stockholders (the
"Annual Meeting") of Garden Ridge Corporation (the "Company") will be held at
Texas Commerce Tower, 600 Travis, 25th Floor Conference Room, Houston, Texas
77002, at 9:00 a.m., Houston time, on Tuesday, June 3, 1997, for the following
purposes:
1. To elect eight persons to serve as directors on the Board of
Directors until the 1998 annual meeting of stockholders and until their
successors have been elected and have qualified.
2. To amend Section 4 of the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock, as
more fully set forth under "Proposal No. 2."
3. To amend Section 4 of the Company's Restated Certificate of
Incorporation to increase the authorized shares of Preferred Stock, as more
fully set forth under "Proposal No. 3."
4. To amend Section 9 of the Company's Restated Certificate of
Incorporation to provide that such Restated Certificate of Incorporation may
only be amended by the affirmative vote of at least 66 2/3% of the shares
entitled to vote for the election of directors, as more fully set forth under
"Proposal No. 4."
5. To amend Section 5 of the Company's Restated Certificate of
Incorporation to provide that directors may be removed only for cause and only
by the affirmative vote of at least 66 2/3% of the shares entitled to vote for
the election of directors, as more fully set forth under "Proposal No. 5."
6. To amend Section 8 of the Company's Restated Certificate of
Incorporation to provide that stockholders may make, amend or repeal By-laws
only by the affirmative vote of at least 66 2/3% of the shares entitled to vote
for the election of directors, as more fully set forth under "Proposal No. 6."
7. To add a new Section 10 to the Company's Restated Certificate of
Incorporation to provide that any action taken by the stockholders must be
effected at a duly called annual or special meeting of such holders and not by
written consent, as more fully set forth under "Proposal No. 7."
8. To increase the number of shares of Common Stock available for grant
under the Company's Amended and Restated 1994 Stock Option Plan by 100,000
shares, as more fully set forth under "Proposal No. 8."
9. To amend the eligibility requirements for participation in the
Employee Stock Purchase Plan as more fully set forth under "Proposal No. 9."
10. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending January 25, 1998.
11. To transact such other business as may properly come before the
Annual Meeting, or any adjournment or adjournments thereof.
Stockholders of record at the close of business on April 16, 1997 will
be entitled to notice of and to vote at the Annual Meeting, or any adjournment
or adjournments thereof. Stockholders are cordially invited to attend the Annual
Meeting in person. Those who will not attend and who wish their shares voted are
requested to sign, date and mail promptly the enclosed proxy for which a return
envelope is provided.
By Order of the Board of Directors
Jane L. Arbuthnot, SECRETARY
Houston, Texas
April 23, 1997
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE
URGED TO SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY. IF YOU ATTEND THE
ANNUAL MEETING, YOU CAN VOTE EITHER IN PERSON OR BY YOUR PROXY.
<PAGE>
GARDEN RIDGE CORPORATION
19411 ATRIUM PLACE, SUITE 170
HOUSTON, TEXAS 77084
PROXY STATEMENT
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Garden Ridge Corporation, a
Delaware corporation ("Garden Ridge" or the "Company"), for use at the annual
meeting of stockholders to be held on Tuesday, June 3, 1997, at Texas Commerce
Tower, 600 Travis, 25th Floor Conference Room, Houston, Texas 77002, at 9:00
a.m., Houston time, or at any adjournment or adjournments thereof (such meeting
or adjournment(s) thereof referred to as the "Annual Meeting"). Copies of the
Proxy and Notice and Proxy Statement are being mailed to stockholders on or
about April 23, 1997.
In addition to solicitation by mail, solicitation of proxies may be made
by personal interview, special letter, telephone or telecopy by the officers,
directors and employees of the Company. Brokerage firms will be requested to
forward proxy materials to beneficial owners of shares registered in their names
and will be reimbursed for their expenses. In addition, the Company has retained
the services of Corporate Investor Communications to assist in the solicitation
of proxies either in person or by mail, telephone or telecopy, at an estimated
cost of $2,000 plus expenses. The cost of solicitation of proxies will be paid
by the Company.
A proxy received by the Board of Directors of the Company may be revoked
by the stockholder giving the proxy at any time before it is exercised. A
stockholder may revoke a proxy by notification in writing to the Company at
19411 Atrium Place, Suite 170, Houston, Texas 77084, Attention: Corporate
Secretary. A proxy may also be revoked by execution of a proxy bearing a later
date or by attendance at the Annual Meeting and voting by ballot. A proxy in the
form accompanying this Proxy Statement, when properly executed and returned,
will be voted in accordance with the instructions contained therein. A proxy
received by management which does not withhold authority to vote or on which no
specification has been indicated will be voted in favor of the proposals set
forth in this Proxy Statement and for the nominees for the Board of Directors of
the Company named in Proposal No. 1 of this Proxy Statement. A majority of the
outstanding shares will constitute a quorum at the Annual Meeting. Abstentions
and broker non-votes are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Abstentions are counted in
tabulations of the votes cast on proposals presented to stockholders, whereas
broker non-votes are not counted for purposes of determining whether a proposal
has been approved.
At the date of this Proxy Statement, management of the Company does not
know of any business to be presented at the Annual Meeting other than those
matters which are set forth in the Notice accompanying this Proxy Statement. If
any other business should properly come before the Annual Meeting, it is
intended that the shares represented by proxies will be voted with respect to
such business in accordance with the judgment of the persons named in the proxy.
COMMON STOCK OUTSTANDING AND PRINCIPAL HOLDERS THEREOF
The Board of Directors has fixed the close of business on April 16,
1997, as the record date for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting. At that date there were outstanding
17,832,819 shares of common stock, par value $0.01 per share ("Common Stock"),
of the Company and the holders thereof will be entitled to one vote for each
share of Common Stock held of record by them on that date for each proposal to
be presented at the Annual Meeting.
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<PAGE>
The following table sets forth information with respect to the shares of
Common Stock (the only outstanding class of voting securities of the Company)
owned of record and beneficially as of April 4, 1997, unless otherwise
specified, by (i) all persons who own of record or are known by the Company to
own beneficially more than 5% of the outstanding shares of such class of stock,
(ii) each director and named executive officer, and (iii) all directors and
executive officers of the Company as a group:
Name Number(1) Percent
---- ------------ ---------
Armand Shapiro................................... 641,333(2) 3.6%
Jack E. Lewis.................................... 166,810(3) *
Jane L. Arbuthnot................................ 111,255(4) *
David S. Hensley................................. 84,002(5) *
Phyllis Cohen Hink............................... 91,600(6) *
Dennis R. Dye.................................... 51,700(7) *
Gary Ramsey...................................... 0 *
Terry S. Boyce................................... 5,000(8) *
Alyson Henning................................... 2,500(9) *
Nolan Lehmann.................................... 483,942(10) 2.7%
Ira Neimark...................................... 6,000(11) *
Ronald Rashkow................................... 123,000(12) *
Sam J. Susser.................................... 7,000(13) *
H. Whitney Wagner................................ 358,348(14) 2.0%
Teribe Limited
c/o Craigmuir Chambers
P. O. Box 71, Road Town
Tortola
British Virgin Islands......................... 2,120,000(15) 11.9%
The Capital Group Companies, Inc.
Capital Research and Management Company
333 South Hope Street
Los Angeles, California 90071................... 1,645,000(16) 9.2%
J.P. Morgan & Co. Incorporated
60 Wall Street
New York, New York 10260........................ 1,115,500(16) 6.3%
All directors and executive officers as a group
(14 persons).................................. 2,132,490 12.0%
- ------------
* Less than 1%
(1) The persons listed have the sole power to vote and dispose of the shares
except as otherwise indicated.
(2) Includes 336,450 shares that may be acquired within the next 60 days
upon the exercise of outstanding employee stock options and 19,196
shares that may be acquired within the next 60 days upon the exercise of
an option.
(3) Includes 67,050 shares that may be acquired within the next 60 days upon
the exercise of outstanding employee stock options.
(4) Includes 101,000 shares that may be acquired within the next 60 days
upon the exercise of outstanding employee stock options.
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<PAGE>
(5) Includes 20,000 shares that may be acquired within the next 60 days upon
the exercise of outstanding employee stock options.
(6) Includes 70,004 shares that may be acquired within the next 60 days upon
the exercise of outstanding employee stock options and 1,600 shares
owned by her spouse.
(7) Includes 31,502 shares that may be acquired within the next 60 days upon
the exercise of outstanding employee stock options.
(8) Includes 5,000 shares may be acquired within the next 60 days upon the
exercise of outstanding director options.
(9) Includes 2,500 shares may be acquired within the next 60 days upon the
exercise of outstanding director options.
(10) Includes 474,942 shares held by Equus II Incorporated. Mr. Lehmann
serves as President of Equus II Incorporated, and disclaims beneficial
ownership of such shares. Also includes 5,000 shares that may be
acquired within the next 60 days upon the exercise of outstanding
director options.
(11) Includes 5,000 shares that may be acquired within the next 60 days upon
the exercise of outstanding director options.
(12) Includes an aggregate of 46,006 shares held by Mr. Rashkow's children as
to which Mr. Rashkow maintains voting control, and 5,000 shares that may
be acquired within the next 60 days upon the exercise of outstanding
director options.
(13) Includes 5,000 shares that may be acquired within the next 60 days upon
the exercise of outstanding director options.
(14) Includes 337,342 shares held directly by Three Cities Holdings Limited,
12,734 shares held directly by Three Cities Research, Inc., and 1,616
shares held directly by Three Cities Partners 1990, as to which Mr.
Wagner has disclaimed beneficial ownership.
(15) Based on information in Form 4 filed by Teribe Limited for February
1997.
(16) Based on information in Schedule 13G filed for the year ended December
31, 1996.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
GENERAL
Eight directors are to be elected at the Annual Meeting. The Company
recommends voting for the election of each of the nominees for director listed
below. The persons named as proxy holders in the accompanying proxy intend to
vote each properly signed and submitted proxy for the election as a director of
each of the persons named as a nominee below under "Nominees for Director"
unless authority to vote in the election of directors is withheld on such proxy.
If, for any reason, at the time of the election one or more of the nominees
should be unable to serve, the proxy will be voted for a substitute nominee or
nominees selected by the Board of Directors. Directors are elected by a
plurality of votes cast at the Annual Meeting.
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<PAGE>
Unless otherwise specified, all properly executed proxies received by
the Company will be voted for the election of the directors listed below to hold
office until the 1998 annual meeting of stockholders and until each of their
respective successors is elected and qualified.
THE COMPANY RECOMMENDS VOTING "FOR" THE NOMINEES.
NOMINEES FOR DIRECTOR
The following table sets forth the name, age and principal position of
each nominee for director to hold office until the 1998 annual meeting of
stockholders.
Name Age Position
---- --- --------
Armand Shapiro.......... 55 Chief Executive Officer and Chairman
of the Board
Terry S. Boyce.......... 56 Director
Alyson Henning.......... 42 Director
Nolan Lehmann........... 52 Director
Ira Neimark............. 75 Director
Ronald Rashkow.......... 56 Director
Sam J. Susser........... 57 Director
H. Whitney Wagner....... 41 Director
ARMAND SHAPIRO joined the Company in June 1990 as Chairman of the Board
and Chief Executive Officer. For seven years prior to joining Garden Ridge, Mr.
Shapiro was in executive management at ComputerCraft, Inc. ("ComputerCraft"),
then a publicly traded retailer of computer products, most recently serving as
President from 1986 to 1990. Mr. Shapiro was associated with a family-owned
corporation, Modern Furniture Rentals, Inc. as Chief Operating Officer prior to
joining ComputerCraft. Mr. Shapiro serves on the board of directors of Southgard
Corp., which owns and operates convenience stores.
TERRY S. BOYCE has been a director of the Company since 1992. Mr. Boyce
has been the managing partner in the executive search firm of Boyce Partners,
Inc. since November 1995. Mr. Boyce previously was a partner in the executive
search firm of Ingram & Aydelotte, Inc., from January 1994 to November 1995. Mr.
Boyce was the vice president of administration for the Rockefeller Group, Inc.,
from 1982 to 1990, and was president of Boyce & Associates, Inc., a management
consulting firm, from 1991 to 1993.
ALYSON HENNING has been a director of the Company since 1996. Ms.
Henning has been the Chief Business Development Officer, Worldwide for Ammirati
Puris Lintas, an international marketing firm, since January 1996. From 1985 to
1995, Ms. Henning held various management positions within Ammirati Puris
Lintas.
NOLAN LEHMANN has been a director of the Company since 1992. Mr. Lehmann
has served as President and a director of Equus Capital Management Corporation,
located in Houston, Texas, since 1983, and is also President and a director of
both Equus Capital Management Corporation and Equus II Incorporated, which is a
business development company listed on the American Stock Exchange. Mr. Lehmann
serves on the board of directors of Drypers Corporation, Allied Waste
Industries, Inc., American Residential Services, Inc. and Brazos Sportswear,
Inc. Mr. Lehmann is a certified public accountant.
IRA NEIMARK has been a director of the Company since 1996. Mr. Neimark
has served as a retail consultant since 1992. From 1975 to 1992, Mr. Neimark
held various management positions with Bergdorf Goodman, most recently as
Chairman of the Board and Chief Executive Officer. Mr. Neimark serves on the
board of directors of Hermes Paris and 2 Connect.
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<PAGE>
RONALD RASHKOW has been a director of Garden Ridge since 1994. Mr.
Rashkow was a founding partner, and has served as a principal, of Chapman
Partners L.L.C., an investment banking firm, since 1995. Mr. Rashkow was the
founder and, until April 1996, the Chairman of the Board of Handy Andy Home
Improvement Centers, Inc. ("Handy Andy"), a retail hardware and building
materials company. Mr. Rashkow served as Chief Executive Officer of Handy Andy
from 1988 to February 1995. In October 1995, an involuntary petition of
bankruptcy under Chapter 11 was filed against Handy Andy by several creditors.
Handy Andy has received court approval for a plan of liquidation under Chapter
11. From 1989 to 1993, Mr. Rashkow was a director, vice president and consultant
to Spirit Holdings Company, Inc. and its two operating subsidiaries, Central
Hardware Company, Inc. and Witte Hardware Corporation, each a retailer and
wholesaler of hardware and building materials. Spirit Holdings Company, Inc.,
Central Hardware Company, Inc. and Witte Hardware Corporation filed a voluntary
petition under Chapter 11 of the United States Bankruptcy Code in March 1993 and
emerged from bankruptcy in February 1994. Mr. Rashkow also serves as a director
of Family Bargain Corporation, a publicly traded company.
SAM J. SUSSER has been a director of the Company since 1992. Mr. Susser
serves as Chairman of the Board and served as Chief Executive Officer of
Southgard Corp. from 1988 to 1990. Mr. Susser also has served as Chairman and
Chief Executive Officer of Susser Petroleum Company since 1989. From 1987 to
1992, Mr. Susser served as Chairman and Chief Executive Officer of Shaper
Partners, an investment partnership.
H. WHITNEY WAGNER has been a director of the Company since 1992. Mr.
Wagner has served as a Managing Director of Three Cities Research, Inc. ("TCR"),
a private investment advisory firm, since 1989. He joined TCR in 1983 and was
elected a Vice President in 1986. Mr. Wagner serves on the board of directors of
MLX Corp, a publicly traded company, and on the board of directors of Family
Bargain Corporation, a publicly traded company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met six times in fiscal 1997. The Board of
Directors has established Compensation and Audit Committees. The Compensation
Committee, which met twice in fiscal 1997, is composed of Messrs. Boyce, Susser
and Wagner and is responsible for establishing salaries, bonuses, stock options
and other compensation for the Company's executive officers. The Audit
Committee, which met twice in fiscal 1997, is composed of Messrs. Lehmann,
Susser and Wagner and is responsible for recommending independent auditors,
reviewing with the independent auditors the scope and results of the audit
engagement, establishing and monitoring the Company's financial policies and
control procedures and overseeing the Company's investment funds policy. All
directors attended at least 75% of the meetings of the Board of Directors and
the meetings of the committees on which they served in fiscal 1997.
DIRECTOR COMPENSATION
Independent directors of the Company receive $10,000 per year and $500
per meeting of the Board attended. All directors receive reimbursement of
reasonable out-of-pocket expenses incurred in connection with meetings of the
Board and committees thereof. Pursuant to the 1996 Non-Employee Director Stock
Option Plan, all non-employee directors receive annually a grant of a stock
option to purchase up to 5,000 shares at an exercise price equal to the fair
market value of the Common Stock on the date of grant. All directors receive
such compensation except for Messrs Wagner and Shapiro. The Compensation
Committee annually approves the number of shares granted to directors.
EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of the
persons who are not directors and who are executive officers of the Company:
Name Age Position
---- --- --------
Jack E. Lewis......... 54 President and Chief Operating Officer
Gary Ramsey........... 54 Executive Vice President - Stores
Jane L. Arbuthnot..... 37 Chief Financial Officer and Secretary
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<PAGE>
David S. Hensley...... 44 Vice President - General Merchandise Manager
Dennis R. Dye......... 47 Vice President - Chief Information Officer
Phyllis Cohen Hink.... 54 Vice President - Human Resources and Operations
JACK E. LEWIS joined the Company in June 1990 as Executive Vice
President and was promoted to President and Chief Operating Officer in 1992.
From 1989 to 1990 he served as Executive Vice President - Marketing and Sales at
ComputerCraft. From 1968 to 1989 Mr. Lewis held various management positions
with Sears Roebuck and Company, including manager of National Advertising and
Sales Promotion.
GARY RAMSEY joined the Company in 1996 as Executive Vice President -
Stores. From 1995 to 1996, Mr. Ramsey was a consultant in the retail industry,
and from 1993 to 1995, he was the Senior Vice President - General Merchandise
Manager of Montgomery Wards. From 1964 to 1993, Mr. Ramsey held various
management positions with Sears Roebuck and Company, including Chief Executive
Officer of Sears Business Centers.
JANE L. ARBUTHNOT joined Garden Ridge in July 1990 as Vice President -
Controller and Assistant Secretary, was promoted to Chief Financial Officer in
1991 and elected as Secretary in 1992. From 1983 to 1990, Ms. Arbuthnot held
various management positions at ComputerCraft, most recently as Vice President -
Controller. Prior to joining ComputerCraft, she was employed by Arthur Andersen
& Co. SC. Ms. Arbuthnot is a certified public accountant.
DAVID S. HENSLEY joined the Company in June 1990 as Vice President -
General Merchandise Manager. From 1982 to 1990 Mr. Hensley served as a Product
Marketing Director for ComputerCraft, and prior to 1982 he served as a senior
buyer for Foley's Department Stores.
PHYLLIS COHEN HINK joined Garden Ridge in October 1990 as Vice President
- - Operations and assumed responsibility as well for Human Resources in 1993.
From 1978 to 1990, Ms. Hink served as Vice President of both Operations and
Human Resources for ComputerCraft.
DENNIS R. DYE joined Garden Ridge in July 1994 as Vice President - Chief
Information Officer. Prior to joining Garden Ridge, he held the position of
Manager of Customer Information Systems with Compaq Computer Corporation from
1989 to 1994.
COMPENSATION COMMITTEE REPORT1
The Compensation Committee of the Board of Directors (the "Committee")
is composed entirely of outside directors. The Committee is responsible for
establishing and administering the compensation policies applicable to the
Company's executive officers. All decisions by the Committee are subject to
review and approval of the full Board of Directors.
The Company's executive compensation philosophy and specific
compensation plans tie a significant portion of executive compensation to the
Company's success in meeting specific profit, growth and performance goals.
The Company's compensation objectives include attracting and retaining
the best possible executive talent, motivating executive officers to achieve the
Company's performance objectives, rewarding individual performance and
contributions, and linking executives' and stockholders' interests through
equity based plans.
- -------------
(1) Notwithstanding filings by the Company with the Securities and Exchange
Commission ("SEC") that have incorporated or may incorporate by
reference other SEC filings (including this proxy statement) in their
entirety, this Compensation Committee Report shall not be incorporated
by reference into such filings and shall not be deemed to be "filed"
with the SEC except as specifically provided otherwise.
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<PAGE>
The Company's executive compensation consists of three key components:
base salary, annual incentive compensation and stock options, each of which is
intended to complement the others and, taken together, to satisfy the Company's
compensation objectives. The Compensation Committee's policies with respect to
each of the three components are discussed below.
BASE SALARY. In the early part of each fiscal year, the Compensation
Committee reviews the base salary of the Chief Executive Officer ("CEO") and the
recommendations of the CEO with regard to the base salary of all other executive
officers of the Company and approves, with any modifications it deems
appropriate, annual base salaries for each of the executive officers.
Recommended base salaries of the executive officers, other than the CEO, are
based on an evaluation of the individual performance of the executive officer,
including satisfaction of annual objectives. The recommended base salary of the
CEO is based on achievement of the Company's annual goals relating to financial
objectives, including earnings growth and return on capital employed, and an
evaluation of individual performance.
Recommended base salaries of the executive officers are also in part
based upon an evaluation of the salaries of those persons holding comparable
positions at comparable companies.
ANNUAL INCENTIVE COMPENSATION. The Company's executive officers are
entitled to participate in a discretionary incentive bonus plan which provides
for the payment of annual bonuses to be paid in cash, stock, or a combination
thereof, based on the relative success of the Company in attaining certain
financial objectives and certain subjective factors as established from time to
time by the Committee and/or the Board of Directors. The Committee will consider
aggregate incentive cash and stock bonus payments to the executive officers, as
a group, of up to 50% of aggregate annual executive base salaries, and will
consider bonus payments to be paid in stock in excess of 50% of aggregate annual
executive base salaries. The Committee awarded no cash bonuses to the named
executive officers for fiscal 1997, but stock options aggregating 50,000 shares
were awarded to executive officers at an exercise price of $10.00 per share,
which was $1.00 above the then current market price, as part of the fiscal 1997
bonus program.
STOCK OPTIONS. The primary objective of the stock option program is to
link the interests of the Company's stockholders to the executive officers and
other selected employees of the Company through the grant of significant annual
grants of stock options. The aggregate number of options recommended by the
Committee is based on practices of the same comparable companies utilized for
determining base salary, while actual grants of stock options reflect each
individual's expected long-term contribution to the success of the Company. The
Committee made grants of an aggregate of 13,500 stock options to the named
executive officers in fiscal 1997.
Compensation Committee: Terry S. Boyce, Sam J. Susser and H. Whitney
Wagner.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of the Board of Directors of the
Company was, during fiscal 1997, an officer or employee of the Company or any of
its subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries.
H. Whitney Wagner, a member of the Compensation Committee of the
Company's Board of Directors, is a Managing Director of TCR. The Company has
entered into an Advisory Agreement with TCR pursuant to which the Company has
agreed to pay TCR a fee of $50,000 per annum for advisory services and to
reimburse TCR for out-of-pocket expenses approved in advance by the Company, for
a five-year period ending on July 16, 2001.
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<PAGE>
Sam J. Susser, a member of the Compensation Committee of the Company's
Board of Directors, is chairman of the board of directors of Southgard Corp.
Armand Shapiro, Chairman and Chief Executive Officer of the Company, serves on
the Board and Compensation Committee of Southgard Corp.
Except as set forth above, during fiscal 1997, no executive officer of
the Company served as (i) a member of the compensation committee (or other board
committee performing equivalent functions) of another entity, one of whose
executive officers served on the Compensation Committee of the Board of
Directors, (ii) a director of another entity, one of whose executive officers
served on the Compensation Committee of the Board of Directors, or (iii) a
member of the compensation committee (or other board committee performing
equivalent functions) of another entity, one of whose executive officers served
as a director of the Company.
COMPENSATION TABLES
The following table sets forth compensation information for the chief
executive officer and the four most highly compensated executive officers of the
Company during the Company's fiscal years 1997, 1996 and 1995, for services
rendered during such years to the Company or any of its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
----------------------- ---------------------
FISCAL SECURITIES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS
- --------------------------------------- -------- ---------- ---------- ---------------------
($) ($) (#)
<S> <C> <C> <C> <C>
Armand Shapiro......................... 1997 350,000 0 4,950
Chairman of the Board and 1996 339,583 132,000 0
Chief Executive Officer 1995 321,022 139,590 135,000
Jack E. Lewis.......................... 1997 223,750 0 4,050
President and 1996 211,667 108,000 0
Chief Operating Officer 1995 195,833 109,980 49,500
Jane L. Arbuthnot...................... 1997 116,500 0 1,500
Chief Financial Officer 1996 109,500 40,000 0
and Secretary 1995 94,117 48,645 13,500
David S. Hensley....................... 1997 113,750 0 1,500
Vice President - General 1996 107,500 40,000 0
Merchandise Manager 1995 92,043 48,645 13,500
Dennis R. Dye.......................... 1997 102,250 0 1,500
Vice President - Chief 1996 95,083 40,000 0
Information Officer 1995 49,232 27,495 67,500
</TABLE>
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<PAGE>
The following table presents information regarding options granted to
each of the named executive officers in fiscal 1997.
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OF TOTAL
SECURITIES OPTIONS POTENTIAL REALIZABLE VALUE AT
UNDERLYING GRANTED TO EXERCISE ASSUMED ANNUAL RATES OF
OPTIONS EMPLOYEES IN PRICE EXPIRATION STOCK PRICE APPRECIATION FOR
NAME GRANTED FISCAL YEAR (PER SHARE) DATE OPTION TERM
---- --------- ------------- ----------- ------ -----------------------------
(#) (%) ($) (5%) (10%)
<S> <C> <C> <C> <C> <C> <C>
Armand Shapiro........ 4,950 3.0 18.75 04/2004 $ 43,751 $105,577
Jack E. Lewis......... 4,050 2.0 18.75 04/2004 36,257 86,810
Jane L. Arbuthnot..... 1,500 0.1 18.75 04/2004 13,428 32,163
David S. Hensley...... 1,500 0.1 18.75 04/2004 13,428 32,163
Dennis R. Dye......... 1,500 0.1 18.75 04/2004 13,428 32,163
</TABLE>
The following table presents information regarding options exercised
in fiscal 1997 and the value of options outstanding at January 26, 1997 for each
of the named executive officers:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE OPTIONS AT FISCAL YEAR END FISCAL YEAR END(1)
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Armand Shapiro..................... 0 $ 0 319,950 0 $2,756,250 $ 0
Jack E. Lewis...................... 157,500 1,378,125 53,550 0 433,125 0
Jane L. Arbuthnot.................. 9,000 78,750 96,000 0 826,875 0
David S. Hensley................... 0 0 15,000 0 118,125 0
Dennis R. Dye...................... 19,998 174,983 26,502 22,500 112,509 196,875
- ---------------
</TABLE>
(1) Value is based upon a fair market value of $8.75 per share at fiscal
1997 year end.
-9-
<PAGE>
PERFORMANCE GRAPH
The following performance graph provided by Zacks Investment Research,
Inc. compares the performance of the Company's Common Stock to the S&P 500 Index
and the S&P Retail Stores-Specialty Index since May 9, 1995, the first day of
public trading of the Company's Common Stock.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
STARTING
BASIS
DESCRIPTION 1992 1993 1994 1995 1996 1997
- ----------- -------- ---- ---- ---- ---- ----
GARDEN RIDGE CO (%) 0.00 0.00 0.00 120.00 -47.73
GARDEN RIDGE CO ($) $100.00 $100.00 $100.00 $100.00 $220.00 $115.00
S & P 500 (%) 0.00 0.00 0.00 25.93 26.34
S & P 500 ($) $100.00 $100.00 $100.00 $100.00 $125.93 $159.10
S & P Retail Stores-
Specialty (%) 0.00 0.00 0.00 0.30 9.65
S & P Retail Stores-
Specialty ($) $100.00 $100.00 $100.00 $100.00 $100.30 $109.98
- -------------
NOTE: Data complete through last fiscal year.
EMPLOYMENT CONTRACTS
Armand Shapiro serves as Chairman of the Board and Chief Executive
Officer of the Company pursuant to an Employment Agreement dated July 16, 1992.
The agreement, as amended, provides for a term extending through July 15, 1997.
Mr. Shapiro is entitled to an annual minimum base salary of $325,000, which is
to be increased each year during the term of the agreement by a percentage not
less than the percentage increase in the consumer price index. Mr. Shapiro is
also entitled to participate in a discretionary incentive bonus plan as
determined by the Board of Directors. The Company maintains key man life
insurance of $5.0 million on Mr. Shapiro for the benefit of the Company. The
Company may terminate the agreement upon various actions by Mr. Shapiro,
including any material violation of covenants not to compete and material and
willful violations of any lawful direction of the board of directors. Mr.
Shapiro may terminate his employment at any time and receive no additional
compensation. Mr. Shapiro's employment agreement contains certain
non-competition provisions which generally restrict his ability to compete with
the Company for a period of two years following the termination of his
employment agreement.
PROPOSED AMENDMENTS
TO THE RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has voted unanimously to authorize amendments to
the Company's Restated Certificate of Incorporation and to recommend such
proposed amendments to the stockholders for approval. The proposed amendments
are: (i) to increase the number of authorized shares of Common Stock (Proposal
No. 2); (ii) to increase the number of authorized shares of Preferred Stock
(Proposal No. 3); (iii) to provide for a supermajority vote of stockholders to
amend the Restated Certificate of Incorporation (Proposal No. 4); (iv) to
provide that directors may be removed only for cause and only by a supermajority
vote (Proposal No. 5); (v) to provide that the stockholders may amend the Bylaws
only by a supermajority vote (Proposal No. 6); and (vi) to provide that
stockholder action must be effected at a duly called annual or special meeting
(Proposal No. 7).
The Board of Directors believes that companies can be and are acquired,
and changes in control of companies can and do occur, at prices below
realistically achievable levels when boards do not have measures in place to
require a potential acquiror to negotiate or pay the highest price. While it is
possible for such measures to be misused to resist reasonable takeover actions
contrary to a board's fiduciary obligations, the board is aware of, and
committed to, its fiduciary obligations. These proposals are not in response to
any efforts of which the Company is aware to accumulate the Company's stock or
to obtain control of the Company.
-10-
<PAGE>
Approval of each of the proposed amendments requires the affirmative
vote of a majority of the outstanding shares of the Common Stock entitled to
vote in person or by proxy at the Annual Meeting.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENTS ARE IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS
VOTING "FOR" APPROVAL OF EACH OF THE PROPOSED AMENDMENTS.
PROPOSAL NO. 2 - AMENDMENT TO SECTION 4 OF
THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY
INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors of the Company has approved an amendment to
Section 4 of the Company's Restated Certificate of Incorporation authorizing an
increase in the number of authorized shares of Common Stock, and has directed
that such amendment be submitted to the stockholders for approval. If Proposal
No. 2 is approved by a majority of the outstanding shares of Common Stock, the
first provisions of Section 4 of the Restated Certificate of Incorporation shall
be amended to read as follows:
4. SHARES. The total number of shares of stock which the Corporation
shall have authority to issue is Forty-Two Million Five Hundred Thousand
(42,500,000) consisting of (a) Forty Million (40,000,000) shares of
Common Stock, par value $.01 per share (the "Stock"),
Under Section 4 of the Restated Certificate of Incorporation, the
Company is currently authorized to issue Twenty-Two Million (22,000,000) shares
of capital stock consisting of: (i) Twenty Million (20,000,000) shares of Common
Stock, (ii) One Million (1,000,000) shares of 8% Cumulative Preferred Stock, par
value $.01 per share (the "8% Cumulative Preferred Stock"), and (iii) One
Million (1,000,000) shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock"). Section 4 of the Restated Certificate of Incorporation
specifies the rights, preferences and designations applicable to the 8%
Cumulative Preferred Stock. Furthermore, Section 4 of the Restated Certificate
of Incorporation grants the Board of Directors full discretion to issue shares
of Common Stock and to issue and determine the rights, preferences and
designations applicable to shares of Preferred Stock; provided that there are no
shares of 8% Cumulative Preferred Stock outstanding.
If approved by the stockholders, Proposal No. 2 will increase the number
of authorized shares of Common Stock to Forty Million (40,000,000). The Board of
Directors will continue to have full discretion to issue shares of Common Stock.
As of April 16, 1997, there were 17,832,819 shares of Common Stock
outstanding and 97,945 shares of Common Stock reserved for issuance under the
Company's Stock Purchase Plan and 980,170 shares of Common Stock reserved for
issuance upon exercise of options granted under the Company's stock option
plans, leaving only 1,089,066 shares of Common Stock authorized and available
for issuance. An additional 100,000 shares will be reserved for issuance under
the Amended and Restated 1994 Stock Option Plan if Proposal No. 8 is approved.
The Company will be required to reserve additional shares of Common Stock in the
future for issuance in connection with its Stock Purchase Plan and stock option
plans.
Management believes that it is important for the Company to have a
sufficient reserve of shares of Common Stock available for the future needs of
the Company. Increasing the number of authorized shares of Common Stock will
make such shares available for various corporate purposes, including any future
issuances of Common Stock in public or private financings, payment of stock
dividends, or upon subdivision of outstanding shares through stock splits, or
upon conversion or exercise of any convertible securities, options, warrants or
rights which may hereafter be issued for any desirable corporate purpose. Having
such additional authorized shares of Common Stock available for issuance in the
future will give the Company greater flexibility and will allow such shares to
be issued without the expense and delay of a special shareholders meeting. The
additional shares of Common Stock will be available for issuance without further
action by the stockholders, unless such action is required by applicable law or
the rules of any stock exchange on which the Company's securities may then be
listed. Other than its current Stock Purchase Plan and stock option plans, the
Company does not have any plans, agreements, understandings or arrangements that
could or will result in the issuance of any Common Stock.
-11-
<PAGE>
Stockholders should note that certain disadvantages may result from the
authorization of additional shares of capital stock pursuant to this Proposal
No. 2. For example, the issuance of a significant amount of additional
authorized shares of Common Stock will likely result in significant dilution of
the beneficial ownership interests and/or voting power of the stockholders. Once
authorized in the Restated Certificate of Incorporation, shares of Common Stock
generally may be issued by the Board of Directors without further authorization
from the stockholders. Such additional shares may be issued for cash, property,
services or cancellation of indebtedness, or any combination thereof, and at
such price or prices and on such terms as the Board of Directors deems
reasonable under the circumstances. Holders of the Company's capital stock have
no preemptive rights with respect to the issuance of additional shares of
capital stock.
Although the Company is not presently aware of any proposed tender offer
or other takeover attempt, stockholders should be aware that the Board of
Directors could utilize the increased number of authorized shares defensively
against an actual or potential takeover threat. For example, the Board of
Directors will have full discretion, subject to its fiduciary duties, to issue
shares of newly authorized capital stock in (i) a private placement transaction
which could have the effect of diluting the stock ownership of a person seeking
to obtain control of the Company, or (ii) in conjunction with a stockholder's
rights plan (so-called "poison-pill"), in each such case without further
approval of the stockholders.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 2.
PROPOSAL NO. 3 - AMENDMENT TO SECTION 4 OF
THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY
INCREASING THE NUMBER OF AUTHORIZED SHARES OF PREFERRED STOCK
The Board of Directors of the Company has approved an amendment to
Section 4 of the Company's Restated Certificate of Incorporation authorizing and
increasing the number of authorized shares of Preferred Stock, and has directed
that such an amendment be submitted to the stockholders for approval. If
Proposal No. 3 is approved by a majority of the outstanding shares of Common
Stock, the remainder of Section 4 of Restated Certificate of Incorporation shall
be amended to read as follows:
and (b) Two Million Five Hundred Thousand (2,500,000) Shares of
Preferred Stock, par value $.01 per share (the "Preferred Stock").
4.1 The Board of Directors is authorized at any time, and from
time to time to divide the Preferred Stock into series, to fix and
determine separately for each series any or all of the relative rights
and preferences, to issues shares of any series then or previously
designated, fixed and determined, and to increase or decrease the number
of shares within any series. The relative rights and preferences of
shares of Preferred Stock may vary between series in any and all
respects. Without limiting the foregoing, each series may vary from any
other series with respect to the following relative rights and
preferences:
(1) the rate of dividend payable with respect to the shares of any
series and the dates, terms and other conditions on which such
dividends shall be payable;
(2) the nature of the dividend payable with respect to shares of any
series as cumulative, non-cumulative or personally cumulative;
(3) the price at and the terms and conditions in which shares may be
redeemed;
(4) the amount payable upon shares in the event of involuntary
liquidation;
-12-
<PAGE>
(5) the amount payable upon shares in the event of voluntary
liquidation;
(6) sinking fund provisions (if any) for the redemption or purchase
of shares;
(7) the terms and conditions on which shares may be converted if the
shares of any series are issued with the privilege of
conversion;
(8) voting rights (including with a number of votes per share, the
matters on which the shares can vote, and the contingencies
which make the voting rights effective); and
(9) repurchase obligations of the corporation with respect to the
shares of any series.
As set forth under Proposal No. 2, the Company is currently authorized
to issue One Million (1,000,000) shares of 8% Cumulative Preferred Stock and One
Million (1,000,000) shares of Preferred Stock. The Board of Directors has full
discretion to issue and determine the rights, preferences and designations
applicable to shares of Preferred Stock; provided that there are no shares of 8%
Cumulative Preferred Stock outstanding. As of April 16, 1997, there were no
shares of 8% Cumulative Preferred Stock or Preferred Stock outstanding.
If approved by the stockholders, Proposal No. 3 will (i) increase the
number of authorized shares of Preferred Stock to Two Million Five Hundred
Thousand (2,500,000), and (ii) eliminate references to the 8% Cumulative
Preferred Stock. The Board of Directors will continue to have full discretion to
issue and determine the rights, preferences and designations applicable to the
additional shares of Preferred Stock. If Proposal No. 3 is not approved by
stockholders, but Proposal No. 2 is so approved, the total number of shares of
stock which the Company shall have authority to issue shall be Forty-Two Million
(42,000,000) consisting of (a) Forty Million (40,000,000) shares of Common
Stock, (b) One Million (1,000,000) shares of 8% Cumulative Preferred Stock, and
(c) One Million (1,000,000) shares of Preferred Stock..
Management believes that it is important for the Company to have a
sufficient reserve of shares of Preferred Stock available for the future needs
of the Company. Increasing the number of authorized shares of Preferred Stock
will make such shares available for various corporate purposes, including any
future issuances of Preferred Stock in public or private financings or any other
desirable corporate purposes. Having such additional authorized shares of
Preferred Stock available for issuance in the future will give the Company
greater flexibility and will allow such shares to be issued without the expense
and delay of a special shareholders meeting. The additional shares of Preferred
Stock will be available for issuance without further action by the stockholders,
unless such action is required by applicable law or the rules of any stock
exchange on which the Company's securities may then be listed. The Company does
not have any plans, agreements, understandings or arrangements that could or
will result in the issuance of any Preferred Stock.
Stockholders should note that certain disadvantages may result from the
authorization of additional shares of capital stock pursuant to this Proposal
No. 3. For example, the issuance of a significant amount of additional
authorized shares of Preferred Stock may result in significant dilution of the
beneficial ownership interests and/or voting power of the stockholders. Once
authorized in the Restated Certificate of Incorporation, shares of Preferred
Stock generally may be issued by the Board of Directors without further
authorization from the stockholders. Such additional shares may be issued for
cash, property, services or cancellation of indebtedness, or any combination
thereof, and at such price or prices and on such terms as the Board of Directors
deems reasonable under the circumstances. Holders of the Company's capital stock
have no preemptive rights with respect to the issuance of additional shares of
capital stock.
Although the Company is not presently aware of any proposed tender offer
or other takeover attempt, stockholders should be aware that the Board of
Directors could utilize the increased number of authorized shares defensively
against an actual or potential takeover threat. For example, the Board of
Directors will have full discretion, subject to its fiduciary duties, to issues
shares of newly authorized capital stock in (i) a private placement transaction
which could have the effect of diluting the stock ownership of a person seeking
to obtain control of the Company, or (ii) in conjunction with a stockholder's
right plan (so-called "poison-pill"), in each such case without further approval
-13-
<PAGE>
of the stockholders.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 3.
PROPOSAL NO. 4 - AMENDMENT TO SECTION 9 OF
THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY
The Board of Directors of the Company has approved an amendment to
Section 9 of the Restated Certificate of Incorporation providing that the
Restated Certificate of Incorporation may only be amended by the affirmative
vote of at least 66 2/3% of the shares entitled to vote in the election of
directors, and has directed that such amendment be submitted to the stockholders
for approval. If Proposal No. 4 is approved by a majority of the outstanding
shares of Common Stock, Section 9 of the Restated Certificate of Incorporation
shall be amended to read as follows:
9. AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION. The Restated
Certificate of Incorporation may be (and may only be) amended by the
affirmative vote of at least 66 2/3% of the issued and outstanding
shares of stock of the Corporation entitled to vote in the election of
Directors of the Corporation.
Section 9 of the Restated Certificate of Incorporation currently
provides that the Restated Certificate of Incorporation may be amended by a
majority of the holders of shares of stock of the Company entitled to vote in
the election of directors. If Proposal No. 4 is approved by the stockholders,
Section 9 of the Restated Certificate of Incorporation will be amended to
provide that the Restated Certificate of Incorporation may be amended by the
affirmative vote of at least 66 2/3% of the shares entitled to vote in the
election of directors.
Proposal No. 4 is designed to limit stockholders' ability to change the
provisions of the Corporation's Restated Certificate of Incorporation without
broad support from the Company's other voting stockholders. The Board of
Directors believes that such an amendment will provide a degree of continuity
and that it is in the best interests of the Company. However, the increase in
the stockholder vote required to amend the Restated Certificate of Incorporation
will make it more difficult for a significant stockholder to make changes in the
Restated Certificate of Incorporation, including changes designed to facilitate
a business combination or the exercise of control over the Company. The
requirement for a super-majority vote would apply to any stockholders' amendment
of the Company's Restated Certificate of Incorporation at any time, whether or
not related to a business combination or the acquisition of control.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 4.
PROPOSAL NO. 5 - AMENDMENT TO SECTION 5 OF
THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY
The Board of Directors of the Company has approved an amendment to
Section 5 of the Company's Restated Certificate of Incorporation providing that
directors may only be removed from office for cause and by the affirmative vote
of at least 66 2/3% of the shares entitled to vote in the election of directors,
and has directed that such amendment be submitted to the stockholders for
approval. If Proposal No. 5 is approved by a majority of the outstanding shares
of Common Stock, Section 5 of the Restated Certificate of Incorporation shall be
amended to read as follows:
5. ELECTION OF DIRECTORS. The business and affairs of the Corporation
shall be managed by and under the direction of the Board of Directors of
the Corporation. Members of the Board of Directors may be elected either
by written ballot or by voice vote. Any Director, or the entire Board of
Directors, may be removed from office at any time, but only for cause
and any only be the affirmative
-14-
<PAGE>
vote of at least 66 2/3% of the shares entitled to vote in the election
of Directors of the Corporation.
The Restated Certificate of Incorporation does not currently address the
removal of directors, and thus, pursuant to Section 141(k) of the Delaware
General Corporation Law ("DGCL"), directors may be removed with or without cause
by the affirmative vote of a majority of shares entitled to vote in the election
of directors. If Proposal No. 5 is approved by the stockholders, Section 5 of
the Restated Certificate of Incorporation will be amended to provide that
directors may only be removed for cause and by the affirmative vote of at least
66 2/3% of the shares entitled to vote in the election of directors.
The Board of Directors recognizes that hostile acquirors often attempt
to gain control of public companies by acquiring significant minority positions
with the intent of electing their own slate of directors. Although such hostile
acquirors may hold only a minority interest in the outstanding capital stock,
they may be able to obtain control of a majority of such public company's board
of directors through a proxy contest or otherwise. This proposed amendment will
preclude a third party from removing incumbent directors without cause and
simultaneously gaining control of the Board by filling, with its own nominees,
the vacancies created by removal. Proposal No. 5, however, will not prevent
stockholders from removing a director for misconduct or wrongful acts, and it
will not limit stockholders ability to elect directors on an annual basis.
Stockholders should note that certain disadvantages may result from the
approval of this Proposal No. 5. For example, if approved by the stockholders,
the proposed amendment to Section 5 of the Restated Certificate of Incorporation
will make it much more difficult for stockholders who oppose the policies of the
Board of Directors to remove directors; such stockholders will be required to
either (i) show cause and obtain the requisite super-majority vote for removal,
or (ii) wait until the next annual meeting of stockholders for the election of
directors. In addition, if this proposed amendment is adopted, early success of
a person in an attempt to take control of the Board of Directors could be
thwarted by incumbent directors by increasing the size of the Board of Directors
and appointing persons holding views consistent with incumbent directors to fill
such vacancies. This prospect could have a deterrent effect on attempts by third
parties or existing shareholders to seek control of the Board of Directors.
Proposal No. 5 is contingent upon stockholder approval of Proposal No.
4. If Proposal No. 4 is not approved, Proposal No. 5 shall be removed from
consideration by stockholders, and shares voted for Proposal No. 5 shall have no
effect.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 5.
PROPOSAL NO. 6 - AMENDMENT TO SECTION 8 OF
THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY
The Board of Directors of the Company has approved an amendment to
Section 8 of the Restated Certificate of Incorporation providing that
stockholders may make, amend or repeal By-Laws only by the affirmative vote of
at least 66 2/3% of the shares entitled to vote in the election of directors,
and has directed that such amendment be submitted to the stockholders for
approval. If Proposal No. 4 is approved by a majority of the outstanding shares
of Common Stock, Section 8 of the Restated Certificate of Incorporation shall be
amended to read as follows:
8. ADOPTION, AMENDMENT AND/OR REPEAL OF BY-LAWS. The Board of Directors
may from time to time make, alter or repeal the By-laws by a vote of the
majority of the entire Board of Directors that would be in office if no
vacancy existed, whether or not present at a meeting; PROVIDED, HOWEVER,
that any By-laws made, amended or repealed by the Board of Directors may
be amended or repealed, and any By-laws may be made, by the stockholders
of the Corporation by the affirmative vote of at least 66 2/3% of the
shares entitled to vote in the election of Directors of the Corporation.
-15-
<PAGE>
Section 8 of the Restated Certificate of Incorporation currently
provides that By-laws may be made, amended or repealed by either (i) a vote of a
majority of the Board of Directors, or (ii) a majority of the shares of stock of
the Company entitled to vote in the election of directors. If Proposal No. 6 is
approved by the stockholders, Section 8 of the Restated Certificate of
Incorporation will be amended to provide that stockholders may make, amend or
repeal By-laws only by the affirmative vote of at least 66 2/3% of the shares
entitled to vote in the election of directors. Proposal No. 6 will not affect
the ability of directors to make, amend or repeal By-laws.
Proposal No. 6 is designed to limit stockholders' ability to change the
provisions of the Corporation's By-laws without broad support from the Company's
other voting stockholders. The Board of Directors believes that such an
amendment will provide a degree of continuity and that it is in the best
interests of the Company. However, the increase in the stockholder vote required
to amend the By-laws will make it more difficult for a significant stockholder
to make changes in the By-laws, including changes designed to facilitate a
business combination or the exercise of control over the Company. The
requirement for a super-majority vote would apply to any stockholders' amendment
of the Company's By-laws at any time, whether or not related to a business
combination or the acquisition of control.
Proposal No. 6 is contingent upon stockholder approval of Proposal No.
4. If Proposal No. 4 is not approved, Proposal No. 6 shall be removed from
consideration by stockholders, and shares voted for Proposal No. 6 shall have no
effect.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 6.
PROPOSAL NO. 7 - AMENDMENT ADDING SECTION 10 TO
THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY
The Board of Directors of the Company has approved an amendment adding
Section 10 to the Restated Certificate of Incorporation providing that action to
be taken by the stockholders of the Corporation must be effected at an annual or
special stockholders' meeting and not by written consent, and has directed that
such amendment be submitted to the stockholders for approval. If Proposal No. 7
is approved by a majority of the outstanding shares of Common Stock, Section 10
will be added to the Restated Certificate of Incorporation, and shall read as
follows:
10. SHAREHOLDER ACTION. Any action required or permitted to be taken by
the stockholders of the Corporation must be effected at a duly called
annual or special meeting of such holders and may not be effected by a
consent in writing of any such holders.
Pursuant to Section 228(a) of the DGCL, unless otherwise provided in the
certificate of incorporation, any action required to be taken at an annual or
special meeting of stockholders of a corporation may be taken without a meeting
if a written consent, setting forth the action so taken, is signed by the
holders of outstanding stock having not less than the minimum number of votes
required to authorize or take such action. If Proposal No. 7 is approved by
stockholders, the Company's Restated Certificate of Incorporation will be
amended to eliminate the right of stockholders to act by written consent, and
all stockholder actions must be taken at an annual or special meeting.
Action by written consent may, in some circumstances, permit the taking
of shareholder action opposed by the Board of Directors more rapidly than would
be possible if a meeting of stockholders were required. By requiring that all
matters to be acted upon by stockholders be brought before an annual or special
meeting, Section 10 of the Restated Certificate of Incorporation will enable
management to review and evaluate any such proposals, and will provide all
stockholders with the opportunity to vote thereon. The Board of Directors
believes that it is important that it be able to give advance notice of and
consideration to any such action, and that stockholders be able to discuss at a
meeting matters which may affect their rights. However, Proposal No. 7, if
adopted, will prohibit stockholders who oppose the policies of the board of
directors from taking action by written consent, and will require that any such
action be taken at a duly called meeting of the stockholders.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 7.
-16-
<PAGE>
PROPOSAL NO. 8 - INCREASE IN SHARES AVAILABLE FOR GRANT
UNDER THE AMENDED AND RESTATED 1994 STOCK OPTION PLAN
The Board of Directors of the Company has approved an amendment to the
Amended and Restated 1994 Stock Option Plan (the "1994 Plan") to make an
additional 100,000 shares of Common Stock available for issuance pursuant
thereto, and has directed that such amendment to the 1994 Plan be submitted to
the stockholders for approval.
The 1994 Plan was initially adopted in 1994, and an aggregate of 219,176
shares of Common Stock were reserved for issuance pursuant thereto. The 1994
Plan was then amended and restated in 1996, and an additional 200,000 shares of
Common Stock were reserved for issuance pursuant thereto, for a total of 419,176
shares. If Proposal No. 8 is approved by the stockholders, an aggregate of
519,176 shares will be reserved for issuance under the 1994 Plan.
As of April 16, 1997, there were 115,876 shares of Common Stock available
for issuance under the 1994 Plan. In the opinion of the Board of Directors, it
is appropriate to consider amending the 1994 Plan to increase such number of
shares available for issuance. Accordingly, the Board of Directors has approved
an amendment to the 1994 Plan to make an additional 100,000 shares available for
issuance, and has directed that such amendment be submitted to the stockholders
of the Company for approval.
The following table sets forth the stock options granted to the persons
set forth below pursuant to the 1994 Plan as bonuses for fiscal 1997.
Non-executive directors are not eligible to participate in the 1994 Plan.
NEW PLAN BENEFITS
Amended and Restated 1994 Stock Option Plan
NAME AND POSITION NUMBER OF UNITS
----------------- ---------------
Armand Shapiro
Chairman of the Board and Chief Executive Officer 16,500
Jack E. Lewis
President and Chief Operating Officer 13,500
Jane L. Arbuthnot
Chief Financial Officer and Secretary 5,000
David S. Hensley
Vice President-General Merchandise Manager 5,000
Dennis R. Dye
Vice President-Chief Information Officer 5,000
Executive Group 50,000
17
<PAGE>
The 1994 Plan is administered by the Company's Compensation Committee
which is comprised of directors who are not eligible to participate in the 1994
Plan. All named executive officers and other key employees of the Company or any
subsidiary of the Company are eligible for selection to participate in the 1994
Plan. Directors of the Company who are not regular employees of the Company are
not eligible to participate in the 1994 Plan. Each option granted under the 1994
Plan shall have a term selected by the Compensation Committee.
No incentive or non-qualified stock option is exercisable more than thirty
days from the date of the optionee's termination of employment with the Company
for any reason other than death. If such termination of employment is due to the
death of the employee, the optionee's estate or the beneficiaries thereof shall
be entitled to exercise the option for a period of one year from the date of the
optionee's death.
In the case of incentive stock options, the purchase price payable upon
the exercise of an option is at least equal to the fair market value of the
stock on the date the option is granted. The exercise price of a non-qualified
stock option need not be equal to the fair market value of the stock at the date
of grant, but may be granted with an exercise price as the Compensation
Committee may determine. Additionally, the grant of incentive stock options to
an employee owning over 10% of the voting stock of the Company must be at an
exercise price of not less than 110% of the fair market value of the stock on
the date of grant.
Grants of incentive or non-qualified stock options to the named executive
officers shall be made at the fair market value of the Common Stock on the date
of grant, and the Company intends for such options to be performance based
options which are granted by the Compensation Committee.
The 1994 Plan may be amended by the Board of Directors, although certain
amendments would require stockholder approval. The 1994 Plan will terminate in
April 2004, unless earlier terminated by the Board.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 8
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<PAGE>
PROPOSAL NO. 9 - AMENDMENT OF EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of the Company has approved an amendment to
Section 4 of the Garden Ridge Corporation Stock Purchase Plan (the "Purchase
Plan") reducing the eligibility requirements for participation in the Purchase
Plan from two (2) years employment with the Company to one (1) year of
employment, and has directed that such amendment be submitted to the
stockholders for approval. If Proposal No. 9 is approved by the stockholders,
Section 4 of the Purchase Plan shall be amended to read as follows:
4. ELIGIBILITY. No right to purchase shares of Common Stock shall be
granted hereunder to a person who is not an employee of Garden Ridge or
a subsidiary corporation or parent corporation now existing or hereafter
formed or acquired. As used in the Plan, the terms "parent corporation"
and "subsidiary corporation" shall have the meanings respectively given
to such terms in Sections 424(e) and 424(f) of the Code. Each Offering
shall be made to all employees of Garden Ridge and/or all employees of
such parent and/or subsidiary corporations as are designated by the
Committee, excluding: (i) employees whose customary employment is 20
hours or less per week or not more than five months in any calendar
year; (ii) employees who have been employed less than one year as of the
effective date of an Offering hereunder; and (iii) any employee who,
immediately after the grant of a right to purchase shares pursuant to an
Offering, owns capital stock possessing 5% or more of the total combined
voting power or value of all classes of stock of Garden Ridge (in
determining stock ownership of an individual, the rules of Section
424(d) of the Code shall be applied; shares that the employee may
purchase under outstanding rights of purchase and options shall be
treated as stock owned by him or her; and the Committee and the
Administrator may rely on representations of fact made to them by the
employee and believed by them to be true). Hereinafter, "Eligible
Employee" refers to employees who meet the eligibility criteria of this
Section 4 with respect to the Offering in question.
Section 4 of the Purchase Plan currently excludes employees who have
been employed by the Company for less than two years from participation in an
offering of Common Stock under the Purchase Plan. Proposal No. 9, if approved by
the stockholders, will reduce such eligibility requirement to one year
employment with the Company, but will have no other effect on the Purchase Plan,
including the other restrictions on participation set forth therein. There are
currently 408 employees eligible for participation in the Purchase Plan, and if
Proposal No. 9 is approved by the stockholders, an additional 797 employees will
become eligible for participation.
The purpose of the Purchase Plan is to provide the Company's employees
with a strong incentive for individual activity and contribution and to assure
the future growth of the Company by enabling such employees to acquire shares of
the Company's Common Stock. The Board of Directors believes that an amendment to
Section 4 of the Purchase Plan expanding the number of eligible employees will
benefit the Company by providing such incentives to additional full-time
employees.
The Purchase Plan is administered by the Compensation Committee. The
Compensation Committee has full authority to interpret and apply the terms of
the Purchase Plan, including the power to determine: (i) when each offering of
rights to purchase shares of Common Stock ("Offering") shall be made pursuant to
the Purchase Plan; (ii) the duration of each Offering (the "Purchase Period");
(iii) the date on which the Purchase Period for each Offering shall begin and
end; (iv) the total number of shares subject to each Offering; and (v) the
purchase price of shares subject to each Offering.
The Company maintains a payroll deduction account for each participating
employee. With respect to any Offering made under the Purchase Plan, an eligible
employee may authorize a payroll deduction of any whole percentage, up to a
maximum of ten percent, of the compensation he or she receives during the
Purchase Period; provided, however, that no employee may purchase shares of
Common Stock pursuant to the Purchase Plan in excess of an annual rate of
$25,000 in fair market value. At any time prior to the end of an applicable
Purchase Period, a participating employee may decrease the amount of his or her
payroll deduction; provided, however, that no participant shall be entitled to
decrease his or her payroll deduction more than twice during any Purchase
Period.
A participating employee may at any time and for any reason withdraw the
entire cash balance then accumulated in his or her payroll deduction account and
thereby withdraw from participation in an Offering. Upon withdrawal, the
employee shall cease to be eligible to participate in the Offering pursuant to
which withdrawn funds were withheld; provided, however, any employee subject to
Section 16 of the Exchange Act, shall cease to be eligible to participate in any
Offering until six months after such withdrawal. Partial withdrawals will not be
permitted.
The purchase price for each share of Common Stock purchased pursuant to
the Purchase Plan shall not be less than an amount which is not less than 85% of
the fair market value of such share at the time that the right to purchase is
exercised.
As of the last day of the Purchase Period, the payroll deduction account
for each participating employee shall be totaled, and the employee shall
purchase, without any further action, the maximum whole number of shares of
Common Stock that can be purchased with the funds in such account. Fractional
shares shall not be issued, and the cash balance, if any, remaining in each
participating employee's payroll deduction account at the end of each Purchase
Period shall remain in such account and be available for the purchase of shares
in subsequent Offerings.
No person entitled to purchase Common Stock under the Purchase Plan shall
have any rights or privileges of a stockholder of the Company in respect of any
shares of stock that may be purchased under the Purchase Plan until certificates
representing such shares shall have been issued and delivered.
Contributions to the Purchase Plan will be included in the participating
employee's taxable income and will not be tax deductible, and an employee's
purchase of stock through the Purchase Plan will not result in the recognition
of income for tax purposes, nor will it result in an income tax deduction for
the Company. When an employee sells shares acquired under the Purchase Plan at
least two years after the date on which such shares were acquired, the employee
will recognize ordinary income equal to the lesser of (i) fifteen percent of the
fair market value of the shares on the first date of the respective Purchase
Period, or (ii) the amount by which the fair market value of the shares at the
time of sale exceeded the price paid by the employee. If the amount received
upon such a disposition exceeds the fair market value of the shares on the first
date of the respective Purchase Period, then the excess will be characterized as
a long-term capital gain. If the participating employee has incurred a loss in
connection with such a disposition, then the participating employee will realize
no ordinary income, and the loss will be a long-term capital loss. If an
employee sells shares before the expiration of the two-year holding period, the
employee will recognize ordinary income equal to the difference between the fair
market value of the shares on the date such shares were acquired and the price
paid by the employee. The employee will have a capital gain or loss to the
extent of the difference, if any, between the amount received upon sale and fair
market value of the shares on the date such shares were acquired. Such capital
gain or loss will be long-term or short-term depending on whether or not the
shares were held for more than one year from the applicable date such shares
were acquired. The Company is not entitled to a deduction for amounts taxed as
ordinary income in cases where an employee realizes ordinary income by reason of
a sale of the shares before the expiration of the two-year holding period
described above.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 9.
PROPOSAL NO. 10 - RATIFICATION AND APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Authur Andersen LLP
as its independent public accountants to audit the accounts of the Company for
the fiscal year ending January 25, 1998. Arthur Andersen LLP has advised the
Company that it will have a representative in attendance at the Annual Meeting
who will respond to appropriate questions presented.
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<PAGE>
Management recommends that the appointment of Arthur Andersen LLP as
independent public accountants of the Company for the fiscal year ending January
25, 1998, be ratified by the stockholders. Unless otherwise specified, all
properly executed proxies received by the Company will be voted for such
ratification at the meeting or any adjournment thereof.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 10.
CERTAIN TRANSACTIONS
The Company has used and will continue to use, as it deems appropriate,
Neon Electric Corporation for the design, construction and installation of its
signs. In fiscal 1997, the Company paid Neon Electric Corporation $996,024 for
its services. Sherman Hink, the spouse of Phyllis Cohen Hink, Vice President -
Human Resources and Operations of the Company, is the owner of Neon Electric
Corporation. The Company believes these services were on terms at least as
favorable to the Company as those which could have been obtained elsewhere.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year, and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and written representations from reporting persons that no Form 5
was required, the Company does not believe that any reporting person failed to
file on a timely basis reports required by Section 16(a) of the Exchange Act.
OTHER MATTERS
The Board of Directors knows of no other matters than those described
above which are likely to come before the Annual Meeting. If any other matters
properly come before the meeting, persons named in the accompanying form of
proxy intend to vote such proxy in accordance with their best judgment on such
matters.
PROPOSALS AND NOMINATIONS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock of the Company intended to be
presented at the Annual Meeting of Stockholders of the Company to be held in
1998 must be received by the Company, addressed to the Secretary of the Company,
19411 Atrium Place, Suite 170, Houston, Texas 77084, no later than January 23,
1998, to be included in the proxy statement relating to that meeting.
By Order of the Board of Directors
Jane L. Arbuthnot, SECRETARY
April 23, 1997
THE COMPANY WILL FURNISH WITHOUT CHARGE ADDITIONAL COPIES OF ITS ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JANUARY 26, 1997 TO INTERESTED
SECURITY HOLDERS ON REQUEST. THE COMPANY WILL FURNISH TO ANY SUCH PERSON ANY
EXHIBITS DESCRIBED IN THE LIST ACCOMPANYING SUCH REPORT UPON PAYMENT OF
REASONABLE FEES RELATING TO THE COMPANY'S FURNISHING SUCH EXHIBITS. REQUESTS FOR
COPIES SHOULD BE DIRECTED TO THE SECRETARY AT THE COMPANY'S ADDRESS PREVIOUSLY
SET FORTH.
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<PAGE>
PROXY GARDEN RIDGE CORPORATION PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder(s) of Garden Ridge Corporation (the "Company")
hereby appoint ARMAND SHAPIRO and JANE L.
ARBUTHNOT each of them, attorneys-in-fact and proxies of the undersigned, with
full power of substitution, to vote in respect of the undersigned's shares of
the Company's Common Stock at the Annual Meeting of Stockholders of the Company
to be held at Texas Commerce Tower, 600 Travis, 25th Floor Conference Room,
Houston, Texas 77002, at 9:00 a.m., Houston time, on Tuesday, June 3, 1997 and
at any adjournment(s) thereof, the number of shares the undersigned would be
entitled to vote if personally present.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES SET FORTH BELOW
AND "FOR" EACH OF PROPOSALS 2, 3, 4, 5, 6, 7, 8 AND 9 BELOW.
PROPOSAL 1: ELECTION OF DIRECTORS [ ] FOR the nominees listed below
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote
FOR THE NOMINEES LISTED BELOW
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Armand Shapiro Terry S. Boyce Nolan Lehmann
Ronald Rashkow Sam J. Susser H. Whitney Wagner
Alyson Henning Ira Neimark
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PROPOSAL 2: TO AMEND SECTION 4 OF THE COMPANY'S RESTATED FOR AGAINST ABSTAIN
CERTIFICATE OF INCORPORATION TO INCREASE THE [ ] [ ] [ ]
AUTHORIZED SHARES OF COMMON STOCK
PROPOSAL 3: TO AMEND SECTION 4 OF THE COMPANY'S RESTATED FOR AGAINST ABSTAIN
CERTIFICATE OF INCORPORATION TO INCREASE THE [ ] [ ] [ ]
AUTHORIZED SHARES OF PREFERRED STOCK
PROPOSAL 4: TO AMEND SECTION 9 OF THE COMPANY'S RESTATED FOR AGAINST ABSTAIN
CERTIFICATE OF INCORPORATION TO PROVIDE THAT [ ] [ ] [ ]
SUCH RESTATED CERTIFICATE OF INCORPORATION MAY
ONLY BE AMENDED BY A SUPER-MAJORITY VOTE OF
THE STOCKHOLDERS
PROPOSAL 5: TO AMEND SECTION 5 OF THE COMPANY'S RESTATED FOR AGAINST ABSTAIN
CERTIFICATE OF INCORPORATION TO PROVIDE THAT [ ] [ ] [ ]
DIRECTORS MAY BE REMOVED ONLY FOR CAUSE AND ONLY
BY A SUPER-MAJORITY VOTE OF THE STOCKHOLDERS
PROPOSAL 6: TO AMEND SECTION 8 OF THE COMPANY'S RESTATED FOR AGAINST ABSTAIN
CERTIFICATE OF INCORPORATION TO PROVIDE THAT [ ] [ ] [ ]
STOCKHOLDERS MAY MAKE, AMEND, OR REPEAL BY-LAWS
ONLY BY A SUPER-MAJORITY VOTE
PROPOSAL 7: TO ADD A NEW SECTION 10 TO THE COMPANY'S RESTATED FOR AGAINST ABSTAIN
CERTIFICATE OF INCORPORATION TO PROHIBIT ACTIONS [ ] [ ] [ ]
BY WRITTEN CONSENT OF THE STOCKHOLDERS
PROPOSAL 8: TO AMEND THE AMENDED AND RESTATED 1994 STOCK OPTION FOR AGAINST ABSTAIN
PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR [ ] [ ] [ ]
GRANT THEREUNDER BY 100,000 SHARES
PROPOSAL 9: TO AMEND THE ELIGIBILITY REQUIREMENTS FOR FOR AGAINST ABSTAIN
PARTICIPATION IN THE EMPLOYEE STOCK PURCHASE PLAN [ ] [ ] [ ]
PROPOSAL 10:TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP FOR AGAINST ABSTAIN
AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS [ ] [ ] [ ]
FOR THE FISCAL YEAR ENDING JANUARY 25, 1998
</TABLE>
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder(s). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" THE DIRECTOR NOMINEES SET FORTH ON THE REVERSE SIDE AND EACH
OF PROPOSALS 2, 3, 4, 5, 6, 7, 8 AND 9. All prior proxies are hereby revoked.
____________________________________________________
Signature(s)
Dated _________________________________________, 1997
(PLEASE SIGN EXACTLY AS YOUR NAME APPEARS
HEREON. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC., GIVE
FULL TITLE AS SUCH. FOR JOINT ACCOUNTS, EACH
JOINT OWNER SHOULD SIGN.)
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY THE PROXY CARD USING THE
ENCLOSED ENVELOPE.
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