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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended: August 1, 1999
Commission File Number: 0-24442
GARDEN RIDGE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3671679
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19411 Atrium Place, Suite 170, Houston, Texas 77084
(Address of principal executive offices) (Zip Code)
(281) 579-7901
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT SEPTEMBER 13, 1999
- ------------------------------- ---------------------------------
Common Stock, $.01 Par Value 17,100,536 shares
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<PAGE>
GARDEN RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JANUARY 31, AUGUST 1,
1999 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................................................... $ 35,882 $ 9,298
Accounts receivable ..................................................................... 2,783 3,497
Inventories ............................................................................. 68,009 92,327
Prepaid expenses and other .............................................................. 5,157 6,689
------------ ------------
Total current assets ............................................................... 111,831 111,811
PROPERTY AND EQUIPMENT, at cost:
Leasehold improvements .................................................................. 23,770 25,370
Furniture and fixtures .................................................................. 18,760 21,157
Equipment ............................................................................... 34,731 31,304
------------ ------------
Total property and equipment ...................................................... 77,261 77,831
Less - Accumulated depreciation and amortization ........................................ (27,423) (31,556)
------------ ------------
Net property and equipment ........................................................ 49,838 46,275
OTHER ASSETS:
Intangible assets, net .................................................................. 8,855 8,548
------------ ------------
Total assets ...................................................................... $ 170,524 $ 166,634
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ........................................................................ $ 18,731 $ 28,842
Accrued liabilities ..................................................................... 7,149 12,769
Federal income taxes payable ............................................................ 6,470 --
------------ ------------
Total current liabilities ......................................................... 32,350 41,611
DEFERRED INCOME TAXES ........................................................................ 977 977
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, 18,341,950 and 18,362,978 shares issued.................................... 183 184
Paid-in capital ......................................................................... 94,026 94,124
Retained earnings ....................................................................... 43,008 35,983
Less - Treasury stock, 182,442 and 1,262,442 shares, at cost ............................ (20) (6,245)
------------ ------------
Total stockholders' equity ....................................................... 137,197 124,046
------------ ------------
Total liabilities and stockholders' equity ....................................... $ 170,524 $ 166,634
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
GARDEN RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY SIX WEEKS ENDED
------------------------------ ------------------------------
JULY 26, AUGUST 1, JULY 26, AUGUST 1,
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES ...................................................... $ 69,585 $ 91,518 $ 138,268 $ 176,053
COST OF SALES .............................................. 45,851 62,057 90,243 115,986
------------ ------------ ------------ ------------
Gross profit ......................................... 23,734 29,461 48,025 60,067
OPERATING EXPENSES:
Store operating ........................................ 20,399 28,049 40,917 53,521
General and administrative ............................. 3,060 5,427 5,659 9,716
Amortization of intangibles and deferred charges ....... 146 149 290 298
Preopening costs ....................................... 369 626 369 1,421
Asset impairment ....................................... -- 6,569 -- 6,569
------------ ------------ ------------ ------------
Total operating expenses ............................ 23,974 40,820 47,235 71,525
------------ ------------ ------------ ------------
Income (loss) from operations ....................... (240) (11,359) 790 (11,458)
INTEREST INCOME ............................................ 502 151 1,106 480
------------ ------------ ------------ ------------
Income (loss) before income taxes ................... 262 (11,208) 1,896 (10,978)
INCOME TAXES (BENEFIT) ..................................... 94 (4,035) 683 (3,953)
------------ ------------ ------------ ------------
Net income (loss) .................................. $ 168 $ (7,173) $ 1,213 $ (7,025)
============ ============ ============ ============
INCOME (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Net income (loss), basic ............................ $ .01 $ (.42) $ .07 $ (.40)
Net income (loss), diluted .......................... $ .01 $ (.42) $ .07 $ (.40)
WEIGHTED AVERAGE SHARES OUTSTANDING,
BASIC ................................................... 18,035,643 17,169,387 18,015,399 17,404,659
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING,
DILUTED ................................................. 18,625,615 17,169,387 18,632,390 17,404,659
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
GARDEN RIDGE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
-----------------------------
JULY 26, AUGUST 1,
1998 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ...................................................... $ 1,213 $ (7,025)
------------ ------------
Adjustments to reconcile net income (loss) to net cash used in operating
activities --
Depreciation and amortization of property and equipment ............. 4,078 5,979
Asset impairment .................................................... -- 6,569
Amortization of intangible assets ................................... 298 298
(Increase) decrease in assets -
Accounts receivable .............................................. (721) (714)
Inventories ...................................................... (18,666) (24,318)
Prepaid expenses and other ....................................... (1,019) 548
Increase (decrease) in liabilities -
Accounts payable ................................................. 5,114 10,111
Accrued liabilities .............................................. 888 5,620
Federal income taxes payable/receivable .......................... (5,312) (8,541)
------------ ------------
Total adjustments ........................................... (15,340) (4,448)
------------ ------------
Net cash used in operating activities ....................... (14,127) (11,473)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Marketable securities .................................................. 3,150 --
Capital expenditures ................................................... (7,334) (8,985)
Purchase of land held for sale/leaseback ............................... (2,515) --
------------ ------------
Net cash used in investing activities ............................ (6,699) (8,985)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of common stock ................................. 166 99
Net payments for repurchase of common stock ............................ -- (6,226)
Proceeds from exercise of stock options and warrants ................... 205 1
------------ ------------
Net cash provided by (used in) financing activities .............. 371 (6,126)
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS ................................... (20,455) (26,584)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............................ 44,586 35,882
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................................. $ 24,131 $ 9,298
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for --
Interest .......................................................... $ 25 $ 19
Income taxes ...................................................... 5,400 4,584
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
GARDEN RIDGE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The accompanying consolidated financial statements of Garden Ridge
Corporation and Subsidiaries (the "Company") have been prepared by the Company
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Pursuant to such regulations, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. In the opinion of the Company, all adjustments necessary for the fair
presentation of the unaudited results for the periods have been included.
Because of the seasonal nature of the Company's business, results for such
interim periods are not necessarily indicative of the results for the full year.
These interim consolidated financial statements should be read in conjunction
with the Company's Annual Report on Form 10-K for fiscal year ended January 31,
1999.
In April 1998, the AICPA issued Statement of Position 98-5 ("SOP 98-5"),
Reporting the Costs of Start-Up Activities, which requires that costs related to
start-up activities be expensed as incurred. Prior to fiscal 2000, preopening
costs were deferred and expensed in the month the store opened. The Company
adopted the provisions of SOP 98-5 in its financial statements for the first
quarter of fiscal 2000, and as a result began expensing preopening costs as
incurred. Management believes the implementation of SOP 98-5 will not have a
material effect on the Company's financial position, results of operations or
cash flows for fiscal 2000.
2. MAJOR EVENTS:
Included in the results of operations for the thirteen weeks ending August
1, 1999 were one time pretax charges totaling $10.3 million ($6.6 million after
tax). Such charges relate to a $3.0 million inventory productivity charge and a
$750,000 charge for the recruitment expense of a new Chief Executive Officer. In
addition, the Company decided in the second quarter to replace certain
proprietary management information systems with an industry standard integrated
business solution. The Company recorded a pre-tax charge of $6.6 million,
related to the estimated remaining book value of these management information
systems at the anticipated date of conversion.
3. SUBSEQUENT EVENTS:
On August 26, 1999, the Company authorized the commencement of a tender
offer to purchase up to three million shares of the Company's common stock at a
price of $7.00 per share, net to the seller. The offer expires on September 23,
1999, unless extended.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company's fiscal year ends on the last Sunday in January in each year
resulting in either a 52 or a 53-week year. References to fiscal years by date
refer to the fiscal year ending in that calendar year; for example, "fiscal
2000" refers to the fiscal year ending January 30, 2000.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated income statement
data expressed as a percentage of sales.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY SIX WEEKS ENDED
------------------------------- ------------------------------
JULY 26, AUGUST 1, JULY 26, AUGUST 1,
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales ................................................ 100.0% 100.0% 100.0% 100.0%
Cost of sales ........................................ 65.9 67.8 65.3 65.9
------------ ------------ ------------ ------------
Gross profit .................................... 34.1 32.2 34.7 34.1
Operating expenses:
Store operating ................................. 29.3 30.6 29.6 30.4
General and administrative ...................... 4.4 5.9 4.1 5.6
Amortization of intangibles and deferred charges 0.2 0.2 0.2 0.2
Preopening costs ................................ 0.5 0.7 0.2 0.8
Asset impairment ................................ -- 7.2 -- 3.7
------------ ------------ ------------ ------------
Income (loss) from operations .............. (0.3) (12.4) 0.6 (6.6)
Interest income ...................................... 0.7 0.2 0.8 0.3
Income taxes (benefit) ............................... 0.2 (4.4) 0.5 (2.3)
------------ ------------ ------------ ------------
Net income (loss) ..................... 0.2% (7.8)% 0.9% (4.0)%
============ ============ ============ ============
</TABLE>
SECOND QUARTER ENDED AUGUST 1, 1999 COMPARED TO SECOND QUARTER ENDED
JULY 26, 1998
Sales in the second quarter of fiscal 2000 increased $21.9 million, or
31.5%, to $91.5 million from $69.6 million in the second quarter of fiscal 1999.
The increase was primarily attributable to (i) the opening of two stores during
May and June of fiscal 2000 and (ii) the results from five stores opened during
the third quarter of fiscal 1999. Comparable store sales remained even with the
same period of the prior year.
Gross profit as a percentage of sales decreased to 32.2% in the second
quarter of fiscal 2000 as compared to 34.1% for the comparable period in fiscal
1999. This decrease in gross profit as a percentage of sales resulted from a
$2.2 million inventory markdown charge included as part of an overall $3.0
million inventory productivity charge recorded during the second quarter of
fiscal 2000. Excluding the markdown charge, gross profit as a percentage of
sales increased 1.0 percentage points as a result of increased product selling
margins.
6
<PAGE>
Store operating expenses increased $7.7 million, or 37.5%, in the second
quarter of fiscal 2000 primarily as a result of the aforementioned opening of
new stores and increased distribution expenses related to the opening of a new
distribution center in Charlotte, North Carolina. Store operating costs as a
percentage of sales increased to 30.6% from 29.3% in the comparable period of
fiscal 1999, primarily because of $0.8 million of store operating expenses
associated with the aforementioned inventory productivity charge and increased
distribution expenses.
General and administrative expenses increased $2.3 million, or 77.4%, to
$5.4 million in the second quarter of fiscal 2000 as compared to $3.1 million in
the second quarter of fiscal 1999. General and administrative expenses as a
percentage of sales increased in the second quarter of fiscal 2000 to 5.9% from
4.4% in the comparable period of fiscal 1999. These increases are related to
corporate personnel additions, management information systems consulting
expenses, increased depreciation costs and a $750,000 charge for the recruitment
of a new Chief Executive Officer.
Preopening expenses were $626,000 for the second quarter of fiscal 2000,
as compared to $369,000 for the second quarter of fiscal 1999, resulting from
two stores being opened during the second quarter of fiscal 2000 compared to one
store in the prior year, and the adoption of Statement of Position 98-5,
"Reporting on Costs of Start Up Activities" ("SOP 98-5").
During the second quarter of fiscal 2000, the Company decided to replace
certain proprietary management information systems with an industry standard
business solution. In connection with this decision, the Company recorded a
pretax charge of $6.6 million to record the impairment of the remaining net book
value of such management information systems at the anticipated date of
replacement.
Interest income was $151,000, or 0.2% of sales in the second quarter of
fiscal 2000, as compared to $502,000, or 0.7% of sales in the comparable period
of fiscal 1999. This decrease is due to the Company's lower amount of invested
cash balances.
Income taxes expense (benefit) was recorded at an effective tax rate of
36% during both fiscal quarters.
TWENTY SIX WEEKS ENDED AUGUST 1, 1999 COMPARED TO TWENTY SIX WEEKS ENDED
JULY 26, 1998
Sales in the first half of fiscal 2000 increased $37.8 million, or 27.3%,
to $176.1 million from $138.3 million in the first half of fiscal 1999. The
increase was primarily attributable to (i) the opening of four stores during the
first six months of fiscal 2000 and (ii) the results from five stores opened
during the third quarter of fiscal 1999. Comparable store sales declined 2% from
the same period of the prior year.
Gross profit as a percentage of sales decreased to 34.1% in the first half
of fiscal 2000, as compared to 34.7% for the comparable period in fiscal 1999.
This decrease in gross profit as a percentage of sales resulted from a $2.2
million inventory markdown charge included as part of an overall $3.0 million
inventory productivity charge recorded during the second quarter. Excluding the
markdown charge, gross profit as a percentage of sales increased 1.4 percentage
points as a result of increased product selling margins.
7
<PAGE>
Store operating expenses increased $12.6 million, or 30.8%, in the first
half of fiscal 2000 primarily as a result of the aforementioned opening of new
stores and increased distribution expenses related to the opening of a new
distribution center in Charlotte, North Carolina. Store operating costs as a
percentage of sales increased to 30.4% from 29.6% in the comparable period of
fiscal 1999, primarily because of $0.8 million of store operating expenses
associated with the aforementioned inventory productivity charge and increased
distribution expenses.
General and administrative expenses increased $4.0 million, or 71.7%, to
$9.7 million in the first half of fiscal 2000 as compared to $5.7 million in the
same period last year. As a percentage of sales, general and administrative
expenses increased to 5.5% for the first half of fiscal 2000 compared to 4.1%
for the same period last year. These increases are related to corporate
personnel additions, management information systems consulting, increased
depreciation costs and a $750,000 charge for the recruitment of a new Chief
Executive Officer.
Preopening expenses were $1.4 million for the first half of fiscal 2000,
as compared to $369,000 for the same period of fiscal 1999, resulting from four
stores being opened during the current fiscal year compared to one store in the
prior fiscal year, and the adoption of SOP 98-5.
During the second quarter of fiscal 2000, the Company decided to replace
certain proprietary management information systems with an industry standard
business solution. In connection with this decision, the Company recorded a
pretax charge of $6.6 million to record the impairment of the remaining net book
value of such management information systems at the anticipated date of
replacement.
Interest income was $480,000, or 0.3% of sales in the first half of fiscal
2000, as compared to $1.1 million, or 0.8% of sales in the same period last
year. These decreases are due to the Company's lower amount of invested cash
balances.
Income taxes expense (benefit) was recorded at an effective tax rate of
36% during both fiscal periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of working capital are its cash flows from
operations and borrowings under its line of credit. The Company had net working
capital of $70.2 million at August 1, 1999 and no borrowings under its
then-existing bank line of credit agreement. On August 24, 1999, the Company
executed its Third Amended and Restated Credit Agreement with a commercial bank.
Such agreement provides for cash borrowings or issuances of letters of credit of
up to $30.0 million through November 15, 1999 and $25.0 million thereafter.
Interest on borrowings is calculated at the Company's option at the prime rate
of the bank or its LIBOR rate plus 1.5%. Letter of credit fees are charged at
the rate of 1.5% per annum. Any and all borrowings must be repaid annually on a
day between November 15 and January 2 of each year, after which no borrowings
may occur for sixty days. Any remaining unpaid balance matures on June 30, 2001.
Proceeds from the borrowings are to be used for general corporate purposes.
Management believes the Company has sufficient working capital, cash flow from
operating activities and available unused credit capacity to sustain current
growth plans.
8
<PAGE>
During the first quarter of fiscal 2000, the Company's board of directors
authorized the repurchase of up to one million shares of the Company's common
stock. In March 1999, the Company repurchased all one million shares at a cost
of approximately $5.7 million.
On July 13, 1999, the Company announced that its board of directors had
authorized the repurchase of up to an additional three million shares of the
Company's common stock on the open market. Through August 1, 1999, the Company
had repurchased 90,000 shares of its common stock under this repurchase program
at a cost of approximately $556,000.
On August 25, 1999, the Company filed with the Securities and Exchange
Commission a tender offer to repurchase for cash up to three million shares of
its common stock at a purchase price of $7.00 per share. Such tender offer
supercedes the aforementioned July 13, 1999 open market offer. The tender offer
is currently scheduled to expire on September 23, 1999.
All of the shares repurchased pursuant to the above will be held in
treasury for future use.
YEAR 2000 ISSUES
As part of a management information systems upgrade undertaken by the
Company over the last several years, the Company has installed new computer
systems that are Year 2000 compliant. The Company has also accelerated
approximately $2 million in costs to fiscal 2000 to replace or upgrade certain
previously identified management information systems that were not Year 2000
compliant. In addition, the Company also initiated and, in August 1999
completed, a general assessment and testing of the impact of Year 2000 date
related issues. All significant Year 2000 date related issues identified in this
assessment are anticipated to be resolved by October 1999.
The amount charged to expense in fiscal year 1999, as well as the amounts
expected to be charged to expense related to Year 2000 testing and modifications
in fiscal 2000, have not been and are not expected to be material to the
Company's financial position, results of operations or cash flow.
In evaluating the risks to the Company, the most serious risk would be
interruption in the ability to communicate and interface with suppliers.
Management is in the process of surveying the Company's suppliers and believes
that in most cases suppliers will be in compliance or have plans to be
compliant. The Company believes that in an emergency it could revert to the use
of manual systems that do not rely on computers and could perform the minimum
functions required to provide information reporting to maintain satisfactory
control of business. Should the Company have to utilize manual systems it is
uncertain that it could maintain the same level of operations, and this could
have a material adverse impact on the business. The Company intends to maintain
constant surveillance of this situation and will develop such contingency plans
as required by the changing environment.
9
<PAGE>
PART II - OTHER INFORMATION
Items 1, 2, 3 and 5 are not applicable and have been omitted.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on June 10, 1999. At such
meeting, seven directors were elected to serve as directors of the Company for
one year. In addition, shareholders approved an amendment to the Amended and
Restated 1994 Stock Option Plan and ratified the appointment of Arthur Andersen
LLP as the Company's independent public accountants for the fiscal year ending
January 30, 2000.
<TABLE>
<CAPTION>
VOTES AGAINST
OR WITHHELD VOTES BROKER
PROPOSAL VOTES FOR AUTHORITY ABSTAINED NON-VOTES
-------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
1. Election of Directors:
Armand Shapiro ............ 15,386,322 186,916 0 0
Terry S. Boyce ............ 15,385,122 188,116 0 0
Alyson Henning ............ 15,385,322 187,916 0 0
Ira Neimark ............... 15,383,562 189,676 0 0
Sam J. Susser ............. 15,385,262 187,976 0 0
Barbara S. Tapp ........... 15,384,222 189,016 0 0
H. Whitney Wagner ......... 15,385,222 188,016 0 0
2. Approval, adoption and
ratification of the amendment
to the Amended and Restated
1994 Stock Option Plan to
increase the number of shares
by 1,200,000 ................ 11,895,194 882,524 16,770 2,778,750
3. Approval and ratification of
the appointment of Arthur
Andersen LLP as the
Company's independent
public accountants for the
fiscal year ending January
30, 2000 ..................... 15,544,711 14,372 14,155 0
</TABLE>
10
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following exhibits are filed with this report:
3 - Amended and Restated Bylaws
10.1 - Amended and Restated 1994 Stock Option Plan
10.2 - Amended and Restated 1996 Non-Employee Director Stock
Option Plan
10.3 - Employment Agreement dated June 1, 1999 between Garden
Ridge Management, Inc. and Armand Shapiro
10.4 - Employment Agreement dated June 7, 1999 between Garden
Ridge, L.P. and Paul T. Davies
27 - Financial Data Schedule
(b) REPORTS ON FORM 8-K
The Company filed no reports on Form 8-K during the period
covered by this report.
11
<PAGE>
GARDEN RIDGE CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed, on its behalf by the
undersigned thereunto duly authorized.
Date: September 13, 1999 GARDEN RIDGE CORPORATION
(Registrant)
By: /s/ JANE L. ARBUTHNOT
---------------------------------------
Jane L. Arbuthnot
Chief Financial Officer
12
<PAGE>
EXHIBIT INDEX
SEQUENTIAL
EXHIBIT NUMBER DESCRIPTION PAGE NUMBER
- --------------- ----------- -----------
3 Amended and Restated Bylaws
10.1 Amended and Restated 1994 Stock Option Plan
10.2 Amended and Restated 1996 Non-Employee Director
Stock Option Plan
10.3 Employment Agreement dated June 1, 1999 between
Garden Ridge Management, Inc. and Armand Shapiro
10.4 Employment Agreement dated June 7, 1999 between
Garden Ridge, L.P. and Paul T. Davies
27 Financial Data Schedule
13
EXHIBIT 3
AMENDED AND RESTATED BY-LAWS
of
GARDEN RIDGE CORPORATION
(A Delaware Corporation)
---------------------------
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise requires, the term:
1.1 "Assistant Secretary" means as Assistant Secretary of the Corporation.
1.2 "Assistant Treasurer" means an Assistant Treasurer of the Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "By-laws means the initial by-laws of the Corporation, as amended from
time to time.
1.5 "Certificate of Incorporation" means the initial certificate of
incorporation of the Corporation, as amended, supplemented or restated from time
to time.
1.6 "Chairman" means the Chairman of the Board of Directors of the
Corporation.
1.7 "Corporation" means Garden Ridge Corporation.
1.8 "Directors" means directors of the Corporation.
1.9 "Entire Board" means all directors of the Corporation in office,
whether or not present at a meeting of the Board, but disregarding vacancies.
-1-
<PAGE>
1.10 "General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended from time to time.
1.11 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.12 "President" means the President of the Corporation.
1.13 "Secretary" means the Secretary of the Corporation.
1.14 "Stockholders" means stockholders of the Corporation.
1.15 "Treasurer" means the Treasurer of the Corporation.
1.16 "Vice President" means a Vice President of the Corporation.
ARTICLE 2
STOCKHOLDERS
2.1 PLACE OF MEETINGS. Every meeting of stockholders shall be held at the
office of the Corporation or at such other place within or without the State of
Delaware as shall be specified or fixed in the notice of such meeting or in the
waiver of notice thereof.
2.2 ANNUAL MEETING. A meeting of stockholders shall be held annually for
the election of Directors and the transaction of other business at such hour and
on such business day in November or as may be determined by the Board and
designated in the notice of meeting.
2.3 DEFERRED MEETING FOR ELECTION OF DIRECTORS, ETC. If the annual meeting
of stockholders for the election of Directors and the transaction of other
business is not held within
-2-
<PAGE>
the months specified in Section 2.2 hereof, the Board shall call a meeting of
stockholders for the election of Directors and the transaction of other business
as soon thereafter as convenient.
2.4 OTHER SPECIAL MEETINGS. A special meeting of stockholders (other than
a special meeting for the election of Directors), unless otherwise prescribed by
statute, may be called at any time by the Board or by the President or by the
Secretary. At any special meeting of stockholders only such business may be
transacted as is related to the purpose or purposes of such meeting set forth in
the notice thereof given pursuant to Section 2.6 hereof or in any waiver of
notice thereof given pursuant to Section 2.7 hereof.
2.5 FIXING RECORD DATE. For the purpose of (a) determining the
stockholders entitled (i) to notice of or to vote at any meeting of stockholders
or any adjournment thereof, (ii) to express consent to corporate action in
writing without a meeting, or (iii) to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect to any change, conversion or exchange of stock; or (b) any other lawful
action, the Board may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date was adopted by the Board
and which record date shall not be (x) in the case of clause (a)(i) above, more
than 60 nor less than 10 days before the date of such meeting, (y) in the case
of clause (a)(ii) above, more than 10 days after the date upon which the
resolution fixing the record date was adopted by the Board, and (z) in the case
of clause (a)(iii) or (b) above, more than 60 days prior to such action. If no
such record date is fixed:
2.5.1 the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the
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day on which notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held;
2.5.2 the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no
prior action by the Board is required under the General Corporation Law,
shall be the first day on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation by
delivery to its registered office in the State of Delaware, its principal
place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded; and when prior action by the Board is required under the General
Corporation Law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the
close of business on the date on which the Board adopts the resolution
taking such prior action; and
2.5.3 the record date for determining stockholders for any purpose
other than those specified in Sections 2.5.1 and 2.5.2 shall be at the
close of business on the day on which the Board adopts the resolution
relating thereto.
When a determination of stockholders entitled to notice of or to vote at any
meeting of stockholders has been made a provided in this Section 2.5, such
determination shall apply to any adjournment thereof unless the Board fixes a
new record date for the adjourned meeting. Delivery made to the Corporation's
registered office in accordance with Section 2.5.2 shall be by hand or by
certified or registered mail, return receipt requested.
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2.6 NOTICE OF MEETINGS OF STOCKHOLDERS. Except as otherwise provided in
Section 2.5 and 2.7 hereof, whenever under the provisions of any statute, the
Certificate of Incorporation or these By-laws, stockholders are required or
permitted to take any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Unless otherwise
provided by any statute, the Certificate of Incorporation or these By-laws, a
copy of the notice of any meeting shall be given, personally or by mail, not
less than ten nor more than sixty days before the date of the meeting, to each
stockholder entitled to notice of or to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
with postage prepaid, directed to the stockholder at his or her address as it
appears on the records of the Corporation. An affidavit of the Secretary or an
Assistant Secretary or of the transfer agent of the Corporation that the notice
required by this Section 2.6 has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. When a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken, and at the adjourned meeting any business may be transacted that might
have been transacted at the meeting as originally called. If, however, the
adjournment is for more than thirty days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
2.7 WAIVERS OF NOTICE. Whenever the giving of any notice is required by
statute, the Certificate of Incorporation or these By-laws, a waiver thereof, in
writing, signed by the
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stockholder or stockholders entitled to said notice, whether before or after the
event as to which such notice is required, shall be deemed equivalent to notice.
Attendance by a stockholder at a meeting shall constitute a waiver or notice of
such meeting except when the stockholder attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business on the ground that the meeting has not been lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice unless no required by statute, the Certificate of Incorporation
or these By-laws.
2.8 LIST OF STOCKHOLDERS. The Secretary shall prepare and make, or cause
to be prepared and made, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, the stockholder's agent or attorney, at the
stockholder's expense, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. The Corporation shall maintain the
stockholder list in written form or in another form capable of conversion into
written form within a reasonable time. Upon the willful neglect or refusal of
the Directors to produce such a list at any meeting for the election of
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Directors, they shall be ineligible for election to any office at such meeting.
The stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list of stockholders or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
2.9 QUORUM OF STOCKHOLDERS; ADJOURNMENT. Except as otherwise provided by
any statute, the Certificate of Incorporation or these By-laws, the holders of
one-third of all outstanding shares of stock entitled to vote at any meeting of
stockholders, present in person or represented by proxy, shall constitute a
quorum for the transaction of any business at such meeting. When a quorum is
once present to organize a meeting of stockholders, it is not broken by the
subsequent withdrawal of any stockholders. The holders of a majority of the
shares of stock present in person or represented by proxy at any meeting of
stockholders, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. Shares of its own
stock belonging to the Corporation or to another corporation, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held, directly or indirectly, by the Corporation, shall neither
be entitled to vote nor be counted for quorum purposes; PROVIDED, HOWEVER, that
the foregoing shall not limit the right of the Corporation to vote stock
including but not limited to its own stock, held by it in a fiduciary capacity.
2.10 VOTING; PROXIES. Unless otherwise provided in the Certificate of
Incorporation, every stockholder of record shall be entitled at every meeting of
stockholders to one vote for each share of capital stock standing in his or her
name on the record of stockholders determined in
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accordance with Section 2.5 hereof. If the Certificate of Incorporation provides
for more or less than one vote for any share on any matter, each reference in
the By-laws or the General Corporation Law to a majority or other proportion of
stock shall refer to such majority or other proportion of the votes of such
stock. The provisions of Section 212 and 217 of the General Corporation Law
shall apply in determining whether any shares of capital stock may be voted and
the persons, if any, entitled to vote such shares; but the Corporation shall be
protected in assuming that the persons in whose names shares of capital stock
stand on the stock ledger of the Corporation are entitled to vote such shares.
Holders of redeemable shares of stock are not entitled to vote after the notice
of redemption is mailed to such holders and a sum sufficient to redeem the stock
has been deposited with a bank, trust company, or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares of stock. At any meeting of stockholders (at which a
quorum was present to organize the meeting), all matters, except as otherwise
provided by statute or by the Certificate or Incorporation or by these By-laws,
shall be decided by a majority of the votes cast at such meeting by the holders
of shares present in person or represented by proxy and entitled to vote
thereon, whether or not a quorum is present when the vote is taken. All
elections of Directors shall be by written ballot unless otherwise provided in
the Certificate of Incorporation. In voting on any other question on which a
vote by ballot is required by law or is demanded by any stockholder entitled to
vote, the voting shall be by ballot. Each ballot shall be signed by the
stockholder voting or the stockholder's proxy and shall state the number of
shares voted. On all other questions, the voting may be VIVA VOCE. Each
stockholder entitled to vote at a meeting of stockholders or to express
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consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by proxy. The
validity and enforceability of any proxy shall be determined in accordance with
Section 212 of the General Corporation Law. A stockholder may revoke any proxy
that is not irrevocable by attending the meeting and voting in person or by
filing an instrument in writing revoking the proxy or by delivering a proxy in
accordance with applicable law bearing a later date to the Secretary.
2.11 VOTING PROCEDURES AND INSPECTORS OF ELECTION AT MEETINGS OF
STOCKHOLDERS. The Board, in advance of any meeting of stockholders, may appoint
one or more inspectors to act at the meeting and make a written report thereof.
The Board may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at a
meeting, the person presiding at the meeting may appoint, and on the request of
any stockholder entitled to vote thereat shall appoint, one or more inspectors
to act at the meeting. Each inspector, before entering upon the discharge of his
or her duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best or his or her
ability. The inspectors shall (a) ascertain the number of shares outstanding and
the voting power of each, (b) determine the shares represented at the meeting
and the validity of proxies and ballots, (c) count all votes and ballots, (d)
determine and retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (e) certify their
determination of the number of shares represented at the meeting and their count
of all votes and ballots. The inspectors may appoint or retain other persons or
entities to assist the inspectors in the performance of their duties. Unless
otherwise provided by the Board, the date and time of
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the opening and the closing of the polls for each matter upon which the
stockholder will vote at a meeting shall be determined by the person presiding
at the meeting and shall be announced at the meeting. No ballot, proxies or
votes, or any revocation thereof or change thereto, shall be accepted by the
inspectors after the closing of the polls unless the Court of Chancery of the
State of Delaware upon application by a stockholder shall determine otherwise.
2.12 ORGANIZATION. At each meeting of stockholders, the Chairman, or in
the absence of the Chairman the President, or in the absence of the President a
Vice President, and in case more than one Vice President shall be present, that
Vice President designated by the Board (or in the absence of any such
designation, the most senior Vice President, based on age, present), shall act
as chairman of the meeting. The Secretary, or in his or her absence one of the
Assistant Secretaries, shall act as secretary of the meeting. In case none of
the officers above designated to act as chairman or secretary of the meeting,
respectively, shall be present, a chairman or a secretary of the meeting, as the
case may be, shall be chosen by a majority of the votes cast at such meeting by
the holders of shares of capital stock present in person or represented by proxy
and entitled to vote at the meeting.
2.13 ORDER OF BUSINESS. The order of business at all meetings of
stockholders shall be as determined by the chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a majority of the votes case at such meeting by the holders of
shares of capital stock present in person or represented by proxy and entitled
to vote at the meeting.
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2.14 NOTICE OF STOCKHOLDER NOMINATIONS OF DIRECTORS. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as Directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of the stockholders by or
at the direction of the Board of Directors, by any nominating committee or
person appointed by the Board of Directors or by any stockholder of the
Corporation entitled to vote for the election of Directors at the meeting who
complies with the notice procedures set forth in this Section 2.14. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than fifty (50) days nor more than seventy-five (75) days prior to the
meeting; provided, however, that in the event that less than sixty-five (65)
days' notice or prior public disclosure of the date of the meeting is given or
made to shareholders, notice by the shareholder to be timely must be so received
not later than the close of business on the fifteenth (15th) day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made. The stockholder's notice to the Secretary shall set forth
(a) as to each proposed nominee for election or reelection as a Director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and number of
shares of the capital stock of the Corporation which are beneficially owned by
the person and (iv) any other information relating to the person that is
required to be disclosed in solicitations for proxies for election of Directors
pursuant to Schedule 14A under the Securities Exchange Act of 1934, as amended;
and
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(b) as to the stockholder giving the notice (i) the name and record address of
the stockholder and (ii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the stockholder. The Corporation may
require any proposed nominee to furnish such other information as may reasonably
be required by the Corporation to determine the eligibility of such proposed
nominee to serve as Director of the Corporation. No person shall be eligible for
election as a Director of the Corporation unless nominated in accordance with
the procedures set forth herein. The chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he or she should so determine,
he or she shall so declare to the meeting and the defective nomination shall be
disregarded.
2.15 NOTICE OF STOCKHOLDER PROPOSALS AND OTHER MATTERS. At an annual
meeting of the stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before an
annual meeting, business must be specified in the notice of the meeting (or any
supplement) given by or at the direction of the Board of Directors, otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or otherwise properly brought before the meeting by a stockholder. In
addition to any other applicable requirements, for business to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of the Corporation. To
be timely, a stockholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation, not less than fifty (50)
days nor more than seventy-five (75) days prior to the meeting; provided,
however, that in the event that
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less than sixty-five (65) days' notice or prior public disclosure of the date of
the meeting is given or made to the stockholders, notice by the stockholder to
be timely must be so received not later than the close of business on the
fifteenth (15th) day following the day on which such notice of the date of the
annual meeting or such public disclosure was made. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and record address of the stockholder
proposing such business, (c) the class and number of shares of the Corporation
which are beneficially owned by the stockholder, and (d) any material interest
of the stockholder in such business. Notwithstanding anything in the By-laws to
the contrary, no business shall be conducted at the annual meeting except in
accordance with the procedures set forth in this Section 2.15 The chairman of an
annual meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting in accordance with the
provisions of this Section 2.15, and if he or she should so determine, he or she
shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
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ARTICLE 3
DIRECTORS
3.1 GENERAL POWERS. Except as otherwise provided in the Certificate of
Incorporation, the business and affairs of the Corporation shall be managed by
or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or these
By-laws or applicable laws, as it may deem proper for the conduct of its meeting
and the management of the Corporation. In addition to the powers expressly
conferred by these By-laws, the Board may exercise all powers and perform all
acts that are not required by these By-laws or the Certificate of Incorporation
or by statute to be exercised and performed by the stockholders.
3.2 NUMBER; QUALIFICATION; TERM OF OFFICE. The Board shall consist of one
or more members. The number of Directors may only be altered by an affirmative
vote of the majority of the Board. Directors need not be stockholders. Each
Director shall hold office until a successor is elected and qualified or until
the Director's death, resignation or removal.
3.3 ELECTION. Directors shall, except as otherwise required by statute or
by the Certificate of Incorporation, be elected by a plurality of the votes cast
at a meeting of stockholders by the holders of shares entitled to vote in the
election.
3.4 NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Unless otherwise provided
in the Certificate of Incorporation, newly created directorships resulting from
an increase in the number of Directors and vacancies occurring in the Board for
any other reason may only be filled by the affirmative votes of a majority of
the entire Board, although less than a quorum, or by a sole
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remaining Director. A Director elected to fill a vacancy shall be elected to
hold office until a successor is elected and qualified, or until the Director's
earlier death, resignation or removal.
3.5 RESIGNATION. Any Director may resign at any time by written notice to
the Corporation. Such resignation shall take effect at the time therein
specified, and, unless otherwise specified in such resignation, the acceptance
of such resignation shall not be necessary to make it effective.
3.6 REMOVAL. Any Director, or the entire Board of Directors, may be
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of at least 66 2/3% of the shares entitled to vote in the
election of Directors.
3.7 COMPENSATION. Each Director, in consideration of his or her service as
such, shall be entitled to receive from the Corporation such amount per annum or
such fees for attendance at Directors' meetings, or both, as the Board may from
time to time determine, together with reimbursement for the reasonable
out-of-pocket expenses, if any, incurred by such Director in connection with the
performance of his or her duties. Each Director who shall serve as a member of
any committee of Directors in consideration of serving as such shall be entitled
to such additional amount per annum or such fees for attendance at committee
meetings, or both, as the Board may from time to time determine, together with
reimbursement for the reasonable out-of-pocket expenses, if any, incurred by
such Director in the performance of his or her duties. Nothing contained in this
Section 3.7 shall preclude any Director from serving the Corporation or its
subsidiaries in any other capacity and receiving prop compensation therefor.
3.8 TIMES AND PLACES OF MEETINGS. The Board may hold meetings, both
regular and special,
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either within or without the State of Delaware. The times and places for holding
meetings of the Board may be fixed from time to time by resolution of the Board
or (unless contrary to a resolution of the Board) in the notice of the meeting.
3.9 ANNUAL MEETINGS. On the day when and at the place where the annual
meeting of stockholders for the election of Directors is held, and as soon as
practicable thereafter, the Board may hold its annual meeting, without notice of
such meeting, for the purposes of organization, the election of officers and the
transaction of other business. The annual meeting of the Board may be held at
any other time and place specified in a notice given as provided in Section 3.11
hereof for special meetings of the Board or in a waiver of notice thereof.
3.10 REGULAR MEETINGS. Regular meetings of the Board may be held without
notice at such times and at such places as shall from time to time be determined
by the Board.
3.11 SPECIAL MEETINGS. Special meetings of the Board may be called by the
Chairman, the President or the Secretary or by any two or more Directors then
serving on at least one day's notice to each Director given by one of the means
specified in Section 3.14 hereof other than by mail, or on at least three days'
notice if given by mail. Special meetings shall be called by the Chairman,
President or Secretary in like manner and on like notice on the written request
of any two or more of the Directors then serving.
3.12 TELEPHONE MEETINGS. Directors or members of any committee designated
by the Board may participate in a meeting of the Board or of such committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the
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meeting can hear each other, and participation in a meeting pursuant to this
Section 3.12 shall constitute presence in person at such meeting.
3.13 ADJOURNED MEETINGS. A majority of the Directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum is
present, may adjourn such meeting to another time and place. At least one day's
notice of any adjourned meeting of the Board shall be given to each Director
whether or not present at the time of the adjournment, if such notice shall be
given by one of the means specified in Section 3.14 hereof other than by mail,
or at least three days' notice if by mail. Any business may be transacted at an
adjourned meeting that might have been transacted at the meeting as originally
called.
3.14 NOTICE PROCEDURE. Subject to Sections 3.11 and 3.17 hereof, whenever,
under the provisions of any statue, the Certificate of Incorporation or these
By-laws, notice is required to be given to any Director, such notice shall be
deemed given effectively if given in person or by telephone, by mail addressed
to such Director at such Director's address as it appears on the records of the
Corporation, with postage thereon prepaid, or by telegram, telex, telecopy or
similar means addressed as aforesaid.
3.15 WAIVER OF NOTICE. Whenever the giving of any notice is required by
statue, the Certificate of Incorporation or these By-laws, a waiver thereof, in
writing, signed by the person or persons entitled to said notice, whether before
or after the event as to which such notice is required, shall be deemed
equivalent to notice. Attendance by a person at a meeting shall constitute a
waiver of notice of such meeting except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business
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on the ground that the meeting has not been lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the Directors or a committee of Directors need be specified in any
written waiver of notice unless so required by statute, the Certificate of
Incorporation or these By-laws.
3.16 ORGANIZATION. At each meeting of the Board, the Chairman, or in the
absence of the Chairman the President, or in the absence of the President a
chairman chosen by a majority of the Directors present, shall preside. The
Secretary shall act as secretary at each meeting of the Board. In case the
Secretary shall be absent from any meeting of the Board, an Assistant Secretary
shall perform the duties of secretary at such meeting; and in the absence from
any such meeting of the Secretary and all Assistant Secretaries, the person
presiding at the meeting may appoint any person to act as secretary of the
meeting.
3.17 QUORUM OF DIRECTORS. The presence in person of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business at any meeting of the Board, but a majority of a smaller
number may adjourn any such meeting to a later date.
3.18 ACTION BY MAJORITY VOTE. Except as otherwise expressly required by
statute, the Certificate of Incorporation or these By-laws, the act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board.
3.19 ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if all Directors or members
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of such committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
3.20 CHANGE OF CONTROL TRANSACTIONS. In the event the Corporation is the
target of an unsolicited tender offer, proxy fight or other proposed transaction
involving the change of control of the Corporation ("Change of Control
Transaction"), the Board of Directors is authorized to consider the interests of
its stockholders and, in its sole discretion, the interests of certain
non-stockholder constituencies, in responding to any such Change of Control
Transaction.
ARTICLE 4
COMMITTEES OF THE BOARD
The Board may, by resolution passed by a vote of the entire Board,
designate one or more committees, each committee to consist of one or more of
the Directors of the Corporation. The Board may designate one or more Directors
as alternate members of any committee to replace absent or disqualified members
at any meeting of such committee. If a member of a committee shall be absent
from any meeting, or disqualified from voting thereat, the remaining member or
members present and not disqualified from voting, whether or not such member or
members constitute a quorum, may, by a unanimous vote, appoint another member of
the Board to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in a resolution of the Board
passed as aforesaid, shall have and may exercise all the powers and authority of
the Board in the management of the business and affairs of the Corporation, and
may authorize the seal of the Corporation to be impressed on all papers that may
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require it, but no such committee shall have the power or authority of the Board
in reference to amending the Certificate of Incorporation, adopting an agreement
of merger or consolidation under Section 251 or 252 of the General Corporation
Law, selling, leasing or exchanging all or substantially all of the
Corporation's property and assets, dissolving or revoking the dissolution of the
Corporation or amending the By-laws of the Corporation; and, unless the
resolution designating it expressly so provides, no such committee shall have
the power and authority to declare a dividend, to authorize the issuance of
stock or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board. Unless otherwise specified in the resolution of the Board designating
a committee, at all meetings of such committee a majority of the total number of
members of the committee shall constitute a quorum for the transaction of
business, and the vote of a majority of the members of the committee present at
any meeting at which there is a quorum shall be the act of the committee. Each
committee shall keep regular minutes of its meetings. Unless the Board otherwise
provides, each committee designated by the Board may make, alter and repeal
rules for the conduct of its business. In the absence of such rules each
committee shall conduct its business in the same manner as the Board conducts
its business pursuant to Article 3 of these By-laws.
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ARTICLE 5
OFFICERS
5.1 POSITIONS. The officers of the Corporation shall be a Chairman, a
Chief Executive Officer, a President, a Secretary, a Treasurer and such other
officers as the Board may appoint, including one or more Vice Presidents and one
or more Assistant Secretaries and Assistant Treasurers, who shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board. The Board may designate one or more Vice Presidents as Executive Vice
Presidents and may use descriptive words or phrases to designate the standing,
seniority or areas of special competence of the Vice Presidents elected or
appointed by it. Any number of offices may be held by the same person unless the
Certificate of Incorporation or these by-laws otherwise provide.
5.2 APPOINTMENT. The officers of the Corporation shall be chosen by the
Board annually or at such other time or times as the Board shall determine.
5.3 COMPENSATION. The compensation of all officers of the Corporation
shall be fixed by the Board. No officer shall be prevented from receiving a
salary or other compensation by reason of the fact that the officer is also a
Director.
5.4 TERM OF OFFICE. Each officer of the Corporation shall hold office
until such officer's successor is chosen and qualifies or until such officer's
earlier death, resignation or removal. Any officer may resign at any time upon
written notice to the Corporation. Such resignation shall take effect at the
date of receipt of such notice or at such later time as is therein specified,
and, unless otherwise specified, the acceptance of such resignation shall not be
necessary to make it effective.
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The resignation of an officer shall be without prejudice to the contract rights
of the Corporation, if any. Any officer elected or appointed by the Board may be
removed a any time, with or without cause, by vote of a majority of the entire
Board. Any vacancy occurring in any office of the Corporation shall be filled by
the Board. The removal of an officer without cause shall be without prejudice to
the officer's contract rights, if any. The election or appointment of an officer
shall not of itself create contract rights.
5.5 FIDELITY BONDS. The Corporation may secure the fidelity of any or all
of its officers or agents by bond or otherwise.
5.6 CHAIRMAN. The Chairman shall preside at all meetings of the Board and
shall exercise such powers and perform such other duties as shall be determined
from time to time by the Board.
5.7 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Corporation shall have general supervision over the business of the Corporation,
subject, however, to the control of the Board and of any duly authorized
committee of Directors. The Chief Executive Officer shall preside at all
meetings of the stockholders and at all meetings of the Board at which the
Chairman is not present. The Chief Executive Officer may sign and execute in the
name of the Corporation deeds, mortgages, bonds, contracts and other instruments
except in cases in which the signing and execution thereof shall be expressly
delegated by the Board or by these By-laws to some other officer or agent of the
Corporation or shall be required by statute otherwise to be signed or executed
and, in general, the Chief Executive Officer shall perform all duties incident
to the office of Chief Executive Officer of a corporation and such other duties
as may from time to time be assigned to the Chief Executive
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Officer by the Board. The Chief Executive Officer may also serve as the
President of the Corporation.
5.8 PRESIDENT. The President shall be the Chief Operating Officer of the
Corporation. The President may sign and execute in the name of the Corporation
deeds, mortgages, bonds, contracts and other instruments except in cases in
which the signing and execution thereof shall be expressly delegated by the
Board or by these By-laws to some other officer or agent of the Corporation or
shall be required by statute otherwise to be signed or executed and, in general,
the President shall perform all duties incident to the office of President of a
corporation and such other duties as may from time to time be assigned to the
President by the Board.
5.9 VICE PRESIDENTS. At the request of the President, or, in the
President's absence, at the request of the Board, the Vice Presidents shall (in
such order as may be designated by the Board or, in the absence of any such
designation, in order of seniority based on age) perform all of the duties of
the President and, in so performing, shall have all the powers of, and be
subject to all restrictions upon, the President. Any Vice President may sign and
execute in the name of the Corporation deeds, mortgages, bonds, contracts or
other instruments, except in cases in which the signing and execution thereof
shall be expressly delegated by the Board or by these By-laws to some other
officer or agent of the Corporation, or shall be required by statute otherwise
to be signed or executed, and each Vice President shall perform such other
duties as from time to time may be assigned to such Vice President by the Board
or by the President.
5.10 SECRETARY. The Secretary shall attend all meetings of the Board and
of the stockholders and shall record all the proceedings of the meetings of the
Board and of the
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stockholders in a book to be kept for that purpose, and shall perform like
duties for committees of the Board, when required. The Secretary shall give, or
cause to be given, notice of all special meetings of the Board and of the
stockholders and shall perform such other duties as may be prescribed by the
Board or by the President, under whose supervision the Secretary shall be. The
Secretary shall have custody of the corporate seal of the Corporation, and the
Secretary, or an Assistant Secretary, shall have authority to impress the same
on any instrument requiring it, and when so impressed the seal may be attested
by the signature of the Secretary or by the signature of such Assistant
Secretary. The Board may give general authority to any other officer to impress
the seal of the Corporation and to attest the same by such officer's signature.
The Secretary or an Assistant Secretary may also attest all instruments signed
by the President or any Vice President. The Secretary shall have charge of all
the books, records and papers of the Corporation relating to its organization
and management, shall see that the reports, statements and other documents
required by statute are properly kept and filed and, in general, shall perform
all duties incident to the office of Secretary of a corporation and such other
duties as may from time to time be assigned to the Secretary by the Board or by
the President.
5.11 TREASURER. The Treasurer shall have charge and custody of, and be
responsible for, all funds, securities and notes of the Corporation; receive and
give receipts for moneys due and payable to the Corporation from any sources
whatsoever; deposit all such moneys and valuable effects in the name and to the
credit of the Corporation in such depositaries as may be designated by the
Board; against proper vouchers, cause such funds to be disbursed by checks or
drafts on the authorized depositaries of the Corporation signed in such manner
as shall be determined by the
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Board and be responsible for the accuracy of the amounts of all moneys so
disbursed; regularly enter or cause to be entered in books or other records
maintained for the purpose full and adequate account of all moneys received or
paid for the account of the Corporation; have the right to require from time to
time reports or statements giving such information as the Treasurer may desire
with respect to any and all financial transactions of the Corporation from the
officers or agents transacting the same; render to the President or the Board,
whenever the President or the Board shall require the Treasurer so to do, an
account of the financial condition of the Corporation and of all financial
transactions of the Corporation; exhibit at all reasonable times the records and
books of account to any of the Directors upon application at the office of the
Corporation where such records and books are kept; disburse the funds of the
Corporation as ordered by the Board; and, in general, perform all duties
incident to the office of Treasurer of a corporation and such other duties as
may from time to time be assigned to the Treasurer by the Board or the
President.
5.12 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Assistant Secretaries
and Assistant Treasurers shall perform such duties as shall be assigned to them
by the Secretary or by the Treasurer, respectively, or by the Board or by the
President.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 EXECUTION OF CONTRACTS. The Board, except as otherwise provided in
these By-laws, may prospectively or retroactively authorize any officer or
officers, employee or employees or agent or agents, in the name and on behalf of
the Corporation, to enter into any contract or execute
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and deliver any instrument, and any such authority may be general or confined to
specific instances, or otherwise limited.
6.2 LOANS. The Board may prospectively or retroactively authorize the
President or any other officer, employee or agent of the Corporation to effect
loans and advances at any time for the Corporation from any bank, trust company
or other institution, or from any firm, corporation or individual, and for such
loans and advances the person so authorized may make, execute and deliver
promissory notes, bonds or other certificates or evidences of indebtedness of
the Corporation, and, when authorized by the Board so to do, may pledge and
hypothecate or transfer any securities or other property of the Corporation as
security for any such loans or advances. Such authority conferred by the Board
may be general or confined to specific instances, or otherwise limited.
6.3 CHECKS, DRAFTS, ETC. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all evidences of
indebtedness of the Corporation shall be signed on behalf of the Corporation in
such manner as shall from time to time be determined by resolution of the Board.
6.4 DEPOSITS. The funds of the Corporation not otherwise employed shall be
deposited from time to time to the order of the Corporation with such banks,
trust companies, investment banking firms, financial institutions or other
depositaries as the Board may select or as may be selected by an officer,
employee or agent of the Corporation to whom such power to select may from time
to time be delegated by the Board.
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ARTICLE 7
STOCK AND DIVIDENDS
7.1 CERTIFICATES REPRESENTING SHARES. The shares of capital stock of the
Corporation shall be represented by certificates in such form (consistent with
the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the Chairman, the
President or a Vice President and by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer, and may be impressed with the seal of
the Corporation or a facsimile thereof. The signatures of the officers upon a
certificate may be facsimiles, if the certificate is countersigned by a transfer
agent or registrar other than the Corporation itself or its employee. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon any certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, such
certificate may, unless otherwise ordered by the Board, be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.
7.2 TRANSFER OF SHARES. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by the holder's duly authorized attorney appointed by a power of
attorney duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates representing
such shares of capital stock properly endorsed for transfer and upon payment of
all necessary transfer taxes. Every certificate exchanged, returned or
surrendered to the Corporation shall be marked "Cancelled," with the date of
cancellation, by the Secretary or an Assistant
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Secretary or the transfer agent of the Corporation. A person in whose name
shares of capital stock shall stand on the books of the Corporation shall be
deemed the owner thereof to receive dividends, to vote as such owner and for all
other purposes as respects the Corporation. No transfer of shares of capital
stock shall be valid as against the Corporation, its stockholders and creditors
for any purpose, except to render the transferee liable for the debts of the
Corporation to the extent provided by law, until such transfer shall have been
entered on the books of the Corporation by an entry showing from and to whom
transferred.
7.3 TRANSFER AND REGISTRY AGENTS. The Corporation may from time to time
maintain one or more transfer offices or agents and registry offices or agents
at such place or places as may be determined from time to time by the Board.
7.4 LOST, DESTROYED, STOLEN AND MUTILATED CERTIFICATES. The holder of any
shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of any
such new certificate, require the owner of the lost, destroyed, stolen or
mutilated certificate, or his or her legal representatives, to make proof
satisfactory to the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and to give the
Corporation and its transfer agents and registrars, or such of them as the Board
may require, a bond in such form, in such sums and with such surety or sureties
as the Board may direct, to indemnify the Corporation an its transfer agents and
registrars against any claim that may be made against any of them on
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account of the continued existence of any such certificate so alleged to have
been lost, destroyed, stolen or mutilated and against any expense in connection
with such claim.
7.5 RULES AND REGULATIONS. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these By-laws or with the
Certificate of Incorporation, concerning the issue, transfer and registration of
certificates representing shares of its capital stock.
7.6 RESTRICTION ON TRANSFER OF STOCK. A written restriction on the
transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be enforced against the
holder of the restricted capital stock or any successor or transferee of the
holder, including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person or estate of the
holder. Unless noted conspicuously on the certificate representing such capital
stock, a restriction, even though permitted by Section 202 of the General
Corporation Law, shall be ineffective except against a person with actual
knowledge of the restriction. A restriction on the transfer or registration of
transfer of capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number of stockholders
or among such stockholders and the Corporation. No restriction so imposed shall
be binding with respect to capital stock issued prior to the adoption of the
restriction unless the holders of such capital stock are parties to an agreement
or voted in favor of the restriction.
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7.7 DIVIDENDS, SURPLUS, ETC. Subject to the provisions of the Certificate
of Incorporation and of law, the Board:
7.7.1 may declare and pay dividends or make other distributions on
the outstanding shares of capital stock in such amounts and at such time
or times as it, in its discretion, shall deem advisable giving due
consideration to the condition of the affairs of the Corporation;
7.7.2 may use and apply, in its discretion, any of the surplus of
the Corporation in purchasing or acquiring any shares of capital stock of
the Corporation, or purchase warrants therefor, in accordance with law, or
any of its bonds, debentures, notes, scrip or other securities or
evidences of indebtedness; and
7.7.3 may set aside from time to time out of such surplus or net
profits such sum or sums as, in its discretion, it may think proper, as a
reserve fund to meet contingencies, or for equalizing dividends or for the
purpose of maintaining or increasing the property or business of the
Corporation, or for any purpose it may think conducive to the best
interests of the Corporation.
ARTICLE 8
IDENTIFICATION
8.1 INDEMNITY UNDERTAKING. To the extent not prohibited by law, the
Corporation shall indemnify any person who is or was made, or threatened to be
made, a party to any threatened, pending or completed action, suit or proceeding
(a "Proceeding"), whether civil, criminal,
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administrative or investigative, including, without limitation, an action by or
in the right of the Corporation to procure a judgment in its favor, by reason of
the fact that such person, or a person of whom such person is the legal
representative, is or was a Director or officer of the Corporation, or is or was
serving in any capacity at the request of the Corporation for any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise (an "Other Entity"), against judgments, fines, penalties, excise
taxes, amounts paid in settlement and costs, charges and expenses (including
attorneys' fees and disbursements). Persons who are not Directors or officers of
the Corporation may be similarly indemnified in respect of service to the
Corporation or to an Other Entity at the request of the Corporation to the
extent the Board at any time specifies that such persons are entitled to the
benefits of this Section 8.
8.2 ADVANCEMENT OF EXPENSES. The Corporation shall, from time to time,
reimburse or advance to any Director or officer or other person entitled to
indemnification hereunder the funds necessary for payment of expenses, including
attorneys' fees and disbursements, incurred in connection with any Proceeding,
in advance of the final disposition of such Proceeding; PROVIDED, HOWEVER, that,
if required by the General Corporation Law, such expenses incurred by or on
behalf of any Director or officer or other person may be paid in advance of the
final disposition of a Proceeding only upon receipt by the Corporation of an
undertaking, by or on behalf of such Director or officer (or other person
indemnified hereunder), to repay any such amount so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right of appeal that such Director, officer or other person is not
entitled to be indemnified for such expenses.
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8.3 RIGHTS NOT EXCLUSIVE. The rights to indemnification and reimbursement
or advancement of expenses provided by or granted pursuant to, this Section 8
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may have or
hereafter be entitled under any statute, the Certificate of Incorporation, these
By-laws, any agreement, any vote of stockholders or disinterested Directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office.
8.4 CONTINUATION OF BENEFITS. The rights to indemnification and
reimbursement or advancement of expenses provided by, or granted pursuant to,
this Section 8 shall continue as to a person who has ceased to be a Director or
officer (or other person indemnified hereunder) and shall inure to the benefit
of the executors, administrators, legatees and distributees of such person.
8.5 INSURANCE. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of an Other Entity, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such liability
under the provisions of this Section 8, the Certificate of Incorporation or
under Section 145 of the General Corporation Law or any other provision of law.
8.6 BINDING EFFECT. The provisions of this Section 8 shall be a contract
between the Corporation, on the one hand, and each Director and officer who
serves in such capacity at any
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time while this Section 8 is in effect and any other person indemnified
hereunder, on the other hand, pursuant to which the Corporation and each such
Director, officer or other person intend to be legally bound. No repeal or
modification of this Section 8 shall affect any rights or obligations with
respect to any state of facts then or theretofore existing or thereafter arising
or any proceeding theretofore or thereafter brought or threatened based in whole
or in part upon any such state of facts.
8.7 PROCEDURAL RIGHTS. The rights to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 8
shall be enforceable by any person entitled to such indemnification or
reimbursement or advancement of expenses in any court of competent jurisdiction.
The burden of proving that such indemnification or reimbursement or advancement
of expenses is not appropriate shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, its independent legal
counsel and its stockholders) to have made a determination prior to the
commencement of such action that such indemnification or reimbursement or
advancement of expenses is proper in the circumstances nor an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel and its stockholders) that such person is not entitled
to such indemnification or reimbursement or advancement of expenses shall
constitute a defense to the action or create a presumption that such person is
not so entitled. Such a person shall also be indemnified for any expenses
incurred in connection with successfully establishing his or her right to such
indemnification or reimbursement or advancement of expenses, in whole or in
part, in any such proceeding.
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8.8 SERVICE DEEMED AT CORPORATION'S REQUEST. Any Director or officer of
the Corporation serving in any capacity (a) another corporation of which a
majority of the shares entitled to vote in the election of its directors is
held, directly or indirectly, by the Corporation or (b) any employee benefit
plan of the Corporation or any corporation referred to in clause (a) shall be
deemed to be doing so at the request of the Corporation.
8.9 ELECTION OF APPLICABLE LAW. Any person entitled to be indemnified or
to reimbursement or advancement of expenses as a matter of right pursuant to
this Section 8 may elect to have the right to indemnification or reimbursement
or advancement of expenses interpreted on the basis of the applicable law in
effect at the time of the occurrence of the event or events giving rise to the
applicable Proceeding, to the extent permitted by law, or on the basis of the
applicable law in effect at the time such indemnification or reimbursement or
advancement of expenses is sought. Such election shall be made, by a notice in
writing to the Corporation, at the time indemnification or reimbursement or
advancement of expenses is sought; PROVIDED, HOWEVER, that if no such notice is
given, the right to indemnification or reimbursement or advancement of expenses
shall be determined by the law in effect at the time indemnification or
reimbursement or advancement of expenses is sought.
ARTICLE 9
BOOKS AND RECORDS
9.1 BOOKS AND RECORDS. There shall be kept at the principal office of the
Corporation correct and complete records and books of account recording the
financial transactions of the
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Corporation and minutes of the proceedings of the stockholders, the Board and
any committee of the Board. The Corporation shall keep at its principal office,
or at the office of the transfer agent or registrar of the Corporation, a record
containing the names and addresses of all stockholders, the number and class of
shares held by each and the dates when they respectively became the owners of
record thereof.
9.2 FORM OF RECORDS. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account,
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs, or any other information storage device,
provided that the records so kept can be converted into clearly legible written
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
9.3 INSPECTION OF BOOKS AND RECORDS. Except as otherwise provided by law,
the Board shall determine from time to time whether, and, if allowed, when and
under what conditions and regulations, the accounts, books, minutes and other
records of the Corporation, or any of them, shall be open to the stockholders
for inspection.
ARTICLE 10
SEAL
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or otherwise reproduced.
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ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and may be changed, by
resolution of the Board.
ARTICLE 12
PROXIES AND CONSENTS
Unless otherwise directed by the Board, the Chairman, the President, any
Vice President, the Secretary or the Treasurer, or any one of them, may execute
and deliver on behalf of the Corporation proxies respecting any and all shares
or other ownership interests of any Other Entity owned by the Corporation
appointing such person or persons as the officer executing the same shall deem
proper to represent and vote the shares or other ownership interests so owned at
any and all meetings of holders of shares or other ownership interests, whether
general or special, and/or to execute and deliver consents respecting such
shares or other ownership interests; or any of the aforesaid officers may attend
any meeting of the holders of shares or other ownership interests of such Other
Entity and thereat vote or exercise any or all other powers of the Corporation
as the holder of such shares or other ownership interests.
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ARTICLE 13
EMERGENCY BY-LAWS
Unless the Certificate of Incorporation provides otherwise, the following
provisions of this Article 13 shall be effective during an emergency, which is
defined as when a quorum of the Corporation's Directors cannot be readily
assembled because of some catastrophic event. During such emergency:
13.1 NOTICE TO BOARD MEMBERS. Any one member of the Board or any one of
the following officers: Chairman, President, any Vice President, Secretary, or
Treasurer, may call a meeting of the Board. Notice of such meeting need be given
only to those Directors whom it is practicable to reach, and may be given in any
practical manner, including by publication and radio. Such notice shall be given
at least six hours prior to commencement of the meeting.
13.2 TEMPORARY DIRECTORS AND QUORUM. One or more officers of the
Corporation present at the emergency Board meeting, as is necessary to achieve a
quorum, shall be considered to be Directors for the meeting, and shall so serve
in order of rank, and within the same rank, in order of seniority. In the event
that less than a quorum of the Directors are present (including any officers who
are to serve as Directors for the meeting), those Directors present (including
the officers serving as Directors) shall constitute a quorum.
13.3 ACTIONS PERMITTED TO BE TAKEN. The Board as constituted in Section
13.2, and after Notice as set forth in Section 13.1 may:
13.3.1 prescribe emergency powers to any officer of the Corporation;
13.3.2 delegate to any officer or Director, any of the powers of the
Board;
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13.3.3 designate lines of succession of officers and agents, in the
event that any of them are unable to discharge their duties;
13.3.4 relocate the principal place of business, or designate
successive or simultaneous principal places of business; and
13.3.5 take any other convenient, helpful or necessary action to
carry on the business of the Corporation.
ARTICLE 14
AMENDMENTS
These By-laws may be altered, amended or repealed and new By-laws may be
adopted by the vote of a majority of the Board of Directors or by an affirmative
vote of the holders of 66 2/3% of the shares entitled to vote in the election of
Directors. Any By-laws adopted, altered or amended by the Board may be altered,
amended or repealed by the stockholders entitled to vote thereon only to the
extent and in the manner provided in the Certificate of Incorporation and these
By-laws.
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EXHIBIT 10.1
GARDEN RIDGE CORPORATION
AMENDED AND RESTATED
1994 STOCK OPTION PLAN
Effective June 10, 1999
ARTICLE I
PURPOSE
The purpose of this Amended and Restated 1994 Stock Option Plan (the
"Plan") of Garden Ridge Corporation, a Delaware corporation (the "Company"), is
to secure for the Company and its stockholders the benefits arising from stock
ownership by selected executive employees and other key employees of the Company
or its subsidiaries as the Board of Directors of the Company (the "Board"), or a
Committee constituted for such purpose, may from time to time determine. The
Plan will provide a means whereby (i) such employees may purchase shares of the
common stock, $0.01 par value per share (the "Common Stock"), of the Company
pursuant to stock options which will qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and
(ii) such employees may purchase shares of the Common Stock of the Company
pursuant to "non-incentive" or "non-qualified" stock options.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Stock Option Committee (the
"Committee"), which shall at all times consist of not less than two members of
the Board, and all members of the Committee shall be "disinterested persons"
within the meaning of Rule 16b-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "1934 Act"). All members of the
Committee shall be selected by (and serve at the pleasure of) the Board. Subject
to the express provisions of the Plan and the policies of each stock exchange on
which any of the Company's stock may at any time be traded, the Committee shall
have plenary authority, in its discretion, to recommend to the Board the
individuals within the class set forth in ARTICLE IV to whom, and the time and
price per share at which, stock options shall be granted, the number of shares
to be subject to each stock option and the other terms and provisions of their
respective Agreements (as defined herein), which need not be identical. In
making such recommendations and determinations, the Committee may take into
account the nature of the services rendered by the respective employees, their
present and potential contributions to the Company's success and such other
factors as the Committee in its discretion shall deem relevant.
<PAGE>
Subject to the express provisions of the Plan, the Committee shall have
authority (i) to construe and interpret the Plan, (ii) to define the terms used
therein, (iii) to prescribe, amend and rescind rules and regulations relating to
the Plan, (iv) to recommend to the Board the terms and provisions of the
respective stock options, (v) to approve and determine the duration of leaves of
absence which may be granted to participants without constituting a termination
of their employment for the purposes of the Plan, and (vi) to make all other
determinations necessary or advisable for the administration of the Plan. All
determinations and interpretations made by the Committee shall be binding and
conclusive on all participants in the Plan and their legal representatives and
beneficiaries. The Committee shall hold meetings at such times and places as it
may determine. Acts by the majority of the Committee or acts reduced to or
approved in writing by a majority of the members of the Committee shall be the
valid acts of the Committee. From time to time, the Board may increase the size
of the Committee and appoint additional members thereof, remove members (with or
without cause), and appoint new members in substitution therefore, or fill
vacancies however caused, subject to the requirements that the members of the
Committee shall be "disinterested persons" as described above and that there
always be at least two members of the Committee. No member of the Committee
shall be liable for any action, failure to act, determination or interpretation
made in good faith with respect to the Plan or any transaction under the Plan.
ARTICLE III
SHARES SUBJECT TO PLAN AND DURATION OF PLAN
Under the Plan, the Board may, but only upon recommendation of the
Committee, grant to eligible persons incentive stock options (as defined in the
Code) and/or non-qualified stock options, to purchase up to but not exceeding an
aggregate amount of 1,969,176 shares of the Company's Common Stock (subject to
adjustment as provided in ARTICLE X). Shares subject to stock options under the
Plan may be either authorized and unissued shares or issued shares that have
been acquired by the Company and held in its treasury, in the discretion of the
Board. When stock options have been granted under the Plan and have lapsed
unexercised or partially unexercised or have been surrendered for cancellation
by the optionee thereof, the unexercised shares which were subject thereto may
be reoptioned under the Plan. No stock options shall be granted after April
2004.
<PAGE>
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
To the fullest extent permitted by applicable laws, all executive
employees and other key employees of the Company or of any subsidiary
corporation (as defined in Section 424(f) of the Code) shall be eligible for
selection to fully participate in the Plan; provided, however, that no member of
the Committee shall be entitled to receive a stock option under this Plan while
serving as a member of the Committee. Directors of the Company who are not
regular employees of the Company are not eligible to participate in the Plan. An
individual who has been granted an option may, if such individual is otherwise
eligible, be granted an additional option or options if the Board or the
Committee shall so determine, subject to the other provisions of the Plan.
ARTICLE V
TERMS AND CONDITIONS OF STOCK OPTIONS
Each stock option granted under the Plan shall be evidenced by a stock
option agreement (the "Agreement"), the form of which shall have been approved
by the Committee. The Agreement shall be executed by the Company and the
optionee and shall set forth the terms and conditions of the stock option, which
terms and conditions shall include, but not be limited to the following:
(a) OPTION PRICE. The option price shall be determined by the
Committee, but shall not in any event be less than the par value of the Common
Stock.
(b) TERM OF STOCK OPTION. The term of the stock option shall be
selected by the Committee, but in no event shall such term exceed ten years from
the grant thereof. Each stock option shall be subject to earlier termination as
hereinafter provided.
(c) TRANSFERABILITY. The stock options granted hereunder shall not
be transferable other than by will or operation of the laws of descent and
distribution or pursuant to a qualified domestic relations order, as defined in
the Code or Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules thereunder. During the lifetime of the optionee,
stock options granted hereunder shall be exercisable only by the optionee, the
optionee's guardian or legal representative.
(d) VESTING. The Committee shall have complete discretion in
determining when stock options granted hereunder are to vest; provided, however,
that the sale of shares of Common Stock issued upon the exercise of a stock
option by any person subject to Section 16 of the 1934 Act shall not be allowed
until at least six months after the grant of the stock option. Such
determination for each stock option is to be made prior to or at the time that
stock option is granted and shall be set forth in each Agreement.
<PAGE>
(e) TERMINATION OF EMPLOYMENT. In the event of an optionee's termination
of employment with the Company for any reason other than death, all stock
options shall terminate to the extent they were not exercisable at the date of
the optionee's termination, but to the extent they were then exercisable by the
optionee, the optionee shall be entitled to exercise such options for a period
of 30 days from the date of the optionee's termination. Upon the termination of
an optionee's employment by reason of death, the optionee's stock options shall
terminate to the extent they are not exercisable at the date of the optionee's
death, but to the extent they were then exercisable by the optionee, the
optionee's estate or the beneficiaries thereof shall be entitled to exercise
such options for a period of one (1) year from the date of the optionee's death
but not thereafter. Notwithstanding the foregoing, the Committee may, in its
sole discretion, accelerate the vesting of stock options that were not
exercisable on the date of termination of an optionee's employment with the
Company, and extend the period in which stock options may be exercised by an
optionee, an optionee's estate or the beneficiaries thereof, as applicable,
following the date of termination, but no stock options shall be exercised after
the expiration of ten years from the date such stock option is granted.
(f) OTHER CONDITIONS. At its sole discretion, the Committee may impose
other conditions upon the stock options granted hereunder, so long as those
conditions do not conflict with any other provisions of the Plan. Such
conditions may include, by way of illustration, but not by way of limitation,
percentage limitations upon the exercisability of stock options granted
hereunder.
ARTICLE VI
INCENTIVE STOCK OPTIONS
The Committee, in recommending and granting stock options hereunder, shall
have the discretion to determine that certain stock options shall be incentive
stock options, as defined in Section 422 of the Code, while other stock options
shall be non-qualified stock options. Neither the members of the Committee, the
members of the Board nor the Company shall be under any obligation or incur any
liability to any person by reason of the determination by the Committee or the
Board whether a stock option granted under the Plan shall be an incentive stock
option or a non-qualified stock option. The provisions of this ARTICLE VI shall
be applicable to all incentive stock options at any time granted or outstanding
under the Plan.
All incentive stock options granted or outstanding under the Plan shall be
granted and held subject to and in compliance with terms and conditions
previously set forth in ARTICLES II, III, IV AND V hereof and, in addition,
subject to and in compliance with the following further terms and conditions:
(a) The per share option price of all incentive stock options shall
not be less than 100% of the Fair Market Value (as defined below) of one share
of the Company's Common Stock at the time the stock option is granted
(notwithstanding any provision of ARTICLE V hereof to the contrary);
(b) No incentive stock option shall be granted to any person who, at
the time of the grant, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any subsidiary
corporation of the Company; provided,
<PAGE>
however, that this ownership limitation will be waived if at the time the option
is granted the per share option price is at least 110% of the Fair Market Value
of one share of the Company's Common Stock and such stock option by its terms is
not exercisable after the expiration of five years from the date such option is
granted;
(c) An incentive stock option shall not be transferable other than
by will or the laws of descent and distribution, and shall be exercisable during
the lifetime of the optionee, only by the optionee; and
(d) The aggregate Fair Market Value of all shares of Common Stock
(determined at the time of the grant of the stock option) with respect to which
incentive stock options are exercisable for the first time by any optionee
during any one calendar year shall not exceed $100,000.
ARTICLE VII
EXERCISE OF STOCK OPTIONS
Each stock option granted hereunder may be exercised in such installments
during the period prior to its expiration date as the Committee shall determine;
provided that, unless otherwise determined by the Committee, if the optionee
shall not in any given installment period purchase all of the shares which the
optionee is entitled to purchase in such installment period, then the optionee's
right to purchase any shares not purchased in such installment period shall
continue until the expiration date or sooner termination of the optionee's stock
option.
The purchase price of the shares of Common Stock acquired upon exercise of
a stock option shall be paid in full at the time of exercise in cash or by
certified or cashier's check payable to the order of the Company, or, upon
receipt of all required regulatory approvals, if any, by delivery of shares of
Common Stock of the Company already owned by, and in the possession of, the
stock option holder having a Fair Market Value equal to such stock option price,
or any combination thereof. Shares of Common Stock used to satisfy the exercise
price of a stock option shall be valued at their Fair Market Value determined as
of the close of business on the date such stock option is exercised, or if such
date is not a business day, on the business day immediately preceding the date
of exercise. Deliveries of cash, shares and notices to the Company shall be
directed to the Secretary of the Company.
No stock option granted hereunder shall be exercisable unless the Plan and
all shares issuable on the exercise thereof have been registered under the
Securities Act of 1933, as amended (the "1933 Act"), and all other applicable
securities laws, and there is available for delivery a prospectus meeting the
requirements of Section 10 of the 1933 Act, or the Company shall have first
received assurance that registration under the 1933 Act and all other applicable
securities laws is not required in connection with such issuance. At the time of
exercise, if the shares with respect to which the stock option is being
exercised have not been registered under
<PAGE>
the 1933 Act and all other applicable securities laws, the Company may require
the optionee to provide the Company whatever written assurance counsel for the
Company may require that the shares are being acquired for investment and not
with a view to the distribution thereof, and that the shares will not be
disposed of without the written opinion of counsel acceptable to the Company
that registration under the 1933 Act and all other applicable securities laws is
not required. Share certificates issued to the optionee upon exercise of the
stock option shall bear a legend to the foregoing effect to the extent counsel
for the Company deems it advisable.
ARTICLE VIII
FAIR MARKET VALUE OF COMMON STOCK
For purposes of the Plan, the term "Fair Market Value" on any date shall
mean (i) if the Common Stock is not listed or admitted to trade on a national
securities exchange and if bid and asked prices for the Common Stock are not
furnished through NASDAQ or a similar organization as described below, the value
established by the Committee, in its sole discretion, for purposes of the Plan;
(ii) if the Common Stock is listed or admitted to trade on a national securities
exchange or national market system, the closing price of the Common Stock, as
published in THE WALL STREET JOURNAL, so listed or admitted to trade on such
date or, if there is no trading of the Common Stock on such date, then the
closing price of the Common Stock on the next preceding date on which there was
trading in such shares; or (iii) if the Common Stock is not listed or admitted
to trade on a national securities exchange or national market system, the mean
between the bid and asked price for the Common Stock on such date, as furnished
by the National Association of Securities Dealers, Inc. through NASDAQ or a
similar organization if NASDAQ is no longer reporting such information. In
addition to the above rules, Fair Market Value shall be determined without
regard to any restriction other than a restriction which, by its terms, will
never lapse.
ARTICLE IX
WITHHOLDING TAX
Upon (i) the disposition by an employee or other person of shares of
Common Stock acquired pursuant to the exercise of an incentive stock option
granted pursuant to the Plan within two years of the granting of the incentive
stock option or within one year after exercise of the incentive stock option, or
(ii) the exercise of "non-incentive" or "non-qualified" options, the Company
shall have the right to require such employee or such other person to pay the
Company the amount of any taxes (including but not limited to any federal, state
and local income taxes, old-age, survivors, and disability insurance premiums
and taxes, medicare taxes, FICA taxes and any other withholding taxes) which the
Company may be required to withhold with respect to such shares.
ARTICLE X
ADJUSTMENTS
<PAGE>
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any
required action by the Company's directors and stockholders, the number of
shares provided for in each outstanding stock option and the price per share
thereof, and the number of shares provided for in the Plan, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of the Company's Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend (but only on the
Common Stock), a stock split, a reverse stock split, or any other increase or
decrease in the number of such shares effected without receipt of consideration
by the Company, and shall also be proportionately adjusted in the event of a
spin-off, spin-out, or other distribution of assets to stockholders of the
Company, to the extent necessary to prevent dilution of the interests of
grantees pursuant to the Plan or of the other stockholders of the Company, as
applicable. If the Company shall engage in a merger, consolidation,
reorganization or recapitalization, each outstanding stock option (or if such
transaction involves less than all of the shares of the Company's Common Stock,
then a number of stock options proportionate to the number of such involved
shares), shall become exercisable for the securities and other consideration to
which a holder of the number of shares of the Company's Common Stock subject to
each such stock option would have been entitled to receive in any such merger,
consolidation, reorganization or recapitalization.
(b) SIGNIFICANT EVENT. In the event of a potential merger or
consolidation involving the Company regardless of whether the Company is the
surviving entity of such merger or consolidation, a potential liquidation or
dissolution of the Company, a potential sale or other disposition by the Company
of all or substantially all of its assets, a potential sale or other disposition
by the stockholders of the Company of all or substantially all of the
outstanding Common Stock to one purchaser, or an underwritten public offering of
the Common Stock of the Company (any such merger, consolidation, liquidation,
dissolution, sale or offering being referred to herein as a "Significant
Event"), then the Company, upon obtaining approval of the Board, may (but shall
not be required to) waive any and all restrictions on the vesting of optionees'
rights under stock options granted pursuant to the Plan by providing written
notice thereof to the optionees. If the Company, upon obtaining approval of the
Board, elects to waive any such vesting restrictions, the optionees' rights
under their respective stock options shall vest in accordance with the terms of
such waiver, subject to the actual occurrence of the Significant Event. In
consideration for any such waiver of vesting restrictions by the Company, the
Company shall have the option (the "Termination Option") to require all
optionees to exercise their vested (determined after taking into account any
waiver of vesting restrictions) but unexercised stock options upon the
occurrence of the Significant Event, by providing written notice to all
optionees at least 10 days before the occurrence of the Significant Event. Any
exercise by an optionee in these circumstances may be conditioned upon the
occurrence of the Significant Event. If the Company exercises the Termination
Option under this paragraph (b), upon the actual occurrence of the Significant
Event, each stock option that is vested (determined after taking into account
any waiver of vesting restrictions) but unexercised as of such date shall
terminate. If the potential Significant Event does not in fact occur for any
reason, then any waiver by the Company of the vesting restrictions and any
exercise by the Company of the Termination Option under this paragraph
<PAGE>
(b) shall have no effect, and the optionee's rights will be vested only to the
extent that they would be vested if no restrictions on vesting had been waived
by the Company herein.
(c) CHANGE OF PAR VALUE. In the event of a change in the Company's
Common Stock which is limited to a change of all of its authorized shares with
par value into the same number of shares with a different par value or without
par value, the shares resulting from any such change shall be deemed to be
Common Stock within the meaning of the Plan.
(d) MISCELLANEOUS. The adjustments provided for in this Article
shall be made by the Committee whose determination in that respect shall be
final, binding and conclusive. Except as hereinbefore expressly provided in this
Article, the holder of a stock option shall not be entitled to the privilege of
stock ownership as to any shares of Common Stock or other stock not actually
issued and delivered to the holder. Any issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
not affect and no adjustment by reason thereof shall be made with respect to the
number or price of shares of the Company's Common Stock subject to any stock
option. The grant of a stock option pursuant to the Plan shall not affect in any
way the right or power of the Company to, among other things, make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve or liquidate or sell or
transfer all or any part of its business or assets.
ARTICLE XI
PRIVILEGES OF STOCK OWNERSHIP
No person entitled to exercise any stock option granted under the Plan
shall have any of the rights or privileges of a stockholder of the Company in
respect of any shares of stock issuable upon exercise of such stock option until
certificates representing such shares shall have been issued and delivered. Upon
exercise of a stock option, the person exercising the stock option shall be
entitled to one stock certificate evidencing the shares acquired upon such
exercise.
ARTICLE XII
CONTINUATION OF EMPLOYMENT
Nothing contained in the Plan (or in any stock option granted pursuant to
the Plan) shall confer upon any employee any right to continue in the employ of
the Company or any subsidiary corporation or constitute any contract or
agreement of employment or interfere in any way with the right of the Company or
any subsidiary corporation to reduce any person's compensation from the rate in
existence at the time of the granting of a stock option or to terminate such
person's employment. Nothing contained herein or in any Agreement shall affect
any other contractual rights of an employee.
<PAGE>
ARTICLE XIII
AMENDMENT OR DISCONTINUANCE
The Board or the Committee may at any time and from time to time amend,
rescind, suspend or terminate the Plan, as it shall deem advisable, provided
that the Plan may not be amended more than once every six months, other than to
comport with changes in the Code, ERISA, or the rules thereunder. In addition to
Board approval of any amendment to the Plan, if the Board or Committee further
determines on advice of counsel that it is necessary or desirable to obtain
stockholder approval of any amendment to the Plan in order to comply with Rule
16b-3 of the General Rules and Regulations under the 1934 Act, or any successor
rule, as it shall read as of the time of amendment, or for any other reason,
then the effectiveness of any such amendment may be conditioned upon its
approval by the affirmative votes of the holders of a majority of the
outstanding voting stock of the Company (voting as a single class) present, or
represented, and entitled to vote at a meeting duly held in accordance with the
applicable laws of the state or other jurisdiction in which the Company is
incorporated.
No change may be made in, and no amendment, rescission, suspension or
termination of the Plan shall have an effect on, stock options previously
granted under the Plan which may impair or alter the rights or obligations of
the holders thereof, except that any change may be made in stock options
previously granted with the consent of the optionees.
ARTICLE XIV
EFFECTIVE DATE OF PLAN; STOCKHOLDER APPROVAL
The Plan shall be effective as of March 6, 1996, the date on which it
received the approval of a majority of the disinterested members of the Board.
However, the Plan and all stock options granted under the Plan shall be void if
the Plan is not approved by the stockholders within twelve (12) months from the
date the Plan is approved by the Board. The Plan shall be deemed approved by the
holders of the outstanding voting stock of the Company by the affirmative votes
of the holders of a majority of the outstanding voting stock of the Company
present, or represented, and entitled to vote at a meeting duly held in
accordance with the applicable laws of the state or other jurisdiction in which
the Company is incorporated. No stock option granted under the Plan shall be
exercisable in whole or in part unless and until such stockholder approval is
obtained.
EXHIBIT 10.2
GARDEN RIDGE CORPORATION
AMENDED AND RESTATED
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Effective June 10, 1999
ARTICLE I
PURPOSE
Garden Ridge Corporation, a Delaware corporation (the "Company"), is
dependent for the successful conduct of its business on the initiative, effort
and judgment of its directors. This 1996 Non-Employee Director Stock Option Plan
(the "Plan") is intended to provide the non-employee directors of the Company
additional compensation for their service as directors and an incentive, through
options to acquire stock in the Company, to increase the value of the Company's
Common Stock, par value $0.01 per share ("Common Stock").
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(the "Board"). Subject to the express provisions of the Plan and the policies of
each stock exchange on which any of the Company's stock at any time may be
traded, the Board shall have plenary authority (i) to construe and interpret the
Plan, (ii) to define the terms used therein, (iii) to prescribe, amend and
rescind rules and regulations relating to the Plan, and (iv) to make all other
determinations necessary or advisable for the administration of the Plan. All
determinations and interpretations made by the Board shall be binding and
conclusive on all participants in the Plan and their legal representatives and
beneficiaries. No member of the Board shall be liable for any action, failure to
act, determination or interpretation made in good faith with respect to the Plan
or any transaction under the Plan.
ARTICLE III
SHARES SUBJECT TO PLAN AND DURATION OF PLAN
The Plan shall expire and terminate on the earlier of (i) the date ten
years from the effective date of this Plan, or (ii) the date on which there have
been granted to eligible non-employee Directors pursuant to the Plan stock
options to purchase an aggregate of 120,000 shares of the Common Stock. Shares
subject to stock options under the Plan may be either authorized and unissued
shares or issued shares that have been acquired by the Company and held in its
treasury, in the sole discretion of the Board. When stock options have been
granted under the Plan and have lapsed unexercised or partially unexercised or
have been surrendered
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<PAGE>
for cancellation by the optionee thereof, the unexercised shares which were
subject thereto may be reoptioned under the Plan.
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
Under the Plan, non-employee directors shall be entitled to receive stock
options to purchase from the Company the number of shares of Common
Stock as set forth below. For purposes of the Plan, the term
"non-employee director" shall be limited to directors who, at the
time of the grant, are not (i) serving as officers or employees of
the Company or any subsidiary, (ii) serving as consultants to the
Company or any subsidiary, or (iii) affiliates of consultants to the
Company.
(a) GRANT UPON INITIAL ELECTION TO BOARD. Effective as of the date of a
non-employee director's initial election to the Board, each non-employee
director shall be granted a stock option to purchase from the Company a certain
number of shares of Common Stock at a price determined as set forth in ARTICLE V
below. The number of shares subject to such stock option shall be adjusted to
reflect the fiscal quarter in which the non-employee director is initially
elected to the Board, and shall be as follows: (i) second quarter election on or
prior to the date three days following the Company's release of financial
results for its first fiscal quarter, 0 shares, (ii) second quarter election
after the date three days following the Company's release of financial results
for its first fiscal quarter, 5,000 shares, (iii) third quarter election, 3,750
shares, (iv) fourth quarter election, 2,500 shares, and (v) first quarter
election, 1,250 shares.
(b) ANNUAL GRANTS. Effective each year beginning on the date which is
three days following the Company's release of financial results for its first
fiscal quarter, and continuing each quarter thereafter, each non-empoyee
director shall be granted a stock option to purchase from the Company 1,250
shares of Common Stock at a price determined as set forth in ARTICLE V below.
ARTICLE V
TERMS AND CONDITIONS OF STOCK OPTIONS;
STOCK OPTION PRICE; TRANSFERABILITY
Each stock option granted under the Plan shall be evidenced by a stock
option agreement (the "Agreement"), the form of which shall have been approved
by the Board. The Agreement shall be executed by the Company and the optionee,
and shall set forth the terms and conditions of the stock option, which terms
and conditions shall include, but not be limited to the following:
(a) OPTION PRICE. The per share stock option price shall be an amount
equal to the Fair Market Value (as defined below) of the Common Stock on the
date of grant of the stock
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<PAGE>
option. In no event shall the stock option price be less than the par value of
the Company's Common Stock.
(b) TERM. The term of each stock option granted under the Plan shall be
for a period of five years from the grant thereof.
(c) TRANSFERABILITY. Except as set forth below, the stock options granted
hereunder shall not be transferable otherwise than by will or operation of the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined in the Internal Revenue Code of 1986, as amended (the "Code"),
or Title I of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules thereunder. During the lifetime of the optionee, stock
options granted hereunder shall be exercisable only by the optionee, the
optionee's guardian or legal representative.
(d) VESTING. Each stock option granted under the Plan shall vest
immediately; provided, however, that the sale of the shares issued upon the
exercise of a stock option by any person subject to Section 16 of the Securities
Act of 1934 (the "1934 Act") shall not be allowed until at least six months
after the later of (i) the approval of this Plan by the stockholders of the
Company in accordance with ARTICLE XI hereof or (ii) the grant of the stock
option.
ARTICLE VI
EXERCISE OF STOCK OPTIONS
The purchase price of shares of Common Stock acquired upon exercise of a
stock option shall be paid in full at the time of exercise in cash or by
certified or cashier's check payable to the order of the Company, or, upon
receipt of all required regulatory approvals, if any, by delivery of shares of
Common Stock of the Company already owned, and in the possession of, the stock
option holder having a Fair Market Value equal to such stock option price, or
any combination thereof. Shares of Common Stock used to satisfy the exercise
price of a stock option shall be valued at their Fair Market Value determined as
of the close of business on the date such stock option is exercised, or if such
date is not a business date, on the business day immediately preceding the date
of exercise. Deliveries of cash, shares and notices to the Company shall be
directed to the Secretary of the Company.
No stock option granted hereunder shall be exercisable unless the Plan and
all shares issuable on the exercise thereof have been registered under the
Securities Act of 1933, as amended (the "1933 Act") and all other applicable
securities laws, and there is available for delivery a prospectus meeting the
requirements of Section 10 of the 1933 Act, or the Company shall have first
received the opinion of its counsel that registration under the 1933 Act and all
other applicable securities laws is not required in connection with such
issuance. At the time of exercise, if the shares with respect to which the stock
option is being exercised have not been registered under the 1933 Act and all
other applicable securities laws, the Company may require the optionee to
provide the Company whatever written assurance counsel for the
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<PAGE>
Company may require that the shares are being acquired for investment and not
with a view to the distribution thereof, and that the shares will not be
disposed of without the written opinion of such counsel that registration under
the 1933 Act and all other applicable securities laws is not required. Share
certificates issued to the optionee upon exercise of the stock option shall bear
a legend to the foregoing effect to the extent counsel for the Company deems it
advisable.
ARTICLE VII
FAIR MARKET VALUE OF COMMON STOCK
For purposes of the Plan, the term "Fair Market Value" on any date shall
mean (i) if the Common Stock is not listed or admitted to trade on a national
securities exchange and if bid and asked prices for the Common Stock are not so
furnished through NASDAQ or a similar organization, the value established by the
Board for purposes of the Plan; (ii) if the Common Stock is listed or admitted
to trade on a national securities exchange or national market system, the
closing price of the Common Stock, as published in the WALL STREET JOURNAL, so
listed or admitted to trade on such date or, if there is no trading of the
Common Stock on such date, then the closing price of the Common Stock on the
next preceding date on which there was trading in such shares; or (iii) if the
Common Stock is not listed or admitted to trade on a national securities
exchange or national market system, the mean between the bid and asked price for
the Common Stock on such date, as furnished by the National Association of
Securities Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is
no longer reporting such information. In addition to the above rules, Fair
Market Value shall be determined without regard to any restriction other than a
restriction which, by its terms, will never lapse.
ARTICLE VIII
ADJUSTMENTS
(a) ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required
action by the Company's directors and stockholders, the number of shares
provided for in each outstanding stock option and the price per share thereof,
and the number of shares provided for in the Plan, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of the
Company's Common Stock resulting from a subdivision or consolidation of shares
or the payment of a stock dividend (but only on the Common Stock), a stock
split, a reverse stock split, or any other increase or decrease in the number of
such shares effected without receipt of consideration by the Company, and shall
also be proportionately adjusted in the event of a spin-off, spin-out, or other
distribution of assets to stockholders of the Company, to the extent necessary
to prevent dilution of the interests of grantees pursuant to the Plan or of the
other stockholders of the Company, as applicable. If the Company shall engage in
a merger, consolidation, reorganization or recapitalization, each outstanding
stock option (or if such transaction involves less than all of the shares of the
Company's Common Stock, then a number of stock options proportionate to the
number of such involved shares), shall become exercisable for the securities and
other consideration to which a holder of the number of shares
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<PAGE>
of the Company's Common Stock subject to each such stock option would have been
entitled to receive in any such merger, consolidation, reorganization or
recapitalization.
(b) SIGNIFICANT EVENT. In the event of a potential merger or consolidation
involving the Company regardless of whether the Company is the surviving entity
of such merger or consolidation, a potential liquidation or dissolution of the
Company, a potential sale or other disposition by the Company of all or
substantially all of its assets, or a potential sale or other disposition by the
stockholders of the Company of all or substantially all of the outstanding
Common Stock to one purchaser (any such merger, consolidation, liquidation,
dissolution, or sale being referred to herein as a "Significant Event"), then
the Company shall have the option of terminating all outstanding stock options
upon the actual occurrence of the Significant Event, by notice to all optionees
at least 10 days before the occurrence of the Significant Event. Any exercise by
an optionee in these circumstances may be conditioned upon the occurrence of the
Significant Event. Upon the actual occurrence of the Significant Event, each
outstanding stock option shall terminate if the Company exercises its option
under this paragraph (b). If the potential Significant Event does not in fact
occur for any reason, then the Company's exercise of its option under this
paragraph (b) shall have no effect and his or her rights will be the same as if
the Company had never exercised its option under this paragraph (b).
(c) CHANGE OF PAR VALUE. In the event of a change in the Company's Common
Stock which is limited to a change of all of its authorized shares with par
value into the same number of shares with a different par value or without par
value, the shares resulting from any such change shall be deemed to be Common
Stock within the meaning of the Plan.
(d) MISCELLANEOUS. The adjustments provided for in this Article shall be
made by the Board whose determination in that respect shall be final, binding
and conclusive. Except as hereinbefore expressly provided in this Article, the
holder of a stock option shall not be entitled to the privilege of stock
ownership as to any shares of Common Stock or other stock not actually issued
and delivered to the holder. Any issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall not
affect and no adjustment by reason thereof shall be made with respect to the
number or price of shares of the Company's Common Stock subject to any stock
option. The grant of a stock option pursuant to the Plan shall not affect in any
way the right or power of the Company to, among other things, make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve or liquidate or sell or
transfer all or any part of its business or assets.
ARTICLE IX
PRIVILEGES OF STOCK OWNERSHIP
No person entitled to exercise any stock option granted under the Plan
shall have any of the rights or privileges of stockholder of the Company in
respect of any shares of stock
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<PAGE>
issuable upon exercise of such stock option until certificates representing such
shares shall have been issued and delivered. Upon exercise of a stock option,
the person exercising the stock option shall be entitled to one stock
certificate evidencing the shares acquired upon such exercise.
ARTICLE X
AMENDMENT OR DISCONTINUANCE
The Board may at any time and from time to time amend, rescind, suspend or
terminate the Plan, as it shall deem advisable, provided that the Plan may not
be amended more than once every six months, other than to comport with changes
in the Code, ERISA, or the rules thereunder. In addition to Board approval of
any amendment to the Plan, if the Board further determines on advice of counsel
that it is necessary or desirable to obtain stockholder approval of any
amendment to the Plan in order to comply with Rule 16b-3 of the General Rules
and Regulations under the 1934 Act, or any successor rule, as it shall read as
of the time of amendment, or for any other reason, then the effectiveness of any
such amendment may be conditioned upon its approval by the affirmative votes of
the holders of a majority of the outstanding voting stock of the Company (voting
as a single class), present, or represented, and entitled to vote at a meeting
duly held in accordance with the applicable laws of the state or other
jurisdiction in which the Company is incorporated.
No change may be made in, and no amendment, rescission, suspension or
termination of the Plan shall have an effect on, stock options previously
granted under the Plan which may impair or alter the rights or obligations of
the holders thereof, except that any change may made in stock options previously
granted with the consent of the optionees.
ARTICLE XI
EFFECTIVE DATE; STOCKHOLDER APPROVAL
The Plan shall be effective as of March 6, 1996, the date on which it
received the approval of a majority of the disinterested members of the Board.
However, the Plan and all stock options granted under the Plan shall be void if
the Plan is not approved by the stockholders within twelve (12) months from the
date the Plan is approved by the Board. The Plan shall be deemed approved by the
holders of the outstanding voting stock of the Company by the affirmative votes
of the holders of a majority of the outstanding voting stock of the Company
present, or represented, and entitled to vote at a meeting of such stockholders
duly held in accordance with the applicable laws of the state or other
jurisdiction in which the Company is incorporated. No stock option granted under
the Plan shall be exercisable in whole or in part unless and until such
stockholder approval is obtained.
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") dated June 1, 1999 is between
Garden Ridge Management, Inc., a Delaware corporation (the "Company"), and
Armand Shapiro (the "Executive").
WHEREAS, the retail and business operations are conducted by and through
the Company and the Company is indirectly owned by Garden Ridge Corporation, a
Delaware corporation ("Garden Ridge"); and
WHEREAS, the Company desires to retain the services of the Executive as
Chairman of Garden Ridge, and the Executive desires to be retained in such
capacity, all upon the terms and subject to the conditions set forth in this
Agreement.
Accordingly, the parties agree as follows:
1. TERM. The term of the Executive's employment hereunder shall commence
on June 1, 1999 (the "Effective Date") and shall continue until the third
anniversary thereof (the "Term"), unless sooner terminated pursuant to Section 7
of this Agreement.
2. EMPLOYMENT. As of the Effective Date, the Company agrees to employ the
Executive and the Executive accepts such employment upon the terms and
conditions of this Agreement. The Executive shall devote to the business of
Garden Ridge such amount of time as determined by the Board of Directors;
PROVIDED, HOWEVER, that the Executive shall be permitted to (i) make personal
investments, (ii) engage in charitable activities and (iii) serve as a member of
the board of directors of corporations other than Garden Ridge and its
subsidiaries, in all cases, to the extent that such activities do not materially
interfere with his duties hereunder.
3. DUTIES. The Executive is employed to serve at all times during the Term
as Chairman of Garden Ridge. He shall do and perform such duties and render such
services as customarily performed by a person in such capacity, subject always
to the policies of the Board of Directors of the Company of Garden Ridge (the
"Board of Directors"). Notwithstanding anything to the contrary herein, all
references to the rights, duties and obligations of the Executive hereunder,
including without limitation the duties of the Executive in serving as Chairman
hereunder, shall relate to the Executive in his capacity as an officer of Garden
Ridge, and shall not refer to any right, duty or obligation of the Executive in
the Executive's capacity as a director of the Company, Garden Ridge or any of
their respective affiliates.
4. COMPENSATION. As compensation for all the services to be rendered
pursuant to this Agreement, the Company shall pay the Executive a base
compensation of $350,000 per annum (the "Base Compensation") payable in
accordance with the regular payroll practices for executives of the Company;
PROVIDED, HOWEVER, that the Executive's Base Compensation shall be appropriately
prorated in the case of a partial year.
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5. EXECUTIVE BENEFITS.
5.1 FACILITIES, SERVICES AND AMENITIES. The Executive shall not
maintain an office at the Company's facilities, but the Company shall provide
the Executive with office facilities and a secretary at a location determined by
the Executive, and other services and amenities substantially similar to the
existing practices of the Company.
5.2 FRINGE BENEFIT PLAN. During the Term, the Executive shall be
entitled to participate in all plans and receive all rights and benefits for
which he shall be eligible under any pension, deferred compensation, health,
hospitalization, disability or group life insurance or other so-called "fringe"
benefit plan which the Company provides for its executives generally. After the
Term and until the Executive reaches age 65, the Executive shall be entitled to
participate, at his expense, in all plans and receive all rights and benefits
for which he shall be eligible under any pension, deferred compensation, health,
hospitalization, disability or group life insurance or other so-called "fringe"
benefit plan which the Company provides for its executives generally.
5.3 VACATION. The Executive shall be entitled to paid vacation
pursuant to the Company's existing vacation policy.
6. BUSINESS EXPENSES. The Company shall pay or reimburse the Executive for
all reasonably incurred travel, hotel, entertainment and other business expenses
upon presentation by him of an itemized account of such expenditures in
accordance with the Company's procedures.
7. TERMINATION.
7.1 EVENTS OF TERMINATION.
7.1.1 The Company may terminate this Agreement prior to the
last day of the Term upon the occurrence of any one or more of the following
events:
(a) the death of the Executive;
(b) a determination of the Disability (as hereinafter
defined) of the Executive;
(c) any material violation by the Executive of the
non-compete or confidentiality covenants set forth in Section 8 of
this Agreement;
(d) a material and willful violation of this Agreement
or any lawful direction of the Board of Directors consistent with
this Agreement;
(e) the commission by the Executive of a willful or
grossly negligent act in bad faith that causes material harm to the
Company as determined by a majority of the Board of Directors;
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(f) a final, unappealable conviction of the Executive in
a court of law of any crime or offense resulting in imprisonment, or
that involves fraud, theft, or embezzlement from the Company, except
as may result from actions or omissions to act that were directed by
the Board of Directors; or
(g) any drug, alcohol or other substance addiction on
the part of the Executive;
PROVIDED, HOWEVER, that termination of this Agreement under clauses (b) through
(g) shall be made upon written notice to the Executive by the Company,
specifying in reasonable detail the reason therefor. The term Disability shall
mean, with respect to the Executive, that due to physical or mental infirmity,
whether total or partial, the Executive is substantially unable to perform his
services hereunder, as determined by the Company's disability carrier, for a
period of six months in the aggregate during any twelve month period.
7.1.2 The Company may terminate this Agreement for any reason
other than the events listed in Sections 7.1.1(c) through (g); PROVIDED,
HOWEVER, that in such event the Executive shall be entitled to receive the
amounts described in Section 7.2.2.
7.1.3 If the Executive resigns or terminates this Agreement
for any reason, the Executive shall be entitled to receive the amounts described
in Section 7.2.2.
7.1.4 If the Executive resigns or terminates this Agreement
because of a willful breach by the Company of its obligations under this
Agreement that continues after notice to the Board of Directors and reasonable
opportunity to cure such breach or because of instructions by the Board of
Directors to perform an unlawful act, then in addition to the Executive being
entitled to receive the amounts described in Section 7.2.2, the Executive shall,
notwithstanding the provisions of Sections 7.2.2 or 8.1, be released from any
obligations under Section 8.1.
7.2 EFFECT OF TERMINATION.
7.2.1 In the event of a termination of this Agreement under
Sections 7.1.1(a) and 7.1.1(c) through (g), the Executive shall be entitled to
receive, within fifteen days of such termination (a) any portion of the Base
Compensation relating to the period prior to the date of such termination which
has not been paid, and (b) all reimbursements due the Executive from the Company
for expenses specified in Section 6 which have not been paid.
7.2.2 In the event of a termination of this Agreement under
Sections 7.1.1(b), 7.1.2, 7.1.3 or 7.1.4, the Executive shall be entitled to
receive the Base Compensation that would have been payable to the Executive
through the end of the Term had this Agreement otherwise not been terminated
hereunder; PROVIDED, HOWEVER, that if the Executive violates at any time the
non-compete or confidentiality covenants set forth in Section 8 of this
Agreement (except to the extent that the Executive may have been released from
such covenants pursuant to Section 7.1.4 if such provision is applicable), the
Executive shall have no right thereafter to receive any compensation or benefit
hereunder.
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7.2.3 In the event of a termination of this Agreement prior to
the end of the Term, the rights and benefits identified in Section 5.2 shall
continue until the end of the Term.
7.2.4 If the Company terminates this Agreement, the Executive
or his legal representative, as the case may be, shall have no claim against the
Company and this Agreement shall become null and void and have no further force
or effect, except that this Section 7.2 and Section 8 shall survive any such
termination.
8. CERTAIN COVENANTS OF THE EXECUTIVE.
8.1 NON-COMPETE AGREEMENT. During the Term and for a period ending
on the second anniversary of the end of the Term (the "Restricted Period"), the
Executive covenants and agrees that he shall not, directly or indirectly, (a)
engage in any business that competes with Garden Ridge (as hereinafter defined)
within the United States, or (b) contact or solicit any of the suppliers of
Garden Ridge for the purpose of causing or attempting to cause any such person
to change materially its relationship with Garden Ridge. As used in this Section
8.1, a business shall be considered to "compete with Garden Ridge" only if more
than 30% of the sales revenues of such business is attributable to the retail
sale of goods which are the same or substantially similar to those categories of
goods being offered for sale by Garden Ridge at retail as of the end of the Term
(or, if being determined as of any time prior to the end of the Term, than as of
such time).
8.2 CONFIDENTIAL INFORMATION. During the Term and at all times
thereafter, the Executive covenants and agrees that he shall keep secret and
retain in strictest confidence, and shall not use for the benefit of himself or
others except in connection with the business and affairs of Garden Ridge and
its affiliates, all confidential matters of Garden Ridge, if any, including,
without limitation, trade secrets, customer lists, financial data and other
proprietary information of Garden Ridge and all information about Garden Ridge
(financial or otherwise), learned by the Executive heretofore or hereafter, and
shall not disclose them to any person outside Garden Ridge, either during or
after employment by Garden Ridge, except as required in the course of performing
duties hereunder or with Garden Ridge express written consent.
8.3 REMEDIES. If the Executive commits a breach, or threatens to
commit a breach, of any of the provisions of Section 8.1 or 8.2, the Company
shall have the right and remedy (in addition to, and not in lieu of, any other
rights or remedies available to the Company under law or in equity) (i) to have
the provisions of this Agreement specifically enforced by a court having
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to Garden Ridge and that money
damages will not provide an adequate remedy to Garden Ridge for any breach
thereof, and (ii) to require the Executive to account for and pay over to the
Garden Ridge all compensation, profits, monies or other benefits derived or
received by the Executive as a result of any breach of any of the provisions of
Section 8.1 or 8.2, and the Executive hereby agrees to account for and pay over
all such amounts to the Company.
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8.4 LIMITATION ON LIABILITY. Notwithstanding anything to the
contrary contained in this Agreement, the Executive shall be liable to the
Company under this Agreement solely for a breach of any of the provisions of
Section 8.1 or 8.2, and the Executive shall have no obligations or liability for
any breach of or default in any other provisions hereof including, without
limitation, the Executive shall have no liability hereunder in the event the
Executive resigns or terminates this Agreement for any reason.
9. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if delivered personally to the
Executive or sent by certified or registered mail to his residence at 10 South
Briar Hollow Lane, Suite 11, Houston, Texas 77027 in the case of the Executive,
or to the principal office of the Company at 19411 Atrium Place, Suite 170,
Houston, Texas 77084-6099 in the case of the Company, or to such other address
as either party may hereafter notify the other.
10. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other shall not operate or be construed as a
waiver of any subsequent breach by that party.
11. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Texas applicable to agreements made and
to be performed entirely within such state.
12. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties in respect of the Executive's employment and employment compensation.
13. SECTION HEADINGS. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
14. SEVERABILITY. If any provision or any portion of any provision of this
Agreement shall be arbitrated or adjudicated to be invalid or unenforceable
under law, the parties hereto agree that the remainder of this Agreement shall
not be affected thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GARDEN RIDGE MANAGEMENT, INC.
By: /s/ PAUL T. DAVIES
Paul T. Davies, Chief Executive Officer
/s/ ARMAND SHAPIRO
Armand Shapiro
5
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "AGREEMENT") dated effective June 7, 1999
(the "EFFECTIVE DATE") is between Garden Ridge, L.P., a Texas limited
partnership (the "COMPANY"), and Paul T. Davies (the "EXECUTIVE").
WHEREAS, the retail and business operations are conducted by and through
the Company and the Company is indirectly owned by Garden Ridge Corporation, a
Delaware corporation ("GARDEN RIDGE");
WHEREAS, the Company desires to retain the services of the Executive as
President and Chief Executive Officer of the Company, and the Executive desires
to be retained in such capacity, all upon the terms and subject to the
conditions set forth in this Agreement.
Accordingly, the parties agree as follows:
1. TERM. The term of the Executive's employment hereunder shall commence
on the Effective Date and shall continue until the first anniversary thereof
(such term, as renewed or extended hereunder is referred to as the "TERM");
provided that commencing on the first anniversary of the Effective Date and on
each anniversary thereafter, the Term shall automatically be extended for one
additional year unless either party gives 60 days prior written notice not to
extend this Agreement prior to 60 days before such extension would be
effectuated; provided further that this Agreement may also be terminated
pursuant to SECTION 7 of this Agreement.
2. EMPLOYMENT. As of the Effective Date, the Company agrees to employ the
Executive and the Executive accepts such employment upon the terms and
conditions of this Agreement. The Executive shall devote his full productive
time, energies and abilities to the Company's business; PROVIDED, HOWEVER, that
the Executive shall be permitted to (a) make personal investments, (b) engage in
charitable activities and (c) with the prior written approval from the Board of
Directors of Garden Ridge ("BOARD"), serve as a member of the board of directors
of corporations other than the Company and its subsidiaries, in all cases, to
the extent that such activities do not materially interfere with his duties
hereunder.
3. DUTIES. The Executive is employed to serve at all times during the Term
as President and Chief Executive Officer of the Company. He shall do and perform
such duties and render such services as customarily performed by a person in
such capacity, subject always to the policies of the Board.
4. COMPENSATION.
4.1 SIGNING BONUS. The Company shall pay the Executive a signing
bonus ("SIGNING BONUS") equal to $300,000. The Signing Bonus shall be paid
within five business days of the execution of this Agreement by the parties
hereto.
<PAGE>
4.2 BASE COMPENSATION. As compensation for all the services to be
rendered pursuant to this Agreement, the Company shall pay the Executive a base
compensation of $550,000 per annum (the "BASE COMPENSATION") payable in
accordance with the regular payroll practices for executives of the Company;
PROVIDED, HOWEVER, that the Executive's Base Compensation shall be appropriately
prorated in the case of a partial year. The Executive's Base Compensation may be
increased, but not reduced, for any fiscal year by such additional amount as the
Compensation Committee of the Board shall, in its sole discretion, determine.
Any amounts payable under this SECTION 4.2 for any fiscal year shall not affect
the computation of Base Compensation or amounts payable under this SECTION 4.2,
in each case, for any subsequent fiscal year.
4.3 ANNUAL BONUS PAYMENTS. In addition to the amounts payable by the
Company under SECTIONS 4.1 and 4.2, the Executive shall be entitled to receive
an annual bonus opportunity with a target objective of fifty percent (50%) of
Base Compensation (the "BONUS PAYMENT"). The bonus opportunities as provided in
this SECTION 4.3 shall be based upon the achievement of certain performance
targets and shall be established in writing by the Compensation Committee of the
Board either prior to, or within 90 days after the beginning of, each fiscal
year of the Company. Any Bonus Payment in excess of fifty percent (50%) of Base
Compensation for any one fiscal year may be paid in restricted shares of common
stock ("COMMON STOCK") of Garden Ridge at the discretion of the Board.
Notwithstanding the calculation of the target objective of the Bonus Payment for
the Executive provided herein, the Executive shall be entitled to a minimum
Bonus Payment of $150,000 for the fiscal year ending January 30, 2000.
4.4 EQUITY INCENTIVES.
4.4.1 Within seven days after the Effective Date, the
Executive shall purchase from Garden Ridge or on the national exchange
securities market in which the Common Stock is traded, $100,000 (or an amount as
close thereto as possible) of whole shares of non-assessable Common Stock at a
per share price equal to the closing price of the Common Stock, as published in
the WALL STREET JOURNAL ("CLOSING PRICE") on the date of purchase of such Common
Stock.
4.4.2 On the Effective Date, the Company shall cause Garden
Ridge to grant the Executive options ("SIGN-ON OPTIONS") to purchase up to
125,000 shares of Common Stock as provided in this SECTION 4.4.2. The Sign-On
Options to purchase up to 125,000 shares of Common Stock shall be fully vested
on the Effective Date. The Sign-On Options shall have an exercise price equal to
the Closing Price per share on the date such Sign-On Options are granted. The
term on the Sign-On Options issued shall be for 10 years after the date the
Sign-On Options are initially granted. In the event the Executive's employment
is terminated for any reason (other than the death or Disability (as hereinafter
defined) of the Executive), all Sign-On Options shall remain exercisable for 180
days following the date of such termination of the Executive. In the event of
the death or Disability of the Executive, all Sign-On Options shall remain
exercisable for a period of one year after the date of the Executive's death or
Disability.
4.4.3 On the Effective Date, the Company shall cause Garden
Ridge to grant the Executive an option to purchase 375,000 shares of Common
Stock as provided in this SECTION
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4.4.3. Such option to purchase 375,000 shares of Common Stock shall vest as
follows: the option to acquire 125,000 shares of Common Stock shall vest in the
Executive and shall be exercisable beginning on June 1, 2000 and an additional
125,000 shares of Common Stock shall vest in the Executive and shall be
exercisable on each of the following dates: June 1, 2001 and June 1, 2002. The
options issued to the Executive under this SECTION 4.4.3 shall have an exercise
price equal to the Closing Price on the Effective Date. The term on the option
issued under this SECTION 4.4.3 shall be for 10 years after the Effective Date.
In the event the Executive is terminated for any reason (other than a Change of
Control (as hereinafter defined)), any options issued to the Executive under
this SECTION 4.4.3 that are not otherwise vested shall be forfeited; provided,
however, that in the event of a Change of Control, all unvested options granted
to the Executive under this SECTION 4.4.3 shall immediately vest and shall be
exercisable in accordance with its terms for a period of one year after the date
of the Change of Control. Notwithstanding anything contained in this SECTION
4.4.3 to the contrary, in the event the Executive's employment is terminated due
to the death or Disability of the Executive, fifty percent (50%) of the unvested
options granted to the Executive under this SECTION 4.4.3 shall immediately vest
and shall be exercisable in accordance with its terms for a period of 180 days
after the date of the Executive's death or Disability.
4.5 RELOCATION AND RELOCATION EXPENSES.
4.5.1 The Executive agrees that he will relocate from his
present residence in Longboat Key, Florida ("CURRENT RESIDENCE") to an area
which is within a reasonable commuting distance to the Company's principal
executive offices which are presently located in the Houston, Texas metropolitan
area ("NEW RESIDENCE"). The Executive agrees to relocate as soon as practicable
following the Effective Date.
4.5.2 The Executive shall be reimbursed (on an after-tax
basis) for all reasonable customary expenses he and his dependents incur related
to the costs of packing, loading, transportation, unloading and unpacking of
household and personal belongings. Such expenses subject to reimbursement shall
include any discount points or closing costs, real estate brokerage, title and
legal fees or administrative fees with respect to the purchase of a New
Residence, but shall not include any discount points or closing costs, real
estate brokerage, title and legal fees or administrative fees with respect to
the sale of the Current Residence.
4.5.3 During the period in which the Executive is attempting
to secure an appropriate New Residence, the Executive shall be entitled to
reimbursement (on an after-tax basis) from the Company from the Effective Date
until October 5, 1999 for all necessary and reasonable expenses for temporary
housing incurred or expended by him and his dependents in moving from the
Current Residence to the New Residence; provided that such expenses shall not
exceed $8,000.00 per month (pro-rated for any partial month). The Company will
reimburse the Executive for these expenses upon his submission to the Company of
vouchers or expense statements evidencing such expenses were incurred.
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4.6 APPLICABLE WITHHOLDING. All payments to the Executive shall be
subject to all federal, state and local withholding obligations which shall be
administered in accordance with the Company's customary payroll practices.
5. EXECUTIVE BENEFITS.
5.1 FACILITIES, SERVICES AND AMENITIES. The Company shall provide
the Executive with office facilities and a secretary, and other services and
amenities substantially similar to the existing practices of the Company.
5.2 FRINGE BENEFIT PLAN. During the Term, the Executive shall be
entitled to participate in all plans and receive all rights and benefits for
which he shall be eligible under any pension, deferred compensation, health,
hospitalization, disability or group life insurance or other so-called "fringe"
benefit plan which the Company provides for its executives generally. After the
Term and until the Executive reaches age 65, the Executive shall be entitled to
participate, at his expense, in all plans and receive all rights and benefits
for which he shall be eligible under any pension, deferred compensation, health,
hospitalization, disability or group life insurance or other so-called "fringe"
benefit plan which the Company provides for its executives generally.
5.3 KEY MAN LIFE INSURANCE. The Company may maintain "key man" life
insurance on the Executive's life for the benefit of the Company to the extent
it deems necessary or advisable, and the Executive shall submit himself for
medical examinations as may be required in connection therewith and shall
otherwise cooperate in arranging for such insurance.
5.4 VACATION. The Executive shall be entitled to four weeks per year
paid vacation as administered pursuant to the Company's existing vacation
policy.
6. BUSINESS EXPENSES. The Company shall pay or reimburse the Executive for
all reasonably incurred travel, hotel, entertainment and other business expenses
upon presentation by him of an itemized account of such expenditures in
accordance with the Company's procedures.
7. TERMINATION.
7.1 EVENTS OF TERMINATION.
7.1.1 The Company may terminate this Agreement immediately
prior to the last day of the Term upon the occurrence of any one or more of the
following events:
(a) the death of the Executive;
(b) a determination of the Disability (as hereinafter
defined) of the Executive;
(c) the failure to move the Executive's family to the
Houston, Texas metropolitan area on or before December 31, 1999;
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(d) any violation by the Executive of the non-compete or
confidentiality covenants set forth in SECTION 8 of this Agreement;
(e) a material and willful violation of this Agreement
or any lawful direction of the Board consistent with this Agreement;
(f) the commission by the Executive of a willful or
grossly negligent act in bad faith that causes material harm to the
Company as determined by a majority of the Board;
(g) a final, unappealable conviction of the Executive in
a court of law of any crime or offense resulting in imprisonment, or
that involves fraud, theft, or embezzlement from the Company, except
as may result from actions or omissions to act that were directed by
the Board; or
(h) any drug, alcohol or other substance addiction on
the part of the Executive;
PROVIDED, HOWEVER, that termination of this Agreement under clauses (c) through
(h) shall be made upon 10 days' prior written notice to the Executive by the
Company, specifying in reasonable detail the reason therefor. The term
Disability shall mean, with respect to the Executive, that due to physical or
mental infirmity, whether total or partial, the Executive is substantially
unable to perform his services hereunder, as determined by the Company's
disability carrier, for a period of six months in the aggregate during any
twelve month period.
7.1.2 The Company may terminate this Agreement for any reason
other than the events listed in SECTION 7.1.1; PROVIDED, HOWEVER, that in such
event the Executive shall be entitled to receive the amounts described in
SECTION 7.2.2.
7.1.3 If the Executive resigns or terminates this Agreement
for any reason (other than pursuant to SECTION 7.1.4), the Executive shall be
entitled to receive only the amounts described in SECTION 7.2.1.
7.1.4 If the Executive resigns or terminates this Agreement
because of a willful breach by the Company of its obligations under this
Agreement that continues after notice to the Board and reasonable opportunity to
cure such breach (which shall be no less than 30 days), the Executive shall be
entitled to receive the amounts described in SECTION 7.2.2.
7.2 EFFECT OF TERMINATION.
7.2.1 In the event of a termination of this Agreement under
SECTIONS 7.1.1(C) through (h) or SECTION 7.1.3, the Executive shall be entitled
to receive, within 15 days of such termination (a) any portion of the Base
Compensation (including any increase provided for in SECTION 4.2) relating to
the period prior to the date of such termination which has not been paid, and
(b) all reimbursements due the Executive from the Company for expenses specified
in SECTION 6 which have not been paid.
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7.2.2 In the event of a termination of this Agreement under
SECTIONS 7.1.2 or 7.1.4, the Executive shall be entitled to receive a lump sum
payment in an amount equal to (a) the Base Compensation paid for the fiscal year
prior to the date the Executive's employment was terminated plus (b) the Bonus
Payment, if any, paid for the fiscal year prior to the date the Executive's
employment was terminated; PROVIDED, HOWEVER, that if the Executive violates at
any time the non-compete or confidentiality covenants set forth in SECTION 8 of
this Agreement, the Executive shall have no right thereafter to receive any
compensation or benefit hereunder.
7.2.3 In the event of a termination of the Executive's
employment due to the death or Disability of the Executive, the Executive (or
his legal representative) shall be entitled to continue to receive the Base
Compensation for a period of six months after the Executive's death or
Disability; provided that such payments shall be paid in accordance with the
regular payroll practices of the Company. The Executive shall also be entitled
to any long-term disability benefits under the applicable long-term disability
insurance plan or program of the Company.
7.2.4 Other than the foregoing, if the Company terminates this
Agreement, the Executive or his legal representative, as the case may be, shall
have no claim against the Company and this Agreement shall become null and void
and have no further force or effect, except that this SECTION 7.2 and SECTION 8
shall survive any such termination.
8. CERTAIN COVENANTS OF THE EXECUTIVE.
8.1 NON-COMPETE AGREEMENT. During the Term and for a period ending
on the second anniversary of the end of the Term (the "RESTRICTED PERIOD"), the
Executive covenants and agrees that he shall not, directly or indirectly, (a)
engage in any business that competes with the Company (as hereinafter defined)
within the United States, or (b) contact or solicit any of the suppliers of the
Company or its affiliates for the purpose of causing or attempting to cause any
such person to change materially its relationship with the Company. As used in
this SECTION 8.1, a business shall be considered to "COMPETE WITH THE COMPANY"
only if more than forty percent (40%) of the sales revenues of such business is
attributable to the retail sale of goods which are the same or substantially
similar to those being offered for sale by the Company or its affiliates at
retail as of the end of the Term (or, if being determined as of any time prior
to the end of the Term, than as of such time).
8.2 CONFIDENTIAL INFORMATION. During the Term and at all times
thereafter, the Executive covenants and agrees that he shall keep secret and
retain in strictest confidence, and shall not use for the benefit of himself or
others except in connection with the business and affairs of the Company and its
affiliates, all confidential matters of the Company and its affiliates, if any,
including, without limitation, trade secrets, customer lists, financial data and
other proprietary information of the Company and all information about the
Company (financial or otherwise), learned by the Executive heretofore or
hereafter, and shall not disclose them to any person outside the Company, either
during or after employment by the Company, except as required in the course of
performing duties hereunder or with the Company's express written consent.
6
<PAGE>
8.3 NONSOLICITATION AGREEMENT. During the Restricted Period, the
Executive covenants and agrees that he shall not, directly or indirectly,
solicit the employment or services of, or cause or attempt to cause, to leave
the employment or services of the Company, or any of its affiliates, any person
employed by, or otherwise engaged to perform services for the Company, or any of
its affiliates (whether in the capacity of employee, consultant, independent
contractor, or otherwise).
8.4 REMEDIES. If the Executive commits a breach, or threatens to
commit a breach, of any of the provisions of SECTIONS 8.1, 8.2 or 8.3, the
Company shall have the right and remedy (in addition to, and not in lieu of, any
other rights or remedies available to the Company under law or in equity) (a) to
have the provisions of this Agreement specifically enforced by a court having
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company, that money
damages will not provide an adequate remedy to the Company for any breach
thereof, and that the Company may obtain injunctive relief for such breach or
threatened breach (any requirements for posting of bond are hereby expressly
waived) and (b) to require the Executive to account for and pay over to the
Company all compensation, profits, monies or other benefits derived or received
by the Executive as a result of any breach of any of the provisions of SECTIONS
8.1, 8.2 or 8.3, and the Executive hereby agrees to account for and pay over all
such amounts to the Company.
9. TERMINATION UPON CHANGE OF CONTROL.
9.1 SEPARATION BENEFIT. Upon termination of the Executive's
employment by the Company after a Change of Control (as hereinafter defined)
transaction is announced, the Company shall pay to the Executive in a lump sum
an amount equal to 200% times the sum of (a) the Executive's Base Compensation
in the Company's most recent fiscal year plus (b) the Executive's Bonus Payment
for the Company's most recent fiscal year. For purposes of this Agreement,
"CHANGE OF CONTROL" shall mean the occurrence of any one of the following
events:
(a) any person or other entity, including any person as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended ("EXCHANGE
ACT"), becoming the beneficial owners, as defined in Rule 13d-3 of the Exchange
Act, directly or indirectly, of more than fifty percent (50%) of the total
combined voting power of all classes of capital stock of Garden Ridge ordinarily
entitled to vote for the election of directors of Garden Ridge;
(b) The Board approving (in one transaction or a series of
transactions) the sale of all or substantially all of the property or assets of
the Company;
(c) The Board approving a consolidation or merger of Garden Ridge
with another corporation, the consummation of which would result in the
occurrence of an event described in subparagraph (a) above.
7
<PAGE>
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if delivered personally to the
Executive or sent by certified or registered mail to his residence at 2165 Gulf
of Mexico Drive, Apt. # 112, Longboat Key, Florida 34228, in the case of the
Executive, or to the principal office of the Company at 19411 Atrium Place,
Suite 170, Houston, Texas 77084-6099 in the case of the Company, or to such
other address as either party may hereafter notify the other.
11. WAIVER OF BREACH. The waiver by either party of a breach of any
provision of this Agreement by the other shall not operate or be construed as a
waiver of any subsequent breach by that party.
12. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Texas, without giving effect to
principles of conflicts of law, applicable to agreements made and to be
performed entirely within such state. Venue for any dispute shall lie in Harris
County, Texas.
13. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties in respect of the Executive's employment and employment compensation.
14. SECTION HEADINGS. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
15. SEVERABILITY. If any provision or any portion of any provision of this
Agreement shall be arbitrated or adjudicated to be invalid or unenforceable
under law, the parties hereto agree that the remainder of this Agreement shall
not be affected thereby.
16. ASSIGNMENTS. The rights and obligations under this Agreement of the
Executive may not be assigned to any party, unless consented to by the Company.
17. COUNTERPARTS. This Agreement may be executed in several identical
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument.
18. MODIFICATIONS. This Agreement may be modified only by written
agreements signed by the Executive and the Company.
19. ATTORNEYS FEES AND EXPENSES. Each party shall pay their respective
legal fees and expenses in connection with the preparation and negotiation of
this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
GARDEN RIDGE, L.P.
By: Garden Ridge Management Corporation, its
General Partner
By: /s/ ARMAND SHAPIRO
Armand Shapiro,
Chairman and Chief Executive Officer
/s/ PAUL T. DAVIES
Paul T. Davies
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ITEM 8.,
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> AUG-01-1999
<CASH> 9,298
<SECURITIES> 0
<RECEIVABLES> 3,497
<ALLOWANCES> 0
<INVENTORY> 92,327
<CURRENT-ASSETS> 111,811
<PP&E> 77,831
<DEPRECIATION> (31,556)
<TOTAL-ASSETS> 166,634
<CURRENT-LIABILITIES> 41,611
<BONDS> 0
0
0
<COMMON> 184
<OTHER-SE> 123,862
<TOTAL-LIABILITY-AND-EQUITY> 166,634
<SALES> 91,518
<TOTAL-REVENUES> 91,518
<CGS> 62,057
<TOTAL-COSTS> 40,820
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151
<INCOME-PRETAX> (11,208)
<INCOME-TAX> (4,035)
<INCOME-CONTINUING> (7,173)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,173)
<EPS-BASIC> (.42)
<EPS-DILUTED> (.42)
</TABLE>
